Please turn to slide three, where I'll recap 2025 and outline the key drivers for our 2026 outlook. We achieved record sales, operating margin, and earnings per share for both the fourth quarter and the full year. Organic sales rose 8%, and reported sales were up 16% this quarter. For the entire year, organic sales grew 5% and adjusted operating margin improved by 190 basis points to 19.6% while we continued investing in strategic priorities.
We generated a record $356 million in free cash flow for 2025, up 7%, reaching a conversion rate of 105%. This strong cash flow supports our robust balance sheet and gives us flexibility to invest in future growth. Our capital allocation continues to focus on strategic M&A, high-return organic investments, competitive dividends, and steady share buybacks. Both acquisitions are expected to be accretive to Adjusted EPS in 2026 after accounting for added interest expense and normal purchase accounting adjustments.
Through this ongoing evaluation, we've identified $10-15 million of European sales and $25-30 million in the Americas, mainly in lower-margin retail and OEM channels that we intend to eliminate during 2026. We anticipate these changes will be neutral or potentially margin accretive in 2026. We expect that pricing, along with continued repair and replacement activity, will fuel further growth in 2026. However, the Dodge Momentum Index is slightly more optimistic, indicating potential growth in non-residential projects.
| Metric | Period | Current guidance |
|---|---|---|
| Reported sales growth (full year 2026) | FY2026 | 8% to 12% (new) |
| Organic sales growth (full year 2026) | FY2026 | 2% to 6% (new) |
| Adjusted EBITDA margin (full year 2026) | FY2026 | 21.5% to 22.1% (new) |
| Adjusted operating margin (full year 2026) | FY2026 | 19.1% to 19.7% (new) |
| Americas organic sales growth | FY2026 | 3% to 7% (new) |
| Europe organic sales growth | FY2026 | down 4% to flat (new) |
| APMEA organic sales growth | FY2026 | 4% to 8% (new) |
| Free cash flow conversion | FY2026 | at or above 90% of net income (new) |
| Reported sales growth (Q1) | Q1 2026 | 12% to 16% (new) |
| Organic sales growth (Q1) | Q1 2026 | 4% to 8% (new) |
| EBITDA margin (Q1) | Q1 2026 | 21.1% to 21.7% (new) |
| Operating margin (Q1) | Q1 2026 | 18.6% to 19.2% (new) |
| Metric | YoY | Note |
|---|---|---|
| Q4 total sales | +16% reported, +8% organic to $625 million | Favorable price and volume, an additional shipping day, data center growth, and acquisitions. |
| Q4 Americas organic sales | +10% organic, +17% reported | Favorable price and volume, one additional shipping day, data center sales, and $27 million of acquisition contribution. |
| Q4 Europe organic sales | +1% organic, +10% reported | Favorable pricing and the extra shipping day, with reported also aided by positive foreign exchange. |
| Q4 APMEA sales | +9% organic, +15% reported | Organic growth plus 6 points of acquisition contribution. |
| Q4 adjusted EBITDA | +28% to $134 million (margin 21.4%, up 210 bps) | Favorable pricing and productivity gains offsetting inflation, European volume deleverage, tariffs, and acquisition dilution. |
| Q4 adjusted EPS | +28% to $2.62 | Operational performance, acquisitions, and foreign exchange gains outweighing higher tax and net interest expense. |
| Full-year total sales | +8% reported, +5% organic to $2.4 billion | Americas (+8% organic) and APMEA (+5% organic) growth partly offset by Europe organic decline of 5%; acquisitions added 2% and FX 1%. |
| Full-year adjusted EPS | +19% to $10.58 | Operations, acquisitions, favorable foreign exchange, and lower net interest expense exceeding higher tax costs. |
| Q4 Europe segment margin | +490 bps to 15.1% | Benefited from the extra shipping day and volume leverage in the quarter. |
| Topic | Previous mention | Current period | Trend |
|---|---|---|---|
| Data center solutions (cooling valves, strainers, drainage, thermal storage) | — | Over 3% of total sales, growing at the higher end of double digits, with a $1 billion-plus addressable market and a shift toward higher-margin stainless steel for liquid cooling. | Rising |
| Acquisitions and M&A pipeline | — | Five deals closed in 2025; eight deals over three years deploying about $660 million and adding roughly $450 million of annualized revenue; pipeline remains active with leverage kept below 2-2.5x. | Rising |
| 80/20 product and channel rationalization | About a 1-point headwind in 2025 | A roughly 2-point organic headwind in 2026, eliminating lower-margin retail and OEM sales in core Americas and Europe. | Rising |
| Europe market and margins | Full-year 2025 organic sales declined 5% | 2026 organic guided down 4% to flat with segment margin roughly flat as restructuring savings trail off and volume deleverage and 80/20 weigh. | Declining |
| Price/cost and copper inflation | — | Higher price in Q1 from prior tariff-related carryover, averaging low single digits for the year; a mid-year price increase possible if copper stays elevated. | Steady |
| Nexa digital strategy | — | Gaining traction across hospitality, stadiums, and multifamily properties and supporting core product sales, though still early in data centers. | Rising |