Corporate annual report

Financial highlights

A letter from the CEO

Fiscal 2025 was a year of measurable operating discipline. Revenue grew 9.4 percent on a base that has now compounded above ten percent annually for five years. Adjusted EBITDA held at 22.1 percent, unchanged from prior year despite a 6 percent step-up in raw material costs. Free cash flow of $118M funded the completed acquisition of Delft Coatings and left $32M for the buyback program.

The story behind those numbers is simpler than the numbers make it look. We sold more product to customers who had already told us they wanted more of it. We passed price to reflect what our inputs cost. We closed one plant in Ohio because a plant three counties over ran better. We hired 214 people, most in the electronics segment. We did not do a large acquisition and we did not need to.

What we did do is finish a five-year rebuild of the specialty coatings platform. That platform now represents 41 percent of revenue at margins above the corporate average. It is the reason we grew, and it is why I feel comfortable telling shareholders we will do it again in fiscal 2026.

Rebecca Chao, President and Chief Executive Officer

How the business is composed

Specialty coatings serves aerospace and defense OEMs with corrosion protection and radar-absorbent finishes. This is the segment that shipped the second production run of the P-series coating this year, the one that took eleven years to develop and eighteen months to qualify. Industrial adhesives sells structural bonding chemistry into automotive and rail. Electronic materials sells encapsulants and thermal-interface materials into the semiconductor supply chain. Consumer packaging is smaller and shrinking on purpose.

Growth strategy

Andaman's growth thesis rests on three propositions. First, specialty chemistry with real technical differentiation is a durable margin business regardless of macro cycles. Second, the buyers who write the largest specialty checks are consolidating and prefer to buy from a supplier with matched scale, which is why we continue to invest in operational reliability instead of chasing revenue. Third, the electronics tailwind is real and long-dated, and we have earned a seat inside three of the largest semiconductor supply chains.

The three-year plan calls for organic revenue growth of eight to ten percent, one or two tuck-in acquisitions per year at the sub-$150M price band, and continued reinvestment in the specialty coatings and electronic materials platforms. Adjusted EBITDA margin holds at 22 to 24 percent across the plan.

Sustainability and workforce

Scope 1 and 2 emissions declined 6 percent on a like-for-like basis, ahead of the 4 percent target. The two remaining coal-connected boilers at the Fort Wayne facility come out in fiscal 2026 as scheduled. Water withdrawal fell 11 percent at the specialty coatings network as the closed-loop retrofit finished on time. Employee voluntary attrition ran at 8.4 percent, the lowest in company history. First-year retention among the 214 new hires was 91 percent.

Outlook

For fiscal 2026 we expect revenue of $690M to $710M, adjusted EBITDA of $155M to $162M, and diluted earnings per share of $2.05 to $2.15. The guidance assumes stable input costs, no unusual working capital movement, and no material contribution from acquisitions not yet announced.

The outlook contains forward-looking statements subject to the risks discussed in Item 1A of the 10-K.

Capital allocation, in specific terms

The company generated $118M of free cash flow in the year. $32M funded the buyback program at an average price of $46.18, retiring 3.4 percent of shares outstanding. $18M paid the quarterly dividend, which the board raised 6 percent in July. $41M closed the Delft Coatings acquisition, adding 82 employees, a proprietary line of low-VOC exterior systems, and a customer roster of eleven European aerospace OEMs. The remaining $27M added to a cash position now above $340M, which is where we intend to keep it while we underwrite one additional tuck-in candidate for early fiscal 2026.

The board reviews the capital allocation policy every June. This year's review reaffirmed a framework we have used since 2021: reinvest in the two highest-margin platforms first, return the difference through the dividend at a payout ratio of 25 to 30 percent of adjusted net income, and use share repurchases to smooth over dilution from employee stock plans and finance opportunistic acquisitions above 15 percent of market cap. That framework is boring on purpose. Boring frameworks compound.

Operational notes from the floor

The Fort Wayne plant consolidation completed in April, three months ahead of the schedule presented to the board last May. The consolidation moves 41 percent of North American specialty coatings production into the retrofitted Cincinnati facility, which now runs at 78 percent of nameplate on three shifts. The Ohio site closes in Q1 fiscal 2026 and its 214 employees have been offered either a role at Cincinnati with a relocation package or a severance package that averages 22 weeks of pay. 118 of the 214 accepted relocation. That number is higher than the industry average by roughly 30 points and is the result of a package the operations team spent four months designing.

The Cincinnati retrofit itself is worth naming. The site now runs a fully closed-loop water recovery system, which is the reason water withdrawal across the coatings network fell 11 percent in a year when production rose. The capital cost of the retrofit was $18M against an operating benefit currently tracking at $4.2M annually and a projected 12-year insurance benefit that removes the site's Tier II hazardous waste designation.

Research and development, priorities named

The R and D budget in fiscal 2025 was $34M, held flat as a percentage of revenue at 5.3 percent. Three named programs consumed roughly 70 percent of that spend. The first is the P-series coating already discussed, which moved from development into qualification and finished the year fully qualified on two active aerospace programs. The second is a next-generation thermal-interface material designed for AI accelerator packaging at TDP above 700 watts, which finished internal testing and enters customer sampling in October. The third is a bio-derived structural adhesive that finished lab-scale validation and moves to pilot production in the second half of fiscal 2026.

The company files patents deliberately. Four issued this year across the three programs. Two more are prosecuting. We do not report a patent count as a leading indicator because a patent that does not defend a specific customer application is a filing fee we lit on fire. Every issued patent this year defends a specific commercial contract that has been signed or is inside negotiation.