ALH

• **Overall Q2 2026 Financial Performance

  • Net revenue grew 7% year-over-year, with pricing contributing slightly more than half of the increase, and volume contributing the remainder
  • Gross profit grew 9% year-over-year, gross margin expanded 90 basis points to 39.8%
  • Adjusted EBITDA grew 12% year-over-year to a margin of 28.1% (up 135 basis points); adjusted EBITDA grew 9% excluding $3.8 million in one-time tariff refunds and business interruption insurance proceeds
  • Adjusted net income rose 55% year-over-year, adjusted EPS grew 32% to 41 cents, driven by strong operating performance and a $22 million year-over-year reduction in interest expense
  • Operating cash flow reached $66 million in the quarter, reflecting strong conversion and disciplined working capital management

• **Balance Sheet Strength

  • The company repaid $50 million of debt in Q2, bringing year-to-date debt paydown to $115 million and 12-month total debt paydown to over $800 million
  • Net leverage fell from 4.6x to 2.4x adjusted EBITDA over the past 12 months, with 1 full turn of deleveraging from organic cash flow generation
  • Both Moody's and S&P upgraded the company's corporate and senior debt ratings, reducing future term loan borrowing costs by 25 basis points

• **Strategic Highlights

  • Management highlights commercial laundry as an essential, resilient, replacement-driven industry with diversified demand across non-discretionary end markets including healthcare, hospitality, and industrial services, providing downside protection across economic cycles
  • Digital connected equipment adoption continues to grow, delivering higher value via improved uptime, lower operating costs, better customer experiences, and stronger customer loyalty
  • The company maintains a local-for-local manufacturing footprint that provides a structural cost advantage against peers, and pricing actions have offset inflation and tariff impacts
  • Southeast Asia is a key long-term structural growth market, driven by urbanization, a growing middle class, and rising demand for out-of-home laundromats; the installed base built from new store growth will drive future recurring replacement demand
  • Product mix is shifting toward higher-capacity large chassis equipment, which delivers higher revenue per square foot for store operators, faster service for consumers, and higher margins for Alliance Laundry due to greater engineering content and limited competition

• Full-year 2026 revenue growth guidance is maintained at 6% to 7%, with equal contribution expected from volume and pricing
• Full-year adjusted EBITDA growth guidance is raised to a range of 8% to 10%, up from prior guidance
• Full-year net leverage is now expected to reach 2.0x at year-end, which is lower than the prior forecast of below 2.0x, reflecting stronger-than-expected debt paydown
• Full-year 2026 interest expense is now expected to total approximately $80 million, and the effective tax rate is projected to be 23% (lower than prior estimates)
• Capital expenditure and share count guidance remain unchanged from prior projections
• Revenue is expected to be fairly consistent across the two second-half quarters, with margin expansion weighted more toward the fourth quarter due to geographic mix and seasonal patterns
• One-time benefits from Q2 tariff refunds are not included in the full-year guidance, so any future additional refunds will be incremental upside

• North America: Revenue grew 9% year-over-year, adjusted EBITDA grew 17% year-over-year (12% growth excluding insurance and tariff refund items), adjusted EBITDA margin reached 31.6%. Growth was broad-based across end markets, with product mix contributing a modest positive impact. This segment represents the majority of Alliance Laundry's global revenue.
• International: Revenue was flat year-over-year, adjusted EBITDA totaled $34 million with an adjusted EBITDA margin of 28.9%. Asia Pacific delivered strong growth especially in vended markets, while Europe performed steadily. The Middle East-Africa region (less than 2% of global total revenue) saw temporary demand declines tied to the ongoing regional conflict. Flat overall revenue masked strong underlying regional momentum, and profitability is lumpy quarter-to-quarter due to smaller scale and regional mix shifts, with a long-term trajectory toward margin parity with North America.

• Ongoing conflict in the Middle East has caused temporary demand pauses in the Middle East-Africa region (less than 2% of total revenue) and has resulted in supply chain transit delays; higher energy prices from the conflict have created indirect headwinds for other international markets including Asia and Europe
• Inflationary pressures, including rising steel and freight costs, are slightly hotter than management prefers, creating potential cost headwinds in the second half of 2026 and into 2027
• International profitability is inherently lumpy quarter-to-quarter due to smaller scale, regional mix shifts, and variable demand across markets, which can create earnings volatility
• Eastern Europe faces greater stress from elevated energy costs compared to Western Europe, creating modest regional headwinds

Q: What is the impact of the Middle East conflict on international revenue and earnings, and what impacts are expected for H2 2026? / A: Management notes the entire Middle East-Africa region makes up less than 2% of global revenue, so direct impacts are de minimis. The main impacts are minor transit delays for vessels, and indirect knock-on effects of slightly higher energy costs that caused temporary demand pausing in parts of Asia and Europe. Management expects the region to remain down for the full year, but overall international performance will remain solid long-term, and the crisis has pushed the team to refocus on high-potential African markets.

Q: North American margins are approaching 32%—what is the long-term ceiling for margin expansion? / A: Management declined to share specific internal margin targets, but stated that the company expects slow, steady upward margin trajectory over time. Margin expansion will be driven by ongoing operational excellence, ongoing cost reduction efforts to offset inflation and tariffs, and product innovation supported by expanded engineering and testing capabilities.

Q: What is the company's capital allocation plan once it reaches 2.0x net leverage by year-end, specifically for dividends, M&A, and buybacks? / A: There is no change from prior strategy: the first priority remains maintaining low leverage, followed by reinvestment in the business. Small distributor roll-up M&A is the primary M&A target, as there are very few large attractive opportunities available. Management acknowledges strong organic cash generation will require returning capital to shareholders long-term, with dividends and buybacks the logical end point, but no firm plan has been finalized yet.

Q: How is the company approaching pricing in the second half of 2026 and 2027 given renewed inflation and competitor surcharges? / A: The company has used short-term surcharges for temporary cost increases historically, and permanent price increases for sustained cost hikes. At present, management is watching inflation trends and can offset most modest cost increases with internal actions, but will get ahead of any sustained cost increases with pricing to protect margins, rather than chasing rising costs after the fact.

Q: What is driving international margin pressure in Q2, and how should H2 margins be expected to perform? / A: Margin pressure mostly stems from temporary regional mix shifts, not structural cost issues. Most international manufacturing facilities are highly cost competitive, with regional sourcing keeping margins high. Occasionally, markets have higher sales of lower-margin small chassis equipment, which is used to help new operators enter the market; these operators typically upgrade to higher-margin large chassis equipment for subsequent stores, leading to long-term margin improvement.