Alliance Laundry 3Q 2025 Earnings Call - Resilient Growth in a Defensive Industry with Strong Margin Expansion

Operator: Good morning, and welcome to the Alliance Laundry third quarter 2025 earnings conference call. With us today are Mike Shabe, Chief Executive Officer; Dean Nolden, Chief Financial Officer; and Bob Calver, Vice President of Investor Relations. After the speakers’ prepared remarks, there will be a question-and-answer session. If you would like to ask a question during this time, simply press star, then the number one on your telephone keypad. If you would like to withdraw your question, please press star two on your telephone keypad. We ask that you please ask one question and one follow-up, then return to the queue. With that, it is my pleasure to turn the program over to Mr. Calver, Vice President of Investor Relations. Mr. Calver, please go ahead.

Bob Calver, Vice President of Investor Relations, Alliance Laundry Systems: Thank you, Operator, and good morning, everyone. Welcome to Alliance Laundry Systems’ third quarter 2025 earnings call. I’m joined today by Mike Shabe, CEO, and Dean Nolden, CFO. Along with today’s call, you can find our earnings press release and earnings presentation on our website at ir.alliancelaundry.com. A replay of this call will also be made available on our website. As a reminder, today’s earnings release, presentation, and statements made during this call include forward-looking statements under federal securities law. 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 the factors set forth in the earnings release and in our filings with the Securities and Exchange Commission, including in the risk factors section of the prospectus from our initial public offering dated October 9, 2025.

We assume no obligation to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise, except as required by law. Additionally, during today’s call, we will discuss certain non-GAAP financial measures outlined in further detail at the beginning of our earnings presentation. We believe that these measures are important indicators of our operations, as they exclude items that may not be indicative of our results from ongoing business operations. A reconciliation of these measures to the most directly comparable GAAP measure can be found in our earnings release, in our 8-K filed with the Securities and Exchange Commission, and in the appendix to the slide presentation. Non-GAAP financial measures should be considered in addition to and not as a substitute for GAAP measures. I’ll now turn the call over to Mike.

Mike Shabe, Chief Executive Officer, Alliance Laundry Systems: Hey, thanks, Bob, and thank you all for joining. It’s a pleasure to speak with you today on the company’s first earnings call as a publicly traded company. Before I begin, I’d like to express my thanks and appreciation to the Alliance team, our end customers and distribution partners, as well as our advisors and the investors who made this milestone possible. I’d also like to thank the research analysts who spent time getting to know our business, our culture, our products, and our team. We look forward to continued dialogue, and we’re excited about the future as we continue to expand our business, deliver what we believe are the highest quality machines and services available in the industry, and create long-term value for our shareholders. For this first call as a public company, I will start with an overview of Alliance, the markets we serve, and our differentiated strategy.

We will then dive into results. Starting with slide four, there are four things I believe you should consider for any investment, and this is my core message on today’s call. Question number one: Is the industry vibrant, growing, and attractive? In our record of close to double-digit growth over the last decade, we suggest it is, as laundry is not a fad or a fashion, but it is essential to everyday life. Additionally, the industry has a unique characteristic of providing downside protection in difficult times, such as what we saw during COVID, where laundromats were deemed essential by governments almost worldwide, and stayed open versus most retail locations which were shuttered, and many that closed for good.

The world is increasingly volatile, and every time there’s a dip in the economy or bad news on the TV, those of us on the executive team look at each other and say, "Thank God for laundry." That protection is combined with growth we see in both emerging markets where the vended-end market is in its early days, as well as in mature markets where aging products need constant replacement, and in the renewal happening in laundromats where many of the old, tired inventory is being replaced by clean, safe, and friendly stores. According to market research, in the U.S. alone, there are over 20,000 of these retail locations, and it is estimated to be a $6 billion market serving an essential need in communities across the country. The next question is industry structure. What are the market leaders?

Excuse me, who are the market leaders, and do they have a sustainable advantage? Our scale versus the competitive set and our financial profile give us the ability to invest at a higher level and simply do what others cannot afford to do. I believe our advantage is both clear and sustainable. The next question is, do you have a team that can execute with consistency and take advantage of the gift that we have been provided to be a market leader in an incredible industry? Our long-term history of compelling performance through economic cycles would suggest we’ve got a very capable team. The final question is, are there systemic tailwinds that provide an opportunity for the company to continue to put points on the board and grow profitably?

For us, we see these tailwinds as being in their early innings, and they are integral to our go-forward strategy, which I will touch on shortly. Against this backdrop, Alliance is at the center of a resilient, essential industry defined by steady replacement demand, consistent aftermarket needs, and stable growth across all macro cycles. On slide five, we are the number one pure-play commercial laundry manufacturer in the world, more than twice the size of our next largest competitor. We are a true global business serving customers in 150 countries, and we hold roughly 40% market share in North America. Our strong market leadership and financial results are built on a compelling value proposition for commercial laundry customers who are incredibly sophisticated and focused on total cost of ownership, or TCO.

Our offering is defined by a relentless focus on quality, reliability, and durability: an industry-leading distribution network, comprehensive wraparound services, and a commitment to excellence. Every day is laundry day, and it is essential for modern life as we know it today. Our large installed base means people around the world interact with our products millions of times a day. Our products get used hard every day in demanding applications. They are mechanical in nature, so they have a finite life with a steady, replacement-driven, and predictable demand. We produce and deliver product via five prominent brands, including our Speed Queen brand, which was recognized by Consumer Reports as the most reliable appliance brand in the U.S. for six consecutive years. We have a strong financial profile with a revenue CAGR of about 10% from 2010 to 2024, a best-in-class adjusted EBITDA margin above 25%, and strong free cash flows.

Throughout our history as a private company, we have invested in our business to support durable growth, which significantly strengthened operations, enhanced capacity, drove our innovation pipeline, and created long-term potential. Alliance operates in a broad, diversified set of end markets, geographies, and product categories, which helps us drive execution and deliver long-term growth. In terms of revenue mix, about three-quarters of our sales come from North America, where we have balance across our three end markets. Now, switching briefly to slide six, you will see the primary end markets we serve. On-premise, we deliver best-in-class systems for hundreds of mission-critical applications that require tailored products, expertise, and an extensive, highly trained field service organization. This includes healthcare, hospitality, and veterinary clinics, as well as bespoke systems for industrial and commercial customers.

If you are running one of these businesses and your laundry equipment goes down, it is not a good day. Think about managing a hotel with several hundred rooms that require thousands of pounds of fresh, clean linens every day. Normally, there is little redundancy of equipment in on-premise laundry rooms. If a unit fails, you do not have a sellable room, and you do not have a business. That example can be taken across all these verticals. In our vended-end market, applications take payment of some type, which is increasingly digital in nature. We equip both retail store laundromats worldwide, as well as communal laundry systems for apartments, condominiums, dormitories, and other multi-housing facilities. Finally, our commercial in-home end market brings differentiated commercial-quality washers and dryers into residential settings, offering the same durability, long life, and performance trusted by our commercial customers.

Consumers around the world are increasingly frustrated by competitive offerings, which are built for initial cost versus low total cost of ownership. On slide seven, we illustrate our long history of performance through all economic cycles. Looking all the way back to 2006, Alliance has generated a steady cadence of growth as we’ve continued to scale our business, serve more customers across more markets, and expand our capabilities and customer offerings. We look forward to building on the strong momentum and driving consistent growth long into the future as we execute on our strategy. Now, on slide eight, to touch briefly on additional investment highlights, which are both attractive and meaningful. First, as a pure-play who only does laundry, we understand what our customers demand, and that is a compelling value based on low total cost of ownership.

Price is always important, but what we hear most often is, "Please do not cheapen the product. Do not cut corners, and do not sacrifice quality." Customers know it’s a smart decision to buy a better product that lasts longer, is more reliable, and cleans extremely well. We have a proven ability to create the highest quality products by leveraging our engineering expertise and rigorous testing and quality controls that ensure long-lasting durability and reliability. We have unmatched scale that is very difficult to replicate in this highly specialized and fragmented industry. Our premier aftermarket services and comprehensive wraparound capabilities are extremely important to support long-lived assets, and they provide us opportunities to win more market share. We also benefit from a robust global manufacturing and engineering footprint, a diversified go-to-market strategy, and a well-established reputation of innovation and commercial laundry expertise. These attributes aren’t just individual advantages.

They are highly complementary and allow Alliance to generate significant recurring revenue streams, protect margin, and create long-term value for our shareholders. On slide nine, we are advancing a clear growth strategy focused on driving long-term sustainable performance. We start with our core strength, producing high-quality, reliable commercial laundry systems that drive repeat business and market share gains. When you provide strong value, price is a byproduct, and it is embedded in our go-to-market strategy. In on-premise laundry, we’re serving a stable, heavily replacement-driven market while delivering leading TCO across many, many niche applications. Alliance has also established a leading position supporting the evolution of laundromats. Laundromat demand is driven by both existing store owners retooling their stores with more efficient and technologically sophisticated products, as well as new investors attracted to the fundamentals of the industry. It is recession-resistant. It is an essential need.

It has low labor requirements, as it is primarily self-serviced by customers, and low shrink, particularly as payment systems become more digital. Our products and services help commercially focused operators succeed, backed by our wraparound services and digital platform. Digital and IoT-connected equipment is a requirement for multi-site and multi-state operators. In North America, we’re meeting rising demand for commercial-quality products in the home, maintaining attractive margins and delivering the reliability customers expect from professional-grade equipment. Internationally, we see significant vended-market opportunities in underpenetrated regions, leveraging our first-mover advantage to play a pivotal role in market development. Alliance is also committed to staying at the forefront of innovation to continue introducing industry-leading features that accelerate replacement cycles and increase digital penetration to drive recurring revenue. As the only manufacturer in the industry with footprints in Asia, the U.S.

In Europe, our local-for-local manufacturing strategy helps to insulate us significantly from tariffs as most of what we source, manufacture, and sell stays in the respective region. We remain disciplined on operational improvements, including cost-down initiatives, where we are extremely careful, as well as plant and supply chain optimization. We are confident in our ability to successfully execute these strategic priorities and strengthen our market position. I’d also like, on slide 10, to share some recent business highlights. As I mentioned, innovation is core to Alliance’s DNA and a key long-term growth driver. We recently attended the Clean Show Conference, North America’s largest exposition in our industry, and exhibited new technologies. We launched a 25-pound stack, or excuse me, 55-pound stack tumbler, the industry’s largest, which allows for faster dry times and, we believe, increased revenue.

We also launched ScanPayWash, a cashless payment technology for laundromats that does not require an app download. This is a first for the industry and has been extremely well received. We also began shipping our Stax X product, a good example of our local-for-local manufacturing and product development strategy as it was developed in Thailand for customers in that region. Stax X was built for high throughput in the limited square footage available in small retail locations, and it offers full commercial-grade washing and drying power in a space-efficient, vertically stacked configuration. On the operational side, we acquired Metropolitan Laundry Machinery Sales in New York, deepening our coverage in a dense, high-opportunity urban market and further enhancing our aftermarket and service capabilities.

In October, we deployed over $500 million in IPO proceeds to pay down debt following our listing, resulting in an IPO-adjusted net leverage ratio of roughly 3.1 times at quarter end. Dean will discuss our successful efforts in further strengthening our balance sheet and financial flexibility shortly. We look forward to building on the strong momentum we’ve achieved as we continue to focus on disciplined execution of our strategy. Dean will now go through our consolidated end segment performance. Thanks, Mike. Turning to slide 11 in our financial performance, we provided our results for the three and nine months ended September 30, 2025. I’ll touch on the results for both periods, but focus most of my remarks on the third-quarter financial performance. We delivered strong results on a consolidated basis. We drove revenue of $438 million, up 14% year-over-year, and year-to-date revenue of $1.27 billion, also up 14%.

Growth this quarter was driven by solid volume gains and modest low-to-mid single-digit price increases implemented to offset higher input costs, which were primarily tariff-related. Volume growth was broad-based across all of our end markets in both of our reportable segments of North America and international, supported by the strength of our brands, the durability of our value proposition, and the product and geographical diversification of our business. Year-to-date gross margin expanded by 70 basis points over last year, driven by higher volumes, manufacturing efficiencies, and modest pricing actions. This performance reflects our core strategy of profitable growth, which is built on the superior total cost of ownership we offer to customers. Adjusted EBITDA was $111 million in Q3 and $330 million year-to-date, representing growth of 16% and 13%, respectively.

For the quarter, adjusted EBITDA margin was 25.3%, up 40 basis points year-over-year, and year-to-date margin was 25.9%, down modestly by 30 basis points due to investments we are making in product and systems, as well as public company support costs. Net income for the quarter of $33 million was up from a loss of $6 million in the prior year. Third-quarter adjusted net income was $48 million, up 47% versus the prior year quarter, and year-to-date adjusted net income was $136 million, an increase of 9%. These results reflect strong top and bottom-line performance, with profitability amplified by a significant reduction in interest expense. This reduction was driven by our successful debt repricings to SOFR plus 225. We also strengthened our balance sheet through a voluntary debt repayment of $135 million made in the third quarter, and we are benefiting from lower variable interest rates year-to-date.

Subsequent to the end of the third quarter, with an additional term loan paydown of $525 million post-IPO, our IPO-adjusted net leverage came in at 3.1 times. We now begin our life as a public company with a stronger balance sheet and will continue to prioritize deleveraging through earnings growth and cash generation. Turning to slide 12, at the regional level, our North America business continued to deliver strong results, driven by favorable end market fundamentals as we leveraged our scale, strong market position, and manufacturing strategies. North America revenue in Q3 was $331 million, an increase of 14%, with our performance driven by robust growth across all three end markets. Volume and modest price increases accounted for approximately two-thirds and one-third of this increase, respectively. Year-to-date revenue was $952 million, up 16% year-over-year.

Q3 adjusted EBITDA in North America grew to $95 million, or 13% year-over-year, and our adjusted EBITDA margin of 29% was flat versus prior year, with results driven by increased volume and realization of manufacturing efficiencies, offset by investments in future growth initiatives. We experienced $3.5 million of tariff impact in the third quarter, which was mostly offset by implemented pricing actions. Year-to-date adjusted EBITDA grew to $273 million, or 14%. We continue to see strong demand from our vended customers in mature markets, coming from both our existing customer base through fleet refreshes, as well as new entrants who are looking to access the attractive and resilient commercial laundry space. In the on-premise market, we also experienced strengthening demand, largely driven by the replacement cycle.

We believe there are still significant opportunities ahead as new builds continue to come online and customers replace existing equipment with more efficient systems before their end of life. Finally, demand in our commercial in-home end market remained high as customers prioritized the durability, reliability, and long life of our products. Turning to slide 13, our international business also contributed meaningfully to overall results this quarter. International revenue was $107 million, an increase of 12%, with growth balanced across mature and developing markets. Volume, modest pricing, and favorable foreign exchange movements each accounted for approximately one-third of the increase. International revenue was $322 million year-to-date, up 10% compared to the same period last year. International adjusted EBITDA rose to $26 million, or 9% year-over-year, reflecting strong top-line momentum, partially offset by product and customer mix. International adjusted EBITDA margin declined modestly in Q3 compared to the prior year-end.

Adjusted EBITDA was $91 million year-to-date, a 15% increase compared to the same period last year. As we look across our international regions, our mature European markets and developing APAC and LATAM markets posted double-digit growth in the quarter. In Europe, our Speed Queen licensed store model continued to gain momentum, and sales remained strong across our direct offices in France, Italy, and Spain. APAC saw steady demand in Australia and New Zealand, along with our continued leadership in key markets like Thailand and expanding growth in newer markets like Indonesia, the Philippines, and Vietnam. Latin America delivered improved results with robust growth in vended, more than offsetting a challenging prior-year comparison in on-premise laundry. Our performance was underpinned by successfully completing major projects in Mexico and proactive customer and portfolio optimization initiatives in Brazil.

In the Middle East and Africa, we are navigating changes in project timelines in our largest market of Saudi Arabia while capturing new opportunities with early laundromat adoption in select African markets. The underlying fundamentals of our international business remain strong, and we view it as a key to our consolidated, sustainable, profitable growth going forward. Turning to slide 14 in our balance sheet, we significantly strengthened our leverage profile, enhancing our ability to continue to drive long-term value creation. As you can see on this slide, we first reduced our leverage organically by approximately three-quarters of a turn through September 30. We then used proceeds from our IPO in October to further reduce our IPO-adjusted leverage to 3.1 times.

At the same time, we have favorably priced term loans post our repricings described earlier, and we have additional opportunity to further tighten our interest rate spread on our term loan in the future by another 25 basis points as a result of our significant deleveraging, supported by one-notch rating upgrades by both major rating agencies. We are on our way toward that goal as in October, we received a one-notch credit rating upgrade from S&P to B plus with a positive outlook, and an outlook upgrade from Moody’s to positive, maintaining for the time being our B2 corporate rating. As a result of all these positive actions we’ve already taken, we will benefit from approximately $46 million in annualized interest savings at today’s debt levels, and we have increased our flexibility through the elimination of any mandatory principal payment requirements through the remaining life of our term loan facility.

Turning to slide 15, as we begin our next chapter as a public company, we will execute on a capital allocation strategy designed to maximize long-term shareholder value. Our primary focus will continue to be on deleveraging. With our strong free cash flow profile, we believe we will continue the trend of one half-a-turn to one full-turn organic deleveraging per year. We will continue to invest in areas to improve our operations and products, launch new products, further expand our capacity and the value we provide to existing customers, and ultimately win market share. We expect to continue these investments while maintaining our capital-efficient business model with a focus on innovation and with CapEx spending targeting approximately 3% of net revenue. We will maintain a very disciplined approach to M&A.

Our strategy is based on selectively pursuing opportunities that supplement our strong organic growth with accretive and value-creating acquisitions that expand our platform and capabilities. Finally, we will maintain flexibility to return capital to shareholders in the future when appropriate through share repurchases in the near term and considering a dividend policy over the longer term. In summary, we’re very pleased with our financial performance in Q3 and the continued momentum in our business and our end markets. We currently intend to provide annual guidance beginning in 2026 when we report our Q4 results, but appreciate that you want to know how 2025 will end. We expect our Q4 growth versus prior year will moderate from year-to-date run rate to the mid-single-digit revenue growth, but 2025 will be an incredible year and mark our second consecutive year of low double-digit top and bottom-line growth.

In addition, we expect to incur a one-time non-cash charge of approximately $16 million in the fourth quarter related to the vesting of stock compensation resulting from our IPO, which we intend to add back for purposes of our adjusted net income and adjusted EBITDA metrics. Now, I’ll turn the call back to Mike. Hey, thanks, Dean. Let me end where I started. Commercial laundry is an incredible, vibrant, and growing industry in which we have earned a privileged position as a clear market leader with significant structural advantages. We have long demonstrated an ability to deliver a best-in-class financial profile, strong margins, and solid growth, and there are systemic tailwinds that we believe will propel continued profitable growth. In closing, I’m incredibly proud of our employees around the world. Their dedication and expertise make these results possible.

I’d also like to thank our distributors, partners, and new shareholders for your continued confidence and support. With that, let’s open the line for questions. We will now begin the question and answer session. As a reminder, we ask that you please limit yourself to one question and one follow-up, then return to the queue if needed. Our first question comes from Andrew Obin with Bank of America. Please go ahead. Good morning and congratulations. Thank you, Andrew. Can we start? Many of your competitors are importing their product into the U.S. How have they responded to the incremental sections to 232 tariffs? What’s the industry environment? Yeah, Andrew, this is Mike. We have seen one small Asian competitor increase price. I think for the full year, they’ve taken 16.5%, something like that. Outside of that, we have actually not seen anything so far.

Again, we expect that to happen, I think, as we talked about really pushing into 2026, but so far, really no activity of note. Interesting. Maybe you acquired a New York distributor in the quarter. Can you talk about the strategic and financial benefits from acquiring distributors? Yeah. Andrew, this is the 16th acquisition we’ve done. We’re vertically integrating in the United States. We are focused on more dense urban markets. Not that we haven’t been opportunistic at times, but we’re really looking for markets that matter, management teams that we can back, where we see opportunity for outsized growth. We like it. It allows us to get much closer to the customer, and we will continue to do it, and we will be a partner. When we see those opportunities and when that distributor principal is interested in speaking to us, we’re always there for them.

Thanks so much. Thank you. Our next question comes from Tomo Sano with JPMorgan. Please go ahead. Hello, everyone. Congratulations from outside as well. Thanks, Tomo. Thank you. Thank you. You achieved double-digit growth on the revenue, and how are you managing supply chain challenges and inventory levels, especially given ongoing global disruptions? Have you seen any improvement or new risks in logistics or components sourcing? Yeah. I’ll say on the supply side, we’ve really seen nothing, Tomo, that is meaningful. There are always blips and always unexpected surprises, but nothing that we do not carry enough inventory for or do not have alternate sources of supply. We feel really good about it. We see no signs that there is going to be any change in that status. We are ready. As you know, we’ve got a very, very capable sourcing team that is out there. Thank you.

Follow-up on digitalization and service revenues. What progress have you made in expanding digital solutions and service-based revenue, such as Laundry IQ and SaaS offerings? How do you see the contributions of these businesses evolving, please? Yeah. Tomo, we’re focused on the long term. We do generate revenue. I would say it’s minimal at the moment. We’re more focused on the analytics, the information that comes back to us as we get these connected machines. As you know, we’ve got several hundred thousand that are out there. I can speak to our most recent launch of the ScanPayWash. Already in the 90 days or so it’s been out there, there have been over 90,000 transactions. All of these things are additive. All of them are meaningful. All of them are putting us into a position of continued strength, but we are early days.

Again, we’re more focused on the power and the information and the data that it allows us to capture to be able to get the true predictive analytics that really complement, again, that best-in-class product that’s out there in the field. Thank you, Mike. Thank you, Tomo. Our next question comes from Susan McClary with Goldman Sachs. Please go ahead. Thank you. Good morning, everyone. My first question is good morning. My first question is talking a bit about the consumer. Can you give us some more color on what you’re seeing in the CIH segment of the business, especially given the headwinds and some of the slowdown that we’ve been hearing as it relates to housing and then just overall consumer activity within R&R and other elements of their spend? Yeah. Susan, I would say one is we have a very, very unique product.

It is a commercial, true professional-grade product. One is a highly differentiated product, but also a highly differentiated strategy where our go-to-market is through independent shops, and demand is extraordinary. We see no change in that. If you wanted to order a product today, you would be waiting in order to get delivery. No change in status on that. That is good to hear. Maybe turning to the balance sheet, can you talk about the path to further deleverage as well as any other priorities for uses of cash as it relates to perhaps shareholder returns and other strategic initiatives? Yes, Susan. Hi. Thank you. First, we are very proud of what we have done year-to-date in terms of our deleveraging, as you have seen in our presentation and our prepared remarks.

Significantly improved our balance sheet through the first three quarters and as a result of the IPO. Our main priority, as we’ve communicated, will continue to be deleveraging through our strong free cash flow through both EBITDA growth and cash generation. Because of that strong free cash flow profile, we have the flexibility to push on multiple levers of capital allocation to continue to invest in CapEx, R&D, new products, and capacity and productivity. We’re not giving any forward guidance on what we intend to do further from a use-of-cash perspective, but given that cash flow profile, we have the flexibility to return capital to shareholders through potential share purchases in the medium term and then to consider dividends over the long term. Okay. Thank you. And good luck. Thank you. Thank you. Our next question comes from Mike Holleren with Baird. Please go ahead. Hey.

Good morning, everyone. Morning. Hey. Congrats on the launch. First question here. Maybe some thoughts on the trajectory into the fourth quarter. I know Dean’s comments were towards a mid-single-digit growth rate in the fourth quarter. That is a decel from earlier this year. Not terribly surprising based on conversations before, but maybe help understand the dynamic for why the growth is tracking where it is and how we should think about sequential dynamics as we move to the fourth quarter. Yeah. Mike, remember, this is two years of consecutive double-digit growth. And the industry grows around a 5% sort of CAGR. It is really just reverting to a more normalized growth rate, number one. Number two, it is always about prior-year comps. The fourth quarter is the strongest quarter of the year for us. Really a combination of those two items.

No change in demand, no change in customer sentiment, no change in anything that we see in the market. As you know, we’re very, very active in the field, always sensing, always touching, always trying to understand the signals. We see no change. Thanks, Mike. The follow-up is just maybe a similar conversation on the margins with a particular emphasis on how the international margins track as we move into the fourth quarter. Moving pieces behind how the international margins track 1H to 3Q and just kind of calibrating where those should be both in fourth quarter and as we exit the year, what the appropriate baseline is. Yeah. Maybe I’ll just touch on it and make sure that Dean, if I do not cover it clearly. In the quarter, obviously, we had customer mix. Obviously, larger customers have a little bit bigger discounts.

We had the launch of some new products, particularly the Stax X, where we wanted to field the early adoption of that product. That is sort of a temporary launch period. As you know, one of the characteristics about us that is unique is our margin parity between the U.S. and international markets is awfully close. We do not see any change in that. Sometimes there will be blips one way or the other. As you know, emerging markets can sometimes be a little more volatile. We flashed to that in the Middle East. Again, no change. We feel really good about it. Those factories in Thailand and in the Czech Republic, where the bulk of what they are selling are extremely well-positioned from a cost perspective. We see no change.

Mike, I would just add on a longer-term view than just the quarter. You can see that year-to-date international revenue grew 10% and EBITDA grew 15%. We enjoyed over 100 basis point improvement in adjusted EBITDA margin and international closing that parity gap with North America. Very proud of the year-to-date results we’ve achieved in international. Thanks, guys. Appreciate it. Our next question comes from Chris Snyder with Morgan Stanley. Please go ahead. Thank you. I believe earlier you referenced that the competitors have yet to push incremental price on the back of 232, at least broadly speaking. Did you guys push incremental price in Q3? It seems like the price in the quarter was about 4%. I’m just trying to figure out if there’s a step up in Q4 if you get the full realization of that. Thank you. Yeah. Thank you, Chris.

We did announce price increases in Q3, and there are some smaller ones that take place in Q4. We have had various price increases as the year has progressed. We will continue to see benefit from those on an annualized or full quarter run rate going forward. Our price increases were meant to offset our cost increases, primarily related to tariffs. We will continue to see that benefit into Q4 and going forward. Thank you. I appreciate that. I guess to follow up, it feels like the guide is implying almost no volumes in Q4. It feels like price alone could maybe be mid-singles. I guess, is there conservatism in that? I understand it has been a long period of really strong growth for you guys, but it does seem like a pretty sharp falloff in volumes.

I think maybe the bigger question is, what does that mean for volumes in 2026? Thank you. Good. Chris, thanks. We’re looking forward to giving you 2026 guidance when we release our Q4 results. We are very bullish on our industry, as Mike alluded to in his prepared remarks. This return to a normalized run rate in Q4 is our current expectation, given where we sit in the quarter, middle of the quarter, and our visibility to our customer demand and our factory production. I’ll turn it over to Mike. I will say again, no change in signals. We are, by nature, somewhat conservative, right? We try to underpromise and overdeliver. I’m not setting expectations there at all. I’m just telling you that is our culture. No change in signal, no change in demand. I’ll repeat what I said earlier.

It’s a tough Q4 comp. The industry is still vibrant. It is growing. We do not see changes in terms of that. As we give you guidance on 2026, we look forward to confirming that outlook. Thank you. I appreciate that. Our next question comes from Ketten Mantora with BMO Capital Markets. Please go ahead. Good morning and congratulations. Maybe to start with, and not to put too fine a line on sort of Q4, but are there any sort of nuances that we should be mindful of between North America and international as we think about sort of what happens in Q4? Not really. I mean, I’m trying to think through your question because it’s a good one. Nothing significant that I can tell you we, again, would expect to change. Again, emerging markets sometimes get lumpy. That happens.

We’ve seen a little bit of that in our Middle East, Africa business, which is less than 3% of revenue. Sometimes that happens, but it can vary from quarter to quarter. The core, the markets that really matter for us that are—and hopefully, I’m not offending any of our customers in these other regions—but given our revenue percentage, right, it’s really the U.S., Europe, and Asia for the most part. That’s how I’d answer that. Got it. No, that’s helpful. Maybe one for Dean. As you think about deleveraging, where do you think sort of you want to get to in terms of a kind of more normalized level? Yeah. Thanks for the question. I think we’ll be prepared to discuss that as we give guidance in the first quarter of next year for 2026 and beyond.

I would emphasize, I guess, in what we said, that this business has very strong free cash flows. Deleveraging will continue to be our number one priority. You have seen that in our balance sheet through the end of September. We have historically deleveraged a half to a full turn per year organically. We will continue to do that. While we continue to invest in the business for growth, new product, productivity, etc., we have multiple levers at our disposal, and we will continue to manage those and look forward to managing those to return value to our shareholders over the long term. I look forward to giving that guidance early next year. Perfect. That is helpful. Good luck. Thank you. Our next question comes from Kyle Mengies with Citigroup. Please go ahead. Hi. Good morning. This is Randy over Kyle.

I guess just on the margin side, outside of volume and price, what are some of the other margin drivers we should be thinking about into 2026? I mean, it’d be great to get some more color on the cost down and manufacturing efficiency initiatives that you guys have in place and how we should be thinking about those contributing to margins going forward. Yeah. Maybe I can start, and then Dean, you can add a little more color. Mix, and maybe I’ll refer you back to sort of slide nine when we talk about it. Mix is a really important part of our margin. The larger capacity product, right, more engineering content, less competitive pressure, and just more value, frankly, that gets offered to the users of those larger products. Mix is a big part that’s meaningful.

On the cost downside, look, there is always opportunity. As we have stressed continually, quality is really the one thing that our customers care about. They talk to us about it all the time. We do have cost down. There are opportunities. We have been pretty good at it. We are very methodical, very careful, very slow because you have dynamic engineering and a product that is bouncing around, particularly in terms of a washer. There are always unexpected things that happen. You cannot always get it, certainly on a computer-aided design, certainly in our laboratories, which we have extensive ones across the world. We do a lot of field testing. Again, we are very, very cautious. It is there. It is meaningful. We will continue to do it. Incremental volumes are meaningful in terms of the contribution that they get to us.

There is a lot of opportunity in these factories to optimize efficiency. Those teams are working on them very diligently day after day. It is a combination really of all those things. Got it. That is helpful. This may be a quick one on capital allocation. I mean, I know that your near-term priority is to continue to deliver. Can you kind of frame up what the M&A pipeline looks for you guys? It would be great to get some color on maybe the size of acquisitions you have done in the past and maybe some areas of your portfolio where you could continue to target, whether that might be more on the distribution side, the tech side, or any other potential gaps you would like to fill. Yeah. Maybe I will start off. You should think of us as very capable in terms of doing M&A.

As we said, we’ve done 16 in the U.S. They’re mainly smaller tuck-in businesses. It is part of the strategy, but it is not something that we need to have. We are capable of growing at quite attractive rates and quite attractive margins. When we see opportunity, we will enter conversations. We have some of those ongoing. I’m not in a position to comment on them. We are always looking, again, on the manufacturing side, but there’s not really anything that would be close or anything that we would be overly excited about. Let me emphasize that we need, at the moment, to continue to grow as we have in the past. Got it. Thanks, guys. Thank you. Our final question comes from Damien Caris with UBS. Please go ahead. Hey, good morning, everyone. Congratulations on the IPO and your third-quarter results. Thanks, Damien.

I have a follow-up question on price. You talked about some additional actions that you’re taking in the fourth quarter. How much pricing benefit that maybe did not flow through P&L this year would you expect to carry over into 2026? Just kind of a hypothetical, if we were to see tariffs ease as a result of ongoing trade negotiations, would you expect to have to lower prices at all? Yeah. Go ahead, Dean. First, I would say from a carryover perspective, again, I apologize, and we’re looking forward to giving guidance in the first quarter for 2026. We had various price increases throughout the year, some in the second quarter, some in the third, and then some in the fourth.

You will see some benefit next year from carryover pricing actions into next year from a price and profitability standpoint, if that helps you know what I’m like. Yeah. From a price give back, we do not have a history of doing that. We are always, as I stated earlier, sensing, talking, seeing. I think one of the strengths for us is we are very nimble. We are very quick. If we sense anything, hey, you will see us act. There is not a history of doing that, and I would not expect that to change. Okay. Thanks. That is helpful. You talked a little bit earlier about, in North America, some of that strength in the market is new entrants emerging. Curious if you have a sense for what proportion of this emerging customer base you are winning.

Is that keeping up with your installed base share of the market, or is that maybe an opportunity where you’re outgrowing? Thanks. Yeah. Good question. If you think about the newer entrant coming in, they’re really looking to scale up faster. They’re looking for multi-site, or as I stated in my earlier comments, oftentimes it’s multi-state. What you must have to do that is you need a full digital suite to allow that operator to understand what’s happening, to be able to maximize revenue, to be able to manage their costs, and really get the intelligence. As a matter of fact, we call our digital platform insights because it gives the operator insights on how to be more effective, how to be more efficient. When they adopt those technologies, the financial performance of those stores improves. We think our value proposition is very strong.

Particularly for the newer entrant, again, looking to scale, we believe we have by far the most comprehensive digital solution in the marketplace. We are continuing to invest in that. We see a lot of opportunity for continued value. You will see us strengthen that offering. Appreciate it. Good luck with everything. Thank you. Thank you. This concludes today’s question and answer session. I would now like to turn the call back over to Mike Shabe for any additional or closing remarks. Thank you very much. That concludes our meeting. I really, really appreciate everybody joining. Thank you for the questions. We look forward to updating you in the next quarter. Thanks again. Thank you. That concludes today’s third quarter 2025 Alliance Laundry Earnings Conference call. You may now disconnect your lines at this time and have a wonderful day.