The Eastern Company — Third Quarter 2026 Earnings Summary

Financial Performance:

• Net sales increased 36% year-over-year to $75.0 million for the third quarter of 2026, compared to $55.3 million in the prior-year quarter; sales for the first nine months of 2026 increased 3% to $196.5 million from $191.4 million.
• Gross margin expanded to 23.9% in the third quarter of 2026 from 22.3% in the prior-year quarter; gross margin for the first nine months was 21.7% compared to 22.9%.
• Operating profit more than tripled to $5.6 million (7.4% of net sales) in the third quarter of 2026 from $1.7 million (3.1% of net sales) in the prior-year quarter.
• Net income from continuing operations was $3.4 million ($0.57 per diluted share) in the third quarter of 2026, compared to $0.6 million ($0.10 per diluted share) in the prior-year quarter; for the first nine months, net income was $9.7 million ($1.61 per diluted share) versus $4.8 million ($0.78 per diluted share).
• Adjusted EBITDA from continuing operations more than doubled to $7.6 million in the third quarter of 2026 from $3.5 million in the prior-year quarter; for the first nine months, adjusted EBITDA was $14.0 million compared to $15.2 million.
• Selling and administrative expenses increased 16.9% to $11.3 million in the third quarter of 2026 from $9.6 million in the prior-year quarter, primarily due to higher compensation costs.
• The company repaid $2 million of debt during the quarter, with $61 million of revolver availability remaining at quarter-end.
• Accounts receivable increased to $42.5 million at October 3, 2026, from $30.1 million at January 3, 2026; inventories increased to $66.7 million from $56.3 million.

Guidance and Future Outlook:

• Management anticipates starting the fourth quarter from a higher base than the prior year, supported by a full automotive launch calendar and a broadened customer base for returnable transport packaging.
• Increasing truck production and fleet replacement are expected to favor demand for mirror assemblies and other commercial vehicle products.
• A pipeline of customer-driven and internally developed products is expected to position the company well in industrial hardware markets.
• Management expects strong demand in the aerospace and defense markets, where Sungear and Crown Precision have established a presence.
• The company plans to navigate industry-wide macro pressures, including rising input and logistics costs, through normal commercial processes with customers.
• Future focus includes converting the $126.1 million backlog, protecting margins, and maintaining discipline on capital allocation, including acquisitions that complement core strengths.

Business Segments and Product Lines:

• Sales growth in the third quarter was driven by higher shipments of truck mirror assemblies ($7.4 million increase), returnable transport packaging ($5.7 million increase), and latch and handle assemblies ($1.1 million increase).
• Sungear and Crown Precision contributed $5.4 million in sales during the third quarter, marking their first full quarter of contribution and adding revenue from the aerospace and defense markets.
• New products at Eberhard moved from development into production during the quarter.
• For the first nine months, aerospace and defense sales from acquired businesses totaled $7.1 million, partially offset by lower shipments of returnable transport packaging ($5.2 million decrease).
• Backlog increased 70% year-over-year to $126.1 million, providing visibility through the balance of 2026 and into 2027.

Market and Competitive Landscape:

• The company serves commercial transportation, logistics, aerospace, defense, and other industrial markets.
• The acquisition of Sungear and Crown Precision expanded the company's footprint into the aerospace and defense market.
• Management noted that demand improved for truck mirror assemblies, returnable transport packaging, and latch and handle assemblies.
• The company operates from locations in the U.S., Canada, Mexico, Taiwan, and China.

Risks and Challenges:

• Risks include fluctuations in exchange rates, inability to repatriate foreign cash, and impacts from trade tariffs and political instability.
• Potential impacts from higher raw material and component costs, supply chain disruptions, and shortages of steel, plastics, scrap iron, zinc, copper, and electronic components.
• Risks associated with integrating Sinecera and Sungear, including the possibility that these businesses do not perform as expected or that anticipated benefits are not realized.
• Exposure to global economic conditions, interest rates, and downturns in the automotive, construction, aerospace, defense, and general industrial markets.
• Risks related to restrictions on operating flexibility imposed by the credit facility agreement.
• Potential adverse impacts from climate change, natural disasters, geopolitical events, pandemics, and military conflicts.

Management Commentary and Tone:

• Ryan Schroeder, President and CEO, stated that the third quarter demonstrated the benefits of restructuring initiatives combined with improving demand.
• Schroeder noted that net sales, gross margin, and operating profit as a percentage of sales reached their highest levels in five quarters.
• Management emphasized that much of the growth was organic, driven by improved demand and higher gross margins on increased volume.
• Schroder highlighted that the company achieved growth while reducing debt, maintaining the dividend, and preserving ample liquidity despite increased working capital requirements.
• Management expressed confidence in the rationale for entering the aerospace and defense market, citing strong demand and room for a disciplined operator to grow.

Other Key Points:

• The company recognized a non-cash bargain purchase gain of $6.5 million in the first nine months of 2026 related to the acquisition of Sungear and Crown Precision.
• Cash dividends per share remained consistent at $0.11 per share for the third quarter of 2026 and $0.33 per share for the first nine months.
• The conference call to discuss results was scheduled for November 11, 2026, at 9:00 AM Eastern Time.
• The company's stock trades on the NASDAQ under the ticker symbol EML.