Eastern (NASDAQ:EML) executives told investors the company navigated a difficult fiscal 2025 marked by pressure in heavy truck and automotive markets, while making what management described as significant structural and operational changes to position the business for improved performance as demand stabilizes.
Management frames 2025 as a “foundation” year amid soft end markets
Chief Executive Officer Ryan Schroeder said fiscal 2025 was defined by “challenging end markets” and tariff and macro uncertainty, alongside “significant operational progress” aimed at preparing the company for future growth. Schroeder said the company began to see “early signs of stabilization” in November and December, and noted that sequential improvement in the fourth quarter suggested the third quarter may have represented a trough.
Fourth-quarter results show sequential improvement, but year-over-year declines
Chief Financial Officer Nicholas Vlahos noted fiscal 2025 was a 53-week year, with the fourth quarter spanning 14 weeks versus 13 weeks in the prior-year period.
In the fourth quarter, net sales decreased 13.7% to $57.5 million from $66.7 million a year earlier, driven by lower shipments of returnable transport packaging products and truck mirror assemblies. For the full year, net sales fell 9% to $249 million from $272.8 million, reflecting the same shipment declines.
Despite the year-over-year decline in the fourth quarter, Schroeder highlighted sequential improvement, saying revenue rose 4% from the third quarter (from $55.3 million to $57.5 million) and adjusted EBITDA improved by $1.1 million sequentially. He said that equated to a 50% margin on incremental revenue versus the prior quarter, which he attributed to cost actions taking effect as volumes stabilized.
Margins, expenses, and profitability
Gross margin in the fourth quarter was 22.8% of sales compared with 23.0% in the prior-year quarter, which Vlahos attributed primarily to higher material costs on lower sales volumes. For the full year, gross margin was 22.9% versus 24.7% in fiscal 2024, again driven by higher material costs and lower volume.
Product development costs were 1.6% of sales in the fourth quarter versus 1.7% a year ago. For the full year, product development costs were 1.6% of sales compared with 1.8% in fiscal 2024, which Vlahos said reflected disciplined investment relative to the revenue base.
Selling and administrative expenses fell $1.2 million, or 10.5%, in the fourth quarter versus the prior year period, due to lower commissions, legal fees, and personnel-related costs. For the full year, selling and administrative expenses were “essentially flat” compared to fiscal 2024, though fiscal 2025 included $2.5 million of restructuring charges tied primarily to a second-quarter reduction in force and facility cost actions.
Operating profit in the fourth quarter was $2.2 million (or 3.8% of sales) versus $3.0 million (or 4.5%) a year earlier.
Net income from continuing operations was $1.2 million, or $0.19 per diluted share, in the fourth quarter, compared with $1.6 million, or $0.26 per diluted share, in the prior-year quarter. For the full year, net income from continuing operations decreased 57% to $6.0 million, or $0.98 per diluted share, from $13.2 million, or $2.13 per diluted share, in fiscal 2024.
Backlog and tariff actions
Vlahos said backlog as of January 3, 2026 was $81.1 million, down 10%, or $8 million, from $89.1 million as of December 28, 2024, primarily due to lower orders for returnable transport packaging products.
Schroeder said the company “neutralized approximately $10 million of tariff exposure,” stating it offset substantially all of the impact through pricing actions and supply chain cost reductions. He added that the company is working to build more flexible supply chains that can provide customers multiple sourcing options domestically and offshore.
Restructuring, portfolio changes, capital allocation, and 2026 view
Schroeder said Eastern executed restructuring and footprint optimization initiatives that lowered the cost base, generating approximately $4 million in annual savings. He also described leadership changes, including hiring Zach Gorny to lead Eberhard, promoting Emilio Ruffolo to lead Big 3, and adding two commercial leaders to support growth initiatives.
On portfolio actions, Schroeder said the company divested the underperforming Centralia Mold division of Big 3, calling it a drag on earnings and a move intended to focus resources on core businesses.
Vlahos said the company refinanced its credit facility in October, entering into a new $100 million, five-year revolving credit facility with Citizens Bank. As of March 3, 2026, Eastern had $66 million of availability under the facility. He reported a senior net leverage ratio of 1.35x at the end of the fourth quarter, compared with 1.64x at the end of the third quarter and 1.23x at the end of fiscal 2024.
Other expense for the full year was $0.5 million compared with $0.4 million in fiscal 2024, which Vlahos said was driven primarily by a one-time $0.5 million write-off of unamortized deferred financing fees tied to the termination of the prior TD Bank agreement in connection with the refinancing. He said this was partially offset by a recovery of employment tax credits during the year.
Schroeder said the company reduced debt by $8.7 million, returned $2.7 million to shareholders through dividends, and repurchased approximately 153,000 shares (about 2.5% of shares outstanding). Vlahos added the repurchases totaled about $3.7 million under a program authorized in April 2025.
Looking to fiscal 2026, Schroeder said the company is “cautiously optimistic” about a more constructive demand environment, citing indicators such as order flow in November and December, OEM production signals, and the “depth and quality” of its opportunity funnel. He also said M&A remains a key part of the long-term strategy and that the pipeline of potential transactions has grown over the past year, while emphasizing a disciplined approach focused on strategically aligned and immediately accretive targets.
Schroeder also addressed governance changes, noting that Chan Galbato joined the board in 2025. He said Charlie Henry and Mike Marty will not stand for re-election, and that the company is reducing the board’s size to improve agility. He added that Eastern reviewed and updated corporate bylaws to enhance shareholder alignment and governance transparency, with additional details to be provided in an upcoming proxy filing.
No analyst questions were asked during the call’s Q&A session.
About Eastern (NASDAQ:EML)
Eastern (NASDAQ:EML), based in West Haven, Connecticut, is a diversified industrial manufacturer specializing in secure hardware and metal finishing services. The company operates through two primary segments: Industrial Hardware Products and Security Products, complemented by a Metal Coatings division. Its Industrial Hardware Products segment produces cold-headed fasteners, forgings, hinges and precision components for heavy commercial vehicles, hydraulic cylinders and industrial machinery.
The Security Products segment designs and manufactures a wide range of lock and latch solutions, including padlocks, door hardware, cabinet locks and rental security towers for commercial and institutional applications.
