Graco Q4 Earnings Call Highlights

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• Graco pivoted from selling motors to licensing the ETM technology to non-competitive OEMs and motor manufacturers

  80% confidence

• The company ended the year with net cash of $600 million and described the balance sheet as providing flexibility to pursue long-term objectives

  80% confidence

• Operating cash flow for the year totaled $684 million, up 10% from 2024, driven in part by inventory reductions

  80% confidence

• Capital expenditures are projected at $90 million to $100 million in 2026, excluding about $50 million for facility expansion projects

  80% confidence

• Construction of a new corporate headquarters building at the French Lake campus has a planned cost of about $50 million, with most spending expected in 2026

  80% confidence

• Contractor demand remained constrained by sluggish conditions in core construction markets

  80% confidence

• The acquisition pipeline remains strong, with well over 100 names under consideration at any given time

  80% confidence

• The effective tax rate is expected to be 20% to 21% in 2026, excluding excess tax benefits from stock option exercises and other one-time items

  80% confidence

• Long-term objective to generate one-third of revenue growth through disciplined M&A

  80% confidence

• Total company adjusted operating earnings rose $21 million, or 15%, and adjusted operating margin was 27% versus 25% a year earlier

  80% confidence

• Inventory was at its lowest level since June 2021, ending the year at $336 million, down $46 million for the year and down $140 million from the end of 2022

  80% confidence

• Tariffs increased product costs by $4 million in the quarter, reducing gross margin by 70 basis points. For the full year, tariffs totaled $14 million and reduced gross margin by 60 basis points

  80% confidence

• Fourth-quarter sales were $593 million, up 8% from the prior year, attributed to 4% from acquisitions, 2% from currency translation, and 2% from organic sales

  80% confidence

• Expansion markets included $5 million of upfront electric motor license fee revenue in the quarter and $7 million for the full year

  80% confidence

• The outlook is described as pretty cautious, while noting that recent order trends supported the guidance

  80% confidence

• Corob grew 25% in the quarter and delivered its largest fourth quarter in the past three years

  80% confidence

• Based on current exchange rates and similar volumes and mix as 2025, currency could have a 1% favorable impact on 2026 net sales and net earnings

  80% confidence

• Industrial segment organic growth of 5% was driven by completions in powder finishing systems and good growth in the Americas and EMEA, offset partly by declines in Asia-Pacific, particularly China

  80% confidence

• Corob, Radia, and Color Service together are expected to generate nearly $190 million in full-year 2026 revenue

  80% confidence

• High single-digit full-year sales growth in the semiconductor business

  80% confidence

• Pricing is expected to contribute about 1% to 1.5% to 2026 revenue growth

  80% confidence

• Upfront licensing revenue is likely lumpy, and 2026 guidance does not assume additional upfront fees. Royalties may follow over time

  80% confidence

• Unusually strong incremental margins for the industrial segment—76% for the quarter and 117% for the full year—crediting benefits from the company's One Graco approach

  80% confidence

• Graco is guiding to low single-digit organic revenue growth in 2026 on a constant-currency basis, and mid-single-digit growth including incremental revenue from acquisitions

  80% confidence

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