Q4 2021 Terex Corp Earnings Call

Speaker 1: Greetings and welcome to the Terex Corporation four-quarter and full year 2021 results conference call. At this time, all participants in a listen-only mode.

Greetings and welcome to the Terex Corporation fourth quarter and full year 2021 results conference call.

At this time all participants are in a listen only mode.

Speaker 1: A brief question and answer session will follow the formal presentation. As a reminder, this conference is being recorded.

A brief question and answer session will follow the formal presentation.

As a reminder, this conference is being recorded.

Speaker 1: It is now my pleasure to introduce your host, Randy Wilson, Director of Investor Relations for Terax Corporation. Thank you, sir. You may begin. Thank you.

It is now my pleasure to introduce your host Randy Wilson director of Investor.

Investor relation fourth Terex Corporation. Thank you Sir you may begin.

Speaker 2: Good morning, and welcome to the TAREX fourth quarter and year-end 2021 earnings conference call. A copy of the press release and presentation slides are posted on our investor relations website at investors.tarex.com. In addition, the replay and slide presentation will be available on our website. I'm joined by John Garrison, Chairman and Chief Executive Officer, and Julie Beck, Senior Vice President and Chief Financial Officer. Their prepared remarks will follow.

Good morning, and welcome to the Terex fourth quarter and year end 2021 earnings conference call a copy of the press release and presentation slides are posted on our Investor Relations website at investors that Eric Dot com.

In addition, the replay and slide presentation will be available on our website I'm joined by John Garrison, Chairman and Chief Executive Officer, Julia <unk>, Senior Vice President and Chief Financial Officer, They're prepared remarks will be followed by Q&A.

Speaker 2: please turn to slide two of the presentation, which reflects our safe harbor state.

Please turn to slide presentation, which reflects our safe Harbor statements.

Speaker 2: Today's conference call contains forward-looking statements which are subject to risk that could cause actual results to be materially different from those expressed or implied.

Today's conference call contains forward looking statements, which are subject to risks that could cause actual results to be materially different from those expressed or implied.

Speaker 2: In addition, we'll be discussing non-GAAP information that we believe is useful in evaluating the company's operating...

In addition, we'll be discussing non-GAAP information that we believe is useful in evaluating the company's operating performance.

Speaker 2: Reconciliations for these non-GAAP measures can be found in the conference call materials. Please turn to slide three.

Reconciliations of these non-GAAP metrics can be found in the conference call materials.

Please turn to slide three and I'll turn it over to John garrison.

Speaker 2: Thank you, Randy, and good morning. I'd like to welcome everyone to our earnings call, and thank you for your interest in Terra.

Thank you Randy and good morning.

I would like to welcome everyone to our earnings call and thank you for your interest in Terex.

Speaker 2: We are proud of all T.E.R.E.X. team members who are keeping themselves and others safe, meeting the needs of customers, and helping our community.

We are proud of all Terex team members, who are keeping themselves and other space.

Meeting the needs of customers and helping our communities.

Speaker 2: I would like to thank our team members around the world for their continued commitment towards zero-harm safety culture and Tarek's way values. Safety remains.

I would like to thank our team members around the world for their continued commitment towards zero harm safety culture, and Terex way values.

Safety remains the top priority of the company.

Speaker 2: Driven by Think Safe, Work Safe, Home Safe.

Bye thanks.

Work safe home safe.

Speaker 2: Our strong commitment to zero harm is driving improvement of safety metrics, such as total record

Our strong commitment to zero harm is driving improvement of safety metrics.

Jazz total recordable incident rates.

Speaker 2: which has significantly improved over the past five years.

<unk> has significantly improved over the past five years.

Speaker 2: This is a testament to the hard work and dedication of our team members.

This is a testament to the hard work and dedication of our team members. Please turn to slide four.

Speaker 2: Our strong environmental, social, and governance foundation drive stakeholder value. A few highlights as we progress on our ESG journey. First,

Our strong environmental social and governance Foundation drive stakeholder value.

A few highlights as we progress on our ESG journey.

First environmental.

Speaker 2: Tarek's products help our customers to meet their sustainability goals.

Terex products help our customers to meet their sustainability goals.

Speaker 2: Two-thirds of genie scissors, one-third of genie booms, and 60% of material processing products have an electric option.

Two thirds of Ginnie centers.

One third of Genie bones, and 60% of material processing products have an electric option.

Turning to social diver.

Speaker 2: Diversity, equity, and inclusion is being embraced and driven throughout the organization. Next.

Diversity equity and inclusion is being embraced and driven throughout the organization.

Next leading with strong governance.

Speaker 2: Our ESG efforts are led by senior management with oversight from our board of directors.

Our ESG efforts are led by senior management with oversight from our board of directors.

Speaker 2: We are firm believers in our actions matching our word.

We are firm believers in our actions matching our words.

Speaker 2: whether it's producing sustainable products, promoting diversity, equity, and inclusion, or being good global citizens.

Whether it's producing sustainable products promoting diversity equity and inclusion or being good global citizens.

Speaker 2: The team recognizes there's more work to do around this important topic, and we will provide updates throughout the year.

Team recognizes there is more work to do around this important topic and we will provide updates throughout the year.

Speaker 2: Please turn to slide 5 to review our 2-4-2021 financial highlights.

Please turn to slide five to review, our Q4 2021 financial highlights.

We had an excellent quarter.

Speaker 2: EPS of $0.82, nearly quadrupled year over year.

EPS of <unk> 82.

Nearly quadrupled year over year sales.

Speaker 2: Sales were up 26% year over year, and we ended 2021 with a record backlog of $3 billion, up 122%, driven by strong customer global demand.

Sales were up 26% year over year, and we ended 2021 with a record backlog of $3 billion.

Up 122% driven.

Driven by strong customer global demand.

Speaker 2: And focus cost management continued, resulting in 300 basis points of operating margin improvement.

And focused cost management continued resulting in 300 basis points of operating margin improvement.

Speaker 2: Overall, the fourth quarter financial performance demonstrated strong execution for our team members in a dynamic and challenging operating environment.

Overall, the fourth quarter financial performance demonstrated strong execution by our team members in a dynamic and challenging operating environment.

Please turn to slide six.

Speaker 2: Our execute, innovate, and grow strategy has strengthened our business operations in 2021.

Our execute innovate and growth strategy has strengthened our business operations in 2021.

On the execution.

Speaker 2: The team proactively managed supply chain disruptions to deliver sales growth of 26% year over year.

The team proactively manage supply chain disruptions to deliver sales growth of 26% year over year.

Speaker 2: aggressively manage costs to deliver a 430 basis point improvement in SG&A as a percent of sales, and improve GE's future cost competitiveness as our temporary Mexico facility is now producing telehandlers and continues to ramp up.

Aggressively manage cost to deliver a 430 basis point improvement in SG&A as a percent of sales and improved Jamie future cost competitiveness as our temporary Mexico facility is now producing talent handers and continues to ramp up.

Turning to innovation.

Speaker 2: We introduced new products, including environmental and recycling solutions and materials processing, new electric offerings in GENIE, and electric grid products in utilities.

We introduced new products, including environmental and recycling solutions and materials processing new.

New electric offerings, and Genie and electric grid products and utilities.

Speaker 2: We continue to invest in connected assets and digital capabilities such as customer dealer integration and telematics across the enterprise to better serve customers.

We continue to invest and connected assets and digital capabilities, such as customer dealer integration and telematics across the enterprise to better serve customers.

Speaker 2: We invested in our business for future growth, both organically and inorganically.

We invested in our business for future growth.

Organically and Inorganically.

Speaker 2: The team expanded production capabilities of mobile crushing and screening equipment in China and Northern Ireland.

<unk> expanded production capabilities of mobile crushing and screening equipment in China and Northern Ireland.

Speaker 2: Acquired. MDS International. Offering adjacent products for MP customers.

Acquired Mds international offering adjacent products for MP customers and continued expansion of service facilities, such as our new Houston, Texas location for us.

Speaker 2: and continued expansion of service facilities such as our new Houston, Texas location for utilities customers.

So all of these customers.

Please turn to slide seven.

Speaker 2: The materials processing segment is a consistent, strong performer.

Materials processing segment is a consistent strong performer it is.

Speaker 2: It is a diversified, high-performing portfolio of businesses, which continues to invest.

Diversified high performing portfolio of businesses.

Which continues to invest for future growth.

Speaker 2: MP brands have leading positions in their respective markets with excellent and market product and geographic diversification.

MP brands have leading positions in their respective markets with excellent end market product and geographic diversification.

Speaker 2: We have a great opportunity to grow organically through innovation, product and service development, and expanding into product adjacencies, including conveying, washing, environmental, and recycling.

We have a great opportunity to grow organically through innovation.

Product and service development and expanding into product adjacencies, including convey.

<unk> environmental and recycling.

Speaker 2: Parts and Service remains a focus for the segment as it continues to develop digital offerings for dealers and customers.

Parts and service remains a focus for the segment as it continues to develop digital offerings for dealers and customers.

Speaker 2: More than 8,000 of MP's machines are fitted with telematics hardware, and the number of dealers using customer-dealer integration, or CDI, has doubled in 2021. MP's end-market diverse

More than 8000 of Mp's machines are fitted with telematics hardware and the number of dealers using customer dealer integration or CVI has doubled in 2021.

Mp's end market diversification is our strength.

Speaker 2: Whether it's aggregates, construction, recycling, or global infrastructure, all of these markets are growing.

Aggregates construction recycling or global infrastructure all of these markets are growing.

Speaker 2: Please turn to slide 8, and I will review AWP offerings in NMRC.

Please turn to slide eight and.

I'll review AWP offerings and end markets.

Speaker 2: Starting with our utilities business, it has excellent growth prospects. The need to maintain and grow the electric grid along with continued 5G rollout will drive multi-year demand.

Starting with our utility business it has excellent growth prospects.

The need to maintain and grow the electric grid, along with continued <unk> rollout will drive multi year demand.

Speaker 2: Some key product lines for Terex utilities include bucket trucks, digger derricks, and tree trimmers used for the maintenance and expansion.

Some key product lines for Terex utilities include.

Bucket trucks bigger derricks and treat tumors.

Use of the maintenance and expansion of electrical grids.

Speaker 2: Also, we recently invested in Biotech's battery technology for utility trucks called Smart Power Takeoff, or Smart PTO. This environmentally friendly solution allows our utility booms to operate without truck idling. As a result, our customers can reduce vehicle maintenance and carbon emissions.

Also we recently invested in biotechs battery technology for utility trucks.

Mark power takeoff for smart PTO. This.

This environmentally friendly solution allows our utility booms to operate without truck idling as a result, our customers can reduce vehicle maintenance and carbon emissions.

Turning to our gaining business <unk> is a globally recognized brand with great products.

Speaker 2: Genie is a globally recognized brand with great products.

Speaker 2: The 60-foot J-Boom was named a contractor's top 50 new product.

The 50 foot J boom was named the contractors top 50 new products.

Speaker 2: Hybrid power options on scissors and booms provide indoor and outdoor job site flexibility and quiet emission-free performance, and our new telehandler offers increased lift capacity and lower cost of ownership.

Hi, Brad power options, and scissors, and booms provide indoor and outdoor job sites flexibility and quiet emission free performance and our new <unk> offers increase lift capacity and lower cost of ownership.

Speaker 2: These products demonstrate Genie's strength in listening to customers and responding with innovative, industry-leading products.

These products demonstrate <unk> strength and listening to customers and responding with innovative industry leading products.

Speaker 2: Gini's end markets of construction, infrastructure, and industrial applications will drive demand.

In these end markets of construction infrastructure and industrial applications will drive demand.

Speaker 3: Further, we are at the beginning of a new multi-year replacement cycle in North America and European rental markets.

Further we are at the beginning of a new multi year replacement cycle in North America and European rental markets.

Speaker 2: Please turn to slide nine, and I will discuss the supply chain environment.

Please turn to slide nine and ill discuss the supply chain environment.

Speaker 2: Like most other industrial companies, we are facing shortages and cost pressures for materials, logistics, freight, and labor. These headwinds have constrained our

Like most other industrial companies, we are facing shortages and cost pressures for materials logistics.

And labor.

These headwinds have constrained our growth in the short term.

Speaker 2: The significant increase in COVID cases in January and February around the world are impacting our production and supplier deliveries. However, we are aggressively managing.

The significant increase in Covid cases in January and February around the world are impacting our production and supplier deliveries.

However, we are aggressively managing these challenges.

Speaker 2: The team continues to mitigate cost pressures and minimize production disruption by staying close to our existing suppliers and expanding our supply base.

The team continues to mitigate cost pressures and minimize production disruption by staying close to our existing suppliers and expanding our supply base.

Speaker 3: Redesign components to maximize availability of critical inputs to improve production.

Redesign components to maximize availability of critical inputs to improve production.

Speaker 2: Provide transparent communication of delivery and cost headwinds for our customers. And we have taken price inaction.

Provide transparent communication of delivery and cost headwinds to our customers and we have taken pricing actions.

Speaker 2: but they have not been sufficient to offset unprecedented material and logistics inflation, which accelerated in the back half.

But they have not been sufficient to offset unprecedented material and logistics inflation.

Which accelerated in the back half of 2021.

Speaker 2: We anticipate these challenges to continue in the first half of 2022. However, for the full year, we anticipate material costs stabilizing and being price cost neutral as price realization improves throughout the year.

We anticipate these challenges to continue in the first half of 2022.

However for.

For the full year, we anticipate material costs stabilizing and being price cost neutral as price realization improves throughout the year.

Speaker 2: Our production and supply chain team members are working tirelessly.

Our production and supply chain team members are working tirelessly they are demonstrating resilience and flexibility to increase customer deliveries and with that I'll turn it over to Julie for her first earnings call with Terex Julien Thanks, John and good morning to everyone. I am very excited to have joined <unk> with.

Speaker 3: They are demonstrating resilience and flexibility to increase customer delivery.

Speaker 2: And with that, I'll turn it over to Julie for her first earnings call with Terex. Julie? Thanks, John . And good morning to everyone. I am very excited to have joined Terex with its great brand, Terex Way values, strong history, and strong balance sheet. I look forward to working with the team to drive operational margin improvement, free cash flow generation, growth, and enhancing value for all stakeholders. Now turning to...

It's great brand Terex way values strong history and strong balance sheet.

I look forward to working with the team to drive operational margin improvement free cash flow generation growth and enhancing value for all stakeholders.

Now turning to slide 10.

Speaker 4: I want to congratulate the team on posting excellent fourth quarter results.

I want to congratulate the team on posting excellent fourth quarter results.

Speaker 4: Looking at the fourth quarter, sales of $990 million were up 26% year-over-year, as year-end market demand remained strong.

Looking at the fourth quarter sales of $990 million were up 26% year over year as year end market demand remains strong.

Speaker 4: For the quarter, we recorded an operating profit of $70 million, more than double our operating profit of $32 million in the fourth quarter of last year. Operating profit increased due to strong sales and $3 million of positive financial callout.

For the quarter, we recorded an operating profit of $70 million more than double our operating profit of $32 million in the fourth quarter of last year.

Operating profit increased due to strong sales and $3 million of positive financial call up.

Speaker 4: Operating margins improved 300 basis points in the quarter driven by actions to prudently manage and reduce costs.

Operating margin improved 300 basis points in the quarter driven by actions to prudently manage and reduce cost.

Speaker 4: We achieved this positive operating result through disciplined cost control while adapting to a dynamic market environment.

We achieved this positive operating results through disciplined cost control, while adapting to a dynamic market environment.

Speaker 4: Interest and other expense was approximately $8 million lower than the fourth quarter of 2020 due to a gain related to the relocation of our GENE Administrative Office and reduced debt levels.

Interest and other expense was approximately $8 million lower than the fourth quarter of 2020 due to a gain related to the relocation of our genie administrative office and reduced debt levels.

Speaker 4: our effective tax rate of approximately 15 percent benefited from discrete items, including the favorable resolution of tax audits.

Our effective tax rate of approximately 15% benefited from discrete items, including the favorable resolution of tax audits.

Speaker 4: Our fourth quarter earnings per share of $0.82 increased nearly four times, representing a $0.61 improvement over last year. The financial call-outs highlighted on this slide represent a $0.16 benefit in the quarter.

Our fourth quarter earnings per share of <unk> 82 cents increased nearly four times, representing a 61 set improvement over last year. The financial Callout highlighted on this slide represent a 16 benefit in the quarter.

Speaker 4: Free cash flow for the quarter was below our expectations. First, we have not yet received an approved $39 million IRS refund. And second, inventories increased due to disruption and logistics delays.

Free cash flow for the quarter was below our expectations.

We have not yet received an approved $39 million IRS refund.

And second inventories increased due to disruption and logistics delays.

Speaker 4: Turning to slide 11 and our Materials Processing Segment Financial Results.

Turning to slide 11, and our materials processing segment financial results.

Speaker 4: MP continues to perform very well with sales of $454 million, up 24% compared to the fourth quarter of 2020, and the business ended the year with a backlog of $1 billion, which is nearly double that of a year ago. These results were driven by continued strong customer demand in all end markets and geographies.

<unk> continues to perform very well with sales of $454 million up 24% compared to the fourth quarter of 2020 and the business ended the year with a backlog of $1 billion, which is nearly double that of a year ago.

These results were driven by continued strong customer demand in all end markets and geographies.

Speaker 4: MP delivered 13.8 percent operating margins by driving sales growth while managing material costs and manufacturing headwinds. This is a testament to the team's operational execution.

MP delivered 13, 8% operating margins by driving sales growth, while managing material cost and manufacturing headwinds. This is a testament to the team's operational execution.

Speaker 4: Turning to slide 12 and our aerial work platform segment financial results.

Turning to slide 12, and our aerial work platforms segment financial results.

Speaker 4: AWP sales of $534 million increased by 30% compared to last year, driven by strong global and market demand. AWP fourth quarter bookings of $922 million were up 23% year over year, while backlog at quarter end was nearly $2 billion, up 137% from the prior year.

AWP sales of $534 million.

<unk> increased by 30% compared to last year, driven by strong global end market demand.

AWP fourth quarter bookings of $922 million were up 23% year over year, while backlog at quarter end was nearly $2 billion up 137% from the prior year.

Speaker 4: AWP delivered improved operating margin of 4.8% in the quarter driven by strong customer demand and prudent expense management.

AWP delivered improved operating margin of four 8% in the quarter driven by strong customer demand and current expense management.

Speaker 4: Turning to slide 13 and full year 2021 financial highlight.

Turning to slide 13, and full year 2021 financial highlights.

Speaker 4: Our performance in 2021 reflected strong improvement in the business and the extraordinary efforts of our team members.

Our performance in 2021 reflected strong improvement in the business and the extraordinary efforts of our team members, earning.

Speaker 4: Earnings per share increased significantly from $0.13 to $3.07 or a $2.94 improvement.

Earnings per share increased significantly from 13 to $3 seven or $2 94 set improvement.

Speaker 4: Sales of $3.9 billion were up 26% year-over-year as end markets recovered.

Sales of $3 $9 billion were up 26% year over year as end markets recovered.

Speaker 4: Operating margin of 8.4% expanded 620 basis points driven by strict expense discipline.

Operating margin of eight 4% expanded 620 basis points driven by strict expense discipline.

Speaker 4: SG&A spending was $42 million lower year over year at 11% of sales, beating our 12.5% target.

SG&A spending was $42 million lower year over year at 11% of sales meeting our 12, 5% target.

Speaker 4: We delivered a 32% incremental margin, exceeding our 25% target. And we repaid a half a billion dollars of debt, reducing net leverage to 1.1 times.

We delivered a 32% incremental margin exceeding our 25% target and we repaid $5 billion of debt, reducing net leverage to one one times.

Turning to slide 14.

Speaker 4: This slide summarizes our 2021 financial results and call-outs.

This slide summarizes our 2021 financial results and call out.

Speaker 4: included in our operating profit were $5 million of positive call-out.

Included in our operating profit was $5 million of positive callouts.

Speaker 4: Below the line there were $29 million of non-cash charges associated with our debt refinancing and term loan repayment. This was partially offset by a $12 million cash gain related to our Jeanne Administrative Office relocation.

Below the line there were $29 million of noncash charges associated with our debt refinancing and term loan repayment.

This was partially offset by a $12 million cash gain related to our Genie administrative office relocation.

Turning to slide 15.

Speaker 4: I want to reaffirm our disciplined capital allocation strategy, including a strong balance sheet and free cash flow generation to enable growth.

I want to reaffirm our disciplined capital allocation strategy, including a strong balance sheet and free cash flow generation to enable growth.

Speaker 4: Our team members remain vigilant and aggressively manage all costs, generating $125 million of free cash flow in the year.

Our team members remain vigilant and aggressively manage all costs generating $125 million of.

A free cash flow in the year.

Speaker 4: Our strong free cash flow generation and proceeds from the sale of our Tariff Financial Services portfolio in February 2021 allowed us to repay a half billion dollars of debt this year, resulting in net leverage of 1.1 times.

Our strong free cash flow generation and proceeds from the sale of our Terex financial services portfolio in February 2021 allowed us to repay our $5 billion of debt. This year, resulting in net leverage of one one times.

Speaker 4: As a reminder, we have no near-term maturities. Our next maturity is in 2024.

As a reminder, we have no near term maturities. Our next maturity is in 2024.

Speaker 4: We continue to invest in the business in 2021 with $60 million of capital expenditures.

We continue to invest in the business in 2021 was $60 million of capital expenditures.

Speaker 4: Our strong balance sheet and free cash flow generation allowed our board of directors to reinstate and pay out a quarterly dividend for 2021. Just this week, the board has approved an increased dividend of $0.13 per share as we continue to return cash to our shareholders.

Our strong balance sheet and free cash flow generation allowed our board of directors to reinstate and pay out a quarterly dividend for 2021. Just this week. The board has approved an increased dividend of <unk> 13 per share as we continue to return cash to our shareholders.

Speaker 4: We have ample liquidity with $867 million available to us at year-end so we can manage and grow the business.

We have ample liquidity with $867 million available to us at year end, so we can manage and grow the business.

Speaker 4: Now turning to slide 16 and our full year 2022 outlook.

Now turning to slide 16, and our full year 2022 outlook.

Speaker 4: I would like to update you on how we currently anticipate 2022 to develop financially.

I would like to update you on how we currently anticipate 2022 to develop financially.

Speaker 4: It is important to realize we are operating in an unprecedented supply chain environment and a pandemic, so results could change negatively or positively. With that said, this outlook represents our best estimate as of today.

It is important to realize we are operating in an unprecedented supply chain environment and a pandemic so results could change negatively or positively.

With that said this outlook represents our best estimate as of today.

Speaker 4: We anticipate earnings per share of $3.55 to $4.05 based on sales of approximately $4.1 to $4.3 billion.

We anticipate earnings per share of $3 55 to.

To $4 <unk>.

Based on sales of approximately four one to $4 3 billion.

Speaker 5: Traditional seasonality of sales is less applicable in 2022 as the supply chain environment has extended product delivery.

Traditional seasonality of sale is less applicable in 2022 as the supply chain environment has extended product deliveries.

Speaker 5: This sales outlook reflects the latest dialogue with our suppliers. Our 2022 sales are not a function of demand, rather the ability of the supply chain to deliver components.

This sales outlook reflects the latest dialogue with our suppliers our 2022 sales are not a function of demand rather the ability of the supply chain to deliver components.

Speaker 5: We have the internal capacity to produce more and have demonstrated such in the past.

We have the internal capacity to produce more and have demonstrated such in the past.

Speaker 5: AWP sales of $2.3 to $2.4 billion and MP sales of $1.8 to $1.9 billion reflect strong customer demand, but with the constraint presented by the supply chain.

AWP sales of two three to $2 $4 billion and <unk> sales of one eight to $1 9 billion reflects strong customer demand, but with the constraint presented by the supply chain.

Turning to operating margin we.

Speaker 5: We expect operating margin for the year to be in the range of 8.8 to 9.5 percent.

We expect operating margin for the year to be in the range of $8 eight to nine 5%.

Speaker 5: operating margin is expected to be lower in the first half of 2022 and higher in the second half as supply chain headwinds abate and pricing actions taken are realized as backlog is shipped.

Operating margin is expected to be lower in the first half of 2022 and higher in the second half as supply chain headwinds abate and pricing actions taken are realized as backlog is shipped.

Speaker 5: To help frame the development of operating margin in 2022, the first quarter of 2022 will see increased cost pressures compared to the fourth quarter of 2021.

To help frame the development of operating margin in 2022.

First quarter of 2022, we'll see increased cost pressures compared to the fourth quarter of 2021.

Speaker 5: MT's margin of 14 to 14.5 percent will be relatively balanced throughout 2022, but the first quarter will be challenged by supply chain constraints.

<unk> margin of 14% to 14, 5% will be relatively balanced throughout 2022, but the first quarter will be challenged by supply chain constraints.

Speaker 5: AWP margins of 7.8 to 8.5% reflect significantly higher input costs peaking in the first quarter, with price realization improving throughout the year as we work through the backlog. In the first quarter of 2022, we expect AWP operating margins in the low single digit and meaningfully improving throughout the year.

AWP margins of seven 8% eight 5% reflects significantly higher input costs, peaking in the first quarter with price realization improving throughout the year as we work through the backlog.

In the first quarter of 2022, we expect AWP operating margin in the low single digits and meaningfully improving throughout the year.

Speaker 5: Based upon global tax laws, we expect a 2022 effective tax rate of approximately 20.5 percent due to higher U.S. income and lower discrete benefits, partially offset by lower local and U.S. tax on rest of world income.

Based upon global tax laws, we expect a 2022 effective tax rate of approximately 25%.

Due to higher U S income and lower discrete benefits, partially offset by lower local and U S tax.

Rest of World income.

Speaker 5: For 2022, we are estimating free cash flow of $175 to $225 million reflecting another year of positive cash generation.

For 2022, we are estimating free cash flow of $175 million to $225 million, reflecting another year of positive cash generation.

Speaker 5: We also estimate capital expenditures, net of asset dispositions will be approximately $90 million, the largest component being our Jeanne, Mexico facility.

We also estimate capital expenditures net of asset dispositions will be approximately $90 million the largest component being our Genie Mexico facility.

Speaker 5: Corporate and other costs are planned to occur relatively evenly throughout the year.

Corporate and other costs are planned to occur relatively evenly throughout the year.

Speaker 5: Overall, our 2022 guidance represents a continued improvement in operating performance when compared to 2021, despite the challenging supply chain environment.

Overall, our 2022 guidance represents a continued improvement in operating performance when compared to 2021, despite the challenging supply chain environment.

Speaker 5: Turning to slide 17, our 2022 earnings-per-share outlook reflects the following assumption.

Turning to slide 17.

Our 2022 earnings per share outlook reflects the following assumptions.

Speaker 5: From an operational perspective, sales will increase as customer demand remains strong.

From an operational perspective.

Sales will increase as customer demand remains strong.

Speaker 4: Pricing actions, along with manufacturing efficiencies, will offset cost pressure.

Reising actions, along with manufacturing efficiencies will offset cost pressures.

Speaker 5: SG&A reflects prudent investment in the business, including our new product development, engineering, and digital initiatives, and remains at 11% of sales.

SG&A reflects prudent investment in the business, including our new product development engineering, and digital initiatives and remains at 11% of sales.

Speaker 4: Further, non-operational impacts include unfavorable foreign exchange headwinds due to a lower euro exchange rate when compared to 2021. In addition, we have an unfavorable tax impact as our full year effective tax rate is expected to normalize to approximately 20.5% as favorable discrete items from 2021 are not expected to repeat.

Further non operational impacts include unfavorable foreign exchange headwinds due to a lower euro exchange rate when compared to 2021 and.

In addition, we have an unfavorable tax impact as our full year effective tax rate is expected to normalize to approximately 25% as favorable discrete items from 2021 are not expected to repeat.

Speaker 5: These two items together amount to a 30 cents per share headwind.

These two items together amount to a <unk> 30 per share headwinds.

Speaker 4: Next, favorable interest and other expense due to lower debt levels and interest rates.

Next favorable interest and other expense due to lower debt levels and interest rates.

Speaker 4: Finally, one-time items, both positive and negative, related to our bond refinancing and Jeanne Administrative Office relocation are not expected to reoccur.

Finally, one time items, both positive and negative related to our bond refinancing and Genie administrative office relocation are not expected to reoccur.

Speaker 4: Taken together, these assumptions result in our 2022 Earnings for Share Outlook of $3.55 to $4.05.

Taken together these assumptions result in our 2022 earnings per share outlook of $3 55 to.

The $4 five.

Speaker 5: This outlook is the best view at this time and can be impacted positively or negatively depending on how the supply chain develops in 2022.

This outlook is the best view at this time and can be impacted positively or negatively depending on how the supply chain develops in 2022.

Speaker 4: Before I finish, I would like to thank John Sheehan for his support and teaching me all things Tarek and leaving me such a strong finance team. Happy retirement, Duffy. And with that, I will turn it back over to you, John . Thanks, Julie. Turning to slide 18. Looking ahead to 2022, let me provide you a few highlights from our Execute, Innovate, and Grow strategy.

Before I finish I would like to thank John Sheehan for his support and teaching me all things Terex and leaving these such a strong finance team happy retirement Duffy.

And with that I will turn it back over to you John Thanks, Julien turning to slide 18.

Looking ahead to 2022, let me provide you a few highlights from our execute innovate and growth strategy.

Speaker 3: Execution is the foundation to deliver on our commitments to our team members, customers and shareholders. We must and will continue to drive operational improvements.

Execution is the foundation to deliver on our commitments to our team members customers and shareholders, we must and will continue to drive operational improvements.

Turning to innovation we.

Speaker 3: We're investing in new product development whether electrification of our products or new and market applications such as recycling and environmental.

We're investing in new product development, whether it's electrification of our products, our new end market applications, such as recycling and environmental.

Speaker 3: We're also investing in digital in multiple facets of the business.

Also investing in digital and multiple facets of the business.

Speaker 3: improving our internal business processes, and enhancing the ease of doing business with Terax.

Improving our internal business processes, and enhancing the ease of doing business with terex.

Speaker 3: Growing Terex is a focus for all team members. We are investing in parts and service capabilities and expanding manufacturing capacity as we look to better serve our customers.

Rowing Terex is a focus for all team members, we are investing in parts and service capabilities and expanding manufacturing capacity as we look to better serve our customers.

Speaker 3: We have a disciplined M&A process and are looking to grow from acquisition.

We have a disciplined M&A process and are looking to grow from acquisitions.

Speaker 3: Turning to slide 19 to conclude my prepared remarks.

Turning to slide 19 to conclude my prepared remarks.

Speaker 2: Terex is well-positioned to deliver increased shareholder value in 2022 because we have strong business.

Terex is well positioned to deliver increased shareholder value in 2022, because we have strong businesses.

Speaker 3: strong variance, and strong market positions upon which we can grow.

<unk> brands and strong market positions upon which we can grow.

Speaker 3: we will continue to invest, including in new products and manufacturing capacity where demand calls for it.

We will continue to invest including in new products and manufacturing capacity with demand calls for it.

Speaker 3: And we have demonstrated resiliency and adaptability in a challenging environment.

And we have demonstrated resiliency and adaptability and a challenging environment.

Speaker 3: I am confident this will result in Tariffs being an even stronger company. And with that, let me turn it back to Randy. Thanks, John . As a reminder, during the question-and-answer session, we ask you to limit your questions to one and a follow-up to ensure we answer as many questions as possible this morning. With that, I'd like to open it up for questions. Operator?

Im confident this will result in tariffs being an even stronger company and with that let me turn it back to Randy. Thanks.

Thanks, John as a reminder, during the question and answer session. We ask you to limit your questions to one and a follow up to ensure we answer as many questions as possible. This morning with that I'd like to open it up for questions operator.

Speaker 1: Thank you. At this time, I would like to remind everyone in order to ask a question, press star, then the number one on your telephone keypad. We'll pause for just a moment to compile the Q&A roster.

Thank you at this time I would like to remind everyone in order to ask a question Press Star then the number one on your telephone keypad, we'll pause for just a moment to compile the Q&A roster.

Speaker 1: Your first question comes from Stephen Folkman from Jeffries. Please go ahead.

Your first question comes from Stephen Volkmann from Jefferies. Please go ahead.

Speaker 6: You talked about sort of more demand in 2022, if you could get more out the door. So I guess my question is, it looked like things did improve a little bit in the fourth quarter from a supply chain perspective, and we're kind of hearing that from other companies. So can you just maybe take us through what you're actually seeing in the supply chain? And I'm curious if your revenue guidance.

You talked about sort of more demand in.

In 2022, if you could get more out the door.

So I guess my question is it looks like things did improve a little bit in the fourth quarter from a supply chain perspective, and we're kind of hearing that from other companies. So can you just maybe take us through what youre actually seeing in the supply chain and I'm curious if your.

Revenue guidance is kind of backed up by kind of firm commitments from suppliers or are you being conservative about how this plays out through 'twenty two.

Speaker 6: is kind of backed up by kind of firm commitments from suppliers? Or are you being kind of conservative about how this plays out through 22?

Speaker 3: Thanks, Stephen, and good morning. So, if you just take a step back and look at the supply chain, and we're not unique. Demand, outlease, production, really across the supply chain, so similar to other companies.

Thanks, Steve and good morning, So just.

Just take a step back and look at the supply chain.

And meet demands outbreaks production really across the supply chain. So similar to other companies will.

Speaker 3: continue to see persistent disruptions in our plants due to component shortages and logistics-related delays. You know, the reality was, Steve, in the fourth quarter, we actually didn't see an improvement. We saw, you know, a modest decrease, frankly, in key metrics like supplier on-time deliveries, number of parts.

We will continue to see persistent.

For options in our plants due to component shortages and logistics related delays when reality was steam in the fourth quarter, we actually didn't see an improvement we saw a modest decrease frankly in key metrics like supplier on time deliveries number of parts and so that did impact our output continues to.

Speaker 3: And so that did impact our output and it continues to impact us going forward. Now, what are we doing about this is, you know, first, everybody in the organization is engaged.

Impact us going forward now what are we doing about this.

First everybody in the organization, we've engaged we have an escalation process and frankly, all the way up to my level I will spend more time over the last year on supply chain related issues than frankly, I have dealing with customer related issue.

Speaker 3: We have an escalation process and frankly, all the way up to my level, I've spent more time over the last year on supply chain related issues than frankly I have dealing with customer related issues because that's what we are.

That's where we are we've done a lot of engineering, Redesigns and Thats really helped especially around our electronic components working with our suppliers to make availability. Our reviews. What is available in the marketplace. As a result of our strategic sourcing initiatives. We did expand our supply base. So we know where to go now for a second.

Speaker 3: We've done a lot of engineering redesigns and that's really helped, especially around our electronic components, working with our suppliers to make availability or use what is available in the marketplace.

Speaker 3: As a result of our strategic sourcing initiatives, we did expand our supply base.

Speaker 3: So we know where to go now for secondary and third suppliers for parts, so we continue to execute that. And then our teams are just really doing a heck of a job.

Berry and <unk>.

Our suppliers for parts. So we continue to execute that and then our teams are just really doing a heck of a job being adaptable and modifying schedules. The number of schedule changes that we have to implement is frankly daily and so the teams become pretty confident and modifying schedules to get as much out as an example.

Speaker 3: you know, being adaptable and modifying schedules, the number of schedule changes that we have to implement is frankly daily. And so the teams become pretty confident at modifying schedules to get as much out as we can for, for our customers. And so we're staying very close with our suppliers.

Work for our customers and so we're staying very close with our suppliers, we're communicating with our customers.

Speaker 3: We're communicating with our customers in terms of where we are. Our outlook, Steve, is guided by supply chain constraints. We, I would say we

In terms of where we are our outlook, Steve is guided by by supply chain constraints.

I would say we are hedging if you will what suppliers are telling us because based on their previous performance.

Speaker 3: hedging if you will, what suppliers are telling us because based on their previous performance.

Speaker 3: You know, we are hedging to some extent. The material plan that we have is higher than our current outlook, if you will. But we'll factor that into our outlook, Steve. So this is our best look.

We are we are hedging to some extent.

Material plan that we have is higher than our current our current outlook. If you will but we factored that into our outlook Z. So this is our best look.

Speaker 3: that we have as of today in terms of what we believe the supply chain is going to be able to deliver. And again, if the supply chain is able to deliver more, we will be able to deliver more for our customers because this is really a, you know, it's a supply chain driven situation. I think the other important comment around the supply chain and working with our supply chain teams and my interaction with CEOs is

That we have as of today in terms of what we believe the supply chain is going to be able to deliver and again at the supply chain is able to deliver more we will be able to deliver more for our customers. Because this is really a.

It's a supply chain driven situations I think the other important comment around the supply chain and working with our supply chain teams in my interaction with CEO of business, we're driving not just to drive improvement in our supply chain. In 2022, we believe we're setting up for a pretty extended strong demand environment across.

Speaker 3: You know we're driving not just to drive improvement in our supply chain in 2022. We believe we're setting up for a pretty extended strong demand environment across our business.

Our businesses and so it's not just 2022 that we need to increase.

Speaker 3: And so it's not just 2022 that we need to increase.

Speaker 3: the availability of supply, it's for 23 and beyond. And so this is an incredibly focused effort on the team. We believe we're going to see improvement as we go through the year, but we didn't see that improvement in Q4, so we have to be prepared for it. And again, the team's done a heck of a job being adaptable and resilient to the significant changes they've had to absorb on a day-to-day basis.

The availability of supply is for 'twenty, three and beyond and so this is <unk>.

Incredibly focused effort on the team we believe were going to see improvement as we go through the year and but we didn't see that improvement in Q4. So we have to be prepared for it in and again the teams done a heck of a job being adaptable and resilient to the significant changes they've had to absorb on a day to day basis. So that's how I would describe.

Speaker 3: So that's how I'd describe the situation. Again, Stephen, I don't think it's that much different than most industrial manufacturing companies around the world today.

The situation again, Stephen I don't think it's that much different than most industrial manufacturing companies around the world today.

Speaker 6: Okay, great. That's helpful, Culler. And then for the quick follow-up, I'm just curious on steel specifically. You know, how much of your 22 steel is kind of protected as it were? And obviously, as steel prices kind of go down, I'm trying to get a sense of how long it would be until you see that benefit.

Okay, Great. That's helpful color and then for the quick follow up.

Just curious on steel specifically, how much of your 'twenty two steel as kind of protected as it were and obviously as steel prices kind of go down I'm trying to get a sense of how long it would be until you see that benefit.

Speaker 3: Thanks. So, you know, we have a steel hedging program, but again, to see that it really is just for HRC or hot rod coil for the US, our AWP.

So we have a scale hedging program, but again.

And it really is just for HRC or hot rolled coil for the U S. Our AWP business, specifically Genie uses about 60% of that Theres not a hedge market place. So we have been hedged we continued to hedge.

Speaker 3: Specifically Jeanne uses about 60% of that. There's not a hedge market for for plate. So we have been hedged We continue to hedge but we hedge

Hedge to have price visibility not to speculate and the good news is that.

Speaker 3: price visibility, not to speculate. And the good news is that steel was, especially in North America and Europe in the middle of the year and into the fourth quarter was an incredible high, $1,800 to $2,000. We are seeing the steel indices and markets come off of that high, thankfully. And we're anticipating that continues as we go into 2022. Thanks, Steve. Appreciate it. We'll talk to you soon.

Steel was especially in North America, and Europe in the middle of the year and into the fourth quarter was an incredible high eight.

$102000, we are seeing the steel indices and markets come off of that high Thankfully and we're anticipating that continues as we go into 2022.

Thanks, Steve I appreciate it and we'll talk to you soon.

Operator next question.

Okay.

Speaker 1: Your next question comes from Meg Dobre with Baird. Please go ahead.

Your next question comes from Mig <unk> with Baird. Please go ahead.

Speaker 2: Thank you and good morning everyone. So, I guess.

Thank you and good morning, everyone.

So I guess.

Speaker 2: Good morning. My question is on slide 17. I appreciate that break in all the details here. So, two things. The $2.30 worth of cost pressure, I'm curious if there's any way to sort of delineate the major buckets in here in terms of what's raw materials versus freight.

Good morning, Mike My question is on Slide 17, I appreciate that they are breaking all the details here.

So two things.

<unk> 30 worth of cost pressure Im curious, if theres any way to sort of delineate the major buckets in here in terms of whats raw materials versus versus freight.

Speaker 2: It would just be helpful for us to kind of, we can make our own assumptions in terms of where things go from here. And then I get the 2nd, part of the question is, is we're, is we're thinking beyond 2022.

Just be helpful for us to kind of we can make our own assumptions in terms of where things go from here.

And then I guess the second part of the question is as we're thinking beyond 2022.

Speaker 2: The price and efficiency component that you have here, $2.55, do you think that it's something that you can hang on to beyond 2022, or will you have to sort of give back some of the gain that you've got on this slide?

The price and efficiency component that you have $2 55 zones do you think that it's.

It's something that you can hang on to beyond 2022, or will you have to sort of get back some of those some of those gains that you've got on the slide.

Speaker 3: Thanks, Greg. I'll try to take them in sequence, and if I don't, please jump back in. In terms of the, you know, the cost elements, it is both. Cost pressure is included both in materials, components, and freight. And, you know, we've seen

Thanks, Craig I'll try to take them in sequence in a by Don Please jump back in in terms of the cost elements. It is both cost pressure is included both in materials components and freight.

We've seen substantial increases, especially in the back half of 2021, and that's what our current outlook reflects and it does reflect looking at board indices, which again, we do believe in that case, we are going to see some abatement of the rapid increase that we've seen.

Speaker 3: substantial increases, especially in the back half of 2021, and that's what our current outlook reflects, and it does reflect looking at forward indices, which, again, we do believe in that case, you know, we are going to see some abatement of the rapid increase that we're seeing in the

In the.

Speaker 3: And as you look to, you know, our pricing actions and then can this pricing action, you know, continue. So you just take a step back. Our pricing actions have really been designed across our global businesses to offset our material and we'll just continue to do that.

Material cost and as you look to.

Our pricing actions and then pricing actions continue so you just take a step back our pricing actions are really been design across our global businesses to offset our material and logistics cost increases.

We have taken pricing actions throughout 'twenty, one and now obviously, taking pricing actions into 2022. These are not easy conversations with customers, but we've been very transparent with our customers and distribution partners are the level of inflation that we're seeing basically shown all the way downtown showing invoices.

Speaker 3: And so that's the action we've taken. If you look at our respective businesses, MIG, on the AWP side, we've instituted a combination of pricing and surcharges. If you look at the results in 2021, those pricing actions did not offset all the material and freight cost increase.

And so that's the action was taken as you look at our respective businesses Meg on the AWP side due to the combination of pricing and surcharges. If you look at the results in 2021, those pricing actions did not offset all of the material and freight cost increases that we had and we saw that acceleration of inflation in the.

Speaker 3: that we had, and we saw that acceleration of inflation in the back half. In 2022, with further increased pricing, and we believe that price realization improves throughout the year as we shift some of the backlog that was at 21, we were supposed to deliver in 21, we didn't, and it was at 21.

In 2022.

Further increased pricing and we believe that price realization improves throughout the year as we shift some of the backlog that was at 21.

To deliver in 'twenty, one we didn't and it was at 21.

Speaker 3: pricing. So we believe price realization will improve. You look at our MP business, they've really done a good job offsetting most of the material and logistics inflation that we're seeing globally. The nature of their business, they've been able to be more dynamic in updating their pricing on an ongoing basis.

Our pricing so we believe price realization will improve.

At our MP business, they've really done a good job offsetting most of the material and logistics inflation that we're seeing growth globally.

Nature of their business, they have been able to be more dynamic and updating their pricing on an ongoing basis and you can look at their results. They were pretty close to price cost neutral in 'twenty, one and we expect there will be price cost neutral in 2022, and so that with that said they have got the challenge of the inflation spiking in the second half of the year.

Speaker 3: And if you look at their results, they were pretty close to price-cost neutral in 21, and we expect they will be price-cost neutral in 2022. And so with that said, they've got the challenge of the inflation spiking in the second half of the year, so the first half of the year is going to be a little bit more of a challenge, and we think that improves in the back half.

So the first half of the year is going to be a little bit more of a challenge.

We think that improves in the back half of the year.

Speaker 3: Now the other good question is, are these prices going to stick? And I think the answer is yes, Meg, and why do we believe that? Well, first

Now is it.

The other good question is are these prices going to stick.

I think the answer is yes, Meg and why do we believe that was first we're seeing broad based inflation across multiple industries. So our customers are not just seeing price increases from us, they're seeing price increases across the spectrum and so we've been very transparent or <unk>.

Speaker 3: we're seeing broad-based inflation across multiple industries. So our customers are not just seeing price increases from us, they're seeing price increases across the spectrum. And so we've been very transparent. Our pricing actions, again, are designed to offset significant material cost increases that we're seeing and freighting costs, freight increases that we're seeing.

<unk> actions again are designed to offset significant material cost increases that we're seeing.

Trading costs freight increases.

Speaker 3: That's far made, I would say, especially across the line of MP businesses.

Seeing thus far Mig I would say, especially across the line of MP businesses, we've seen good pricing discipline in the industry and I would say in the AWP business I would say, we'd said reasonable pricing discipline, reflecting the dynamic environment in North America, a little less in Europe , and frankly, the only place we're not seeing strong.

Speaker 3: business, I would say with a reasonable pricing discipline, reflecting the dynamic environment in North America, a little less in Europe . Frankly, the only place we're not seeing strong price discipline is in China. Chinese competitors are very aggressive on price. But if we look around the world and across the business, I would say we're seeing good price discipline now. And given that everyone is seeing inflation, I do believe going forward that these prices are going to be able to stick. Got it. That's helpful, Collar.

Price discipline is in China Chinese competitors are very aggressive on price, but if we look around the world and across the business I would say, we're seeing good price discipline now and given that everyone is seeing inflation I do believe going forward that these prices are going to be able to stick.

Speaker 2: Got it. That's helpful caller. And then my, my follow up is on materials processing. Maybe get a little more color on how you see demand progressing here. Just the optically looking at the order is a little bit softer this this quarter. I'm wondering kind of what drove that and the alpha going forward. Thanks.

Got it that's helpful color.

And then my follow up is on materials processing.

Maybe get a little more color on how you see demand progressing here.

The optically looking at the orders a little bit softer this quarter I am wondering kind of what drove that and the outlook going forward. Thanks.

Speaker 3: Yeah, thanks, Meg, and I'm going to be a little, you know, I'm going to take some time on this one, too, because, you know, yes, we did see a little softening on the orders, but that's really timing. We're seeing strong global markets.

Yeah, Thanks, Craig I'm going to be a little im going to take some time on this one too because.

Yes, we did see a little softening on the orders so thats really timing, we're seeing strong global markets and strong customer demand across our <unk> portfolio, absolutely. We have record backlog frankly, our backlog as to why we want to ship more product to our customer that we look at our crushing and screening business, our backlog more than doubled versus the prior.

Speaker 3: strong customer demand across our MP portfolio. Actually, we have record backlog. Frankly, our backlog's too high. We want to ship more product to our customers.

Speaker 3: If we look at our question in screening business, our backlog more than doubled versus the prior year, and we're seeing good growth around the world. In our concrete business, backlog is up tremendously. A year ago, we had several large orders that did not repeat at the end of the year, and so that was a partial reason for the bookings falling off slightly. Our materials handling business, what we call FUCS, you've heard me say this, they only benefit a high steel price.

Per year, and we're seeing good growth around the world and our concrete business backlog is up tremendously a year ago. We had several large orders that did not repeat.

At the end of the year and so that that was a partial reason for the bookings falling off slightly our materials handling business will call folks.

Let me say this the only benefit of high steel prices is scrap metal prices were up in that that backlog is up almost fourfold.

Speaker 3: is scrap metal prices are up and that that backlogs up almost fourfold and so we're seeing great demand literally around the world for our Fuchs products.

So we're seeing great demand literally around the world for our Fuchs product and our environmental business. The investments. We've made there we are seeing our backlog up significantly. We believe we're going to continue to be able to grow that business and then our listing businesses are picking carrier Toronto business down in Australia has been strong throughout the pandemic and we actually.

Speaker 3: In our environmental business, the investments we've made there, we're seeing our backlog significantly. We can believe we're gonna continue to be able to grow that business.

Speaker 3: And then our lifting businesses, our pick-and-carry business down in Australia has been strong throughout the pandemic. And we actually saw a rebound in our RTs and our power businesses from an order rate and a backlog standpoint. So overall, we're seeing strength. We did see some – and again, it's just timing, we believe, with the bookings that declined. The backlog is exceptionally strong, and we're not seeing any weakness, frankly, across any of those businesses around the world. Thanks.

Saw a rebound in our rfps and our power businesses.

I'm in order rate and our backlog standpoint. So overall, we're seeing strength, we did see some and again, it's just timing we believe with the with the bookings decline.

Backlog is exceptionally strong and we're not seeing any weakness frankly across any of those businesses around the world.

Thanks, Michael Operator next question.

Speaker 1: Your next question comes from Stan Elliott with Stifel. Please go ahead.

And your next question comes from Tim Elliott with Stifel. Please go ahead.

Speaker 7: Hey, good morning, everyone. Thank you all for taking the question, and good morning and welcome, Julie. A quick question for you. You know, when we think about the two businesses performing from a margin perspective, I mean, it looks like the incremental margins are about the same for both the AWP and the material processing business. Could you help us a little bit kind of understand what's happening in the dynamics between the two?

Hey, good morning, everyone. Thank you all for taking the question and good morning, and welcome Julian.

A quick question for you.

When you think about the two businesses performing from a margin perspective, I mean, it looks like the incremental margins are about the same for both the AWP and the material processing business.

Could you help us a little bit kind of understand what's happening in the dynamics between the two.

Yeah.

Okay.

Speaker 5: Sure. Thanks, Dan. Just as we think about our incremental margins, obviously, we have some really strong performance in 2021 with 32% incremental margin, you know, particularly strong in the AWP business, and the MP business has been strong in terms of absolute margin

Sure. Thanks, Dan just as we as we think about incremental margins. Obviously, we had some really strong performance.

In 2021% to 32% incremental margin.

<unk> strong.

AWP business and the MP business has been strong in terms of absolute margin performance. So I just want to emphasize that our target remains at 25% incremental margin.

Speaker 5: So I just want to emphasize that our target remains at 25% incremental margin.

Speaker 5: And what you saw in 2021 was higher incremental margins in the first half and then lower in the second half as we started to experience increased material costs. So when you look at the year over year comparison and we talk about going forward into 2020-22, the framework is challenged in the first half of 2022 as accelerating inflation happened in the back half and it continues into the first half of 2022.

And.

What you saw in 2020 wisely with higher incremental margins in the first half and then lower in the <unk>.

Second half as we started to experience increased material costs. So when you look at the year over year comparison, and we talk about going forward into 2020 10-Q on the <unk>.

Framework is challenged in the first half of 2022.

As accelerating inflation happens.

And it continues into the first half of 2022, so that's that.

Speaker 5: So that's a summary of where we're at. If we look at AWP.

That's a summary of.

Where we're at if we look at AWP.

Speaker 5: We're looking for our AWP business in 2022 to improve by 110 basis points year-over-year. Again, as a result of the price cost in the first half, we'll see incremental margins substantially below our target in the first half of 2022 and substantially above our target in the second half of 2022.

We're looking for our AWP business in 2022.

<unk> improved by 110 basis points year over year.

Again.

As a result of the price cost in the first half.

Our rental margins substantially below our target in the first half of 2022.

Essentially above our target in the second half of the Form 10-Q for the MP business, we're continuing to invest in new products like the environmental and recycling as well as manufacturing capacity prices in places in Northern Ireland, and China and India.

Speaker 4: For the MP business, we're continuing to invest in new products like conveying, environmental, and recycling, as well as manufacturing capacity such as in places in Northern Ireland and China and India. We're pleased with MP's absolute level of performance at about 14 percent operating margin and we're making growth investments in the business.

We're pleased with the absolute level of performance at about 14% operating margin.

And we're making growth investments in the business.

Speaker 5: This business has been offsetting inflationary pressures and has done a really nice job. And they're maintaining strong operating margins. But again, they too will be a little bit pressed in the first half of the year. So the team understands our 25% incremental margin framework. We're working hard to achieve those long-term goals. And as the new CFO , I fully support the target of 25% incremental margins going forward.

This business has been offsetting inflationary pressures has done a really nice job in there.

We're maintaining strong operating margins, but again, they too will be a little bit pressed in the first half of the year.

The team understands our 25% incremental margin framework, we're working hard to achieve those lifetime goal and as the new CFO I fully support the target of 25% incremental margins going forward.

Speaker 7: Perfect. And thanks for hashing that out, because I was really getting around the level of investment on the MP side, given the comments that it being more price cost, you know, favorable or neutral. And then along those lines, there's a lot to talk about growth, kind of as we go into the next year. How do we balance kind of some of the growth investments you've got on the MP side?

Perfect and thanks for hashed that out because I was really getting around the level of investment on the MP side, given the comments that are being more price cost.

Favorable or neutral.

And then along those lines, there's lots of talk about growth kind of as we go into the next year.

How do we balance kind of some of the growth investments you've got on the E&P side.

Speaker 7: You know, could we look at a sizable sort of an M&A deal, or what's the temperature there? And I'll take it off, thanks.

Could we look at a sizable sort of an M&A deal or whats the temperature, there and I'll take it off thanks.

Speaker 3: Yeah, thanks. And in terms of, you know, in the first place, the good news is we have a very strong cash flow generation, strong balance sheet. So we have balance sheet capacity to do M&A related activities.

Yes.

In terms of on the first.

So the good news is we're very strong cash flow generation strong balance sheets, we have balance sheet capacity to do M&A related activities.

Speaker 3: Our focus is in and around the MP business.

Our focus is in and around the MP business.

Speaker 3: If you look at the structure of the different markets and different verticals that we compete in, there's still a pretty high degree of fragmentation. So as we build out our pipeline, our pipeline looks to in and around the MP space. We did two smaller acquisitions in 2021, the MDS International is a great example.

The structure of the different markets in different verticals that we compete in there is still a pretty high degree of fragmentation. So as we build out our pipeline our pipeline looks to in and around the empty space. We did two smaller acquisitions in 2021, the MBS International is a great example.

It's in Europe .

Speaker 3: near our plant in Northern Ireland, which is good, it's in Southern Ireland, but it's also in the adjacent scenes in terms of product. So we're able to put that product line to our existing distribution and really get a substantial increase.

None of our plant in Northern Ireland, which is good.

Other island, but it's also in euro Jason in terms of products that we're able to put that product line to our existing distribution and really get a substantial increase.

Speaker 3: in the sales. So, we would look to do M&A. We're going to drive organic growth across both businesses, AWP and MP, and we're looking for inorganic growth. And right now, we're looking more around the pipeline associated with our MP business and perhaps our parts and services business, because we think there may be some opportunities there. Great. Thanks, Dan.

In the sales. So we would look to do M&A, we do we're going to drive organic growth across both businesses AWP and MP and we're looking for inorganic growth and right now were looking more around the pipeline associated with our MP business and perhaps our parts and service business, because we think there may be some opportunities there.

Great. Thanks, Dan Operator next question please.

Speaker 1: Your next question comes from David Razzell with Avocar ISI. Please go ahead. Hi, good morning. Thank you for taking the question. My question is related to how you're thinking about the AWP cycle. By my math, the North American AWP

Your next question comes from David Raso with Evercore ISI. Please go ahead.

Hi, Good morning, Thank you for taking the question.

My question is related to how you're thinking about the AWP cycle by my math, the North American AWP business ended 21 is still not even within 25% to 30% of where you were back in 2018.

Speaker 8: end at 21, still not even within 25-30% of where you were back in 2018.

Speaker 8: So when I think about inflation, obviously where the backlog is versus your sales guide for this year, you seem relatively locked in a low.

So when I think about inflation, obviously, where the backlog is versus your sales guide for this year, you seem relatively locked and loaded for 'twenty. Two it's just about execution on the factory floor and price cost, but when you're thinking of investing in Mexico. When you think of the capacity that youre going to need.

Speaker 8: When you're thinking of investing in Mexico, when you think of the capacity that you're going to need.

It looks like at the end of 'twenty to your North American business, which is not just aerials rights utilities as well.

Speaker 8: North American business, which is not just aerials, right? It's utilities as well.

But you're still going to be almost 20% below where you were in 2018. So I'm just curious your confidence in the cycle beyond 'twenty, two and not just qualitatively, but how are we thinking about the capacity.

Speaker 8: I'm just curious, your confidence in the cycle beyond 22, and not just qualitatively, but how are we thinking about the capacity?

Speaker 8: Exiting 22 with these investments in Mexico. We're just trying to get a flavor for How much are you thinking about growth in 23 and 24 with some quantification and and obviously you're willing to?

Existing 22 of these investments in Mexico, We're just trying to get a flavor for how much are you thinking about growth in 'twenty three 'twenty four with some quantification and obviously your willingness to invest in capacity.

Actions not just qualitative description.

A description.

Speaker 3: So thank you for that question, David, and I'll.

So thank you for that question David.

Speaker 3: within AWPs, both genie and utilities, as you clearly indicated, we are substantially below our demonstrated capacity in those businesses based on, you know, just a couple.

Within Awp's, both Julian and utilities.

You clearly indicated we are substantially below our demonstrated capacity in those businesses base.

Based on just go back to 2018 as a result, now and we have increased our capacity and since 2018 with expanded our Changzhou China facility. For example, now as you rightly call out we're investing in Mexico, so installed capacity.

Speaker 3: As a result now, and we have increased our capacity since 2018, we've expanded our Changzhou China facility for example. Now as you rightly call out, we're investing in Mexico. So installed capacity, we believe we're going to be appropriately sized for installed capacity going forward. We're not anywhere near where we were in 2018, and we've added capacity since.

We believe we're going to we're going to be appropriately sized for installed capacity going forward, we're not anywhere near where we were in 2018.

And we've added capacity. Since then why are we doing that because we do believe the AWP business I'll talk specifically Genie and then I'll talk to utilities.

Speaker 3: Why are we doing that? Because we do believe the AWP business, I'll talk specifically genie and then I'll talk utility.

Speaker 3: is going to grow. If you just look at the replacement cycle, David, for the AWP business and Genie business and think, you know, specifically, you know, U.S., North America and Europe .

He is going to grow.

Just look at the replacement cycle, David for the AWP business.

Genie business.

Iphicles.

U S North America.

Speaker 3: The replacement cycle, frankly, was delayed by the pandemic.

Europe .

The replacement cycle, frankly was delayed by the pandemic and now it's being delayed somewhat by constraints across across the industry. If you look at the rental companies.

Speaker 3: And now it's being delayed somewhat by constraints across the industry.

Speaker 3: If you look at the rental companies, they're growing, they need their fleets to grow, their fleets are aging, rental rates are doing great, used equipment values are doing great, and so we believe that we're in the beginning of that replacement cycle, it's a seven to eight year replacement cycle. It's always difficult, as you know, David, you've been doing this a long time, to predict exactly what quarter or what half of the year.

They are growing.

Their fleet to grow their fleets are aging rental rates are doing great used equipment values are doing great and so we believe that we're in the beginning of that replacement cycle with a seven to eight year replacement cycle. It's always difficult as you know David you've been doing this a long time to predict exactly what quarter what half of the year.

Speaker 3: But the economics in that industry are such that we are entering a pretty strong growth period in the replacement cycle, coupled with growth in other markets.

But the economics in that industry are such that we are entering a pretty strong growth period, and the replacement cycle coupled with growth in other markets.

Speaker 3: in the genie business. So we do believe we're in a growth phase in that business. You know and the replacement cycle with a little bit of growth is going to give us a really strong tailwind for the next several.

And the Genie business. So we do believe we're in a growth phase in that business and.

And the replacement cycle with a little bit of growth is going to give us a really strong <unk>.

<unk> for the next several years that coupled with David the other investment we made was in our utilities business. We have a brand new facility. There. We went from 11 buildings to one so we've increased our installed capacity there as well now we've got the same supply chain issues. So we've got to we've got a breakthrough those constraints, but if you look at the <unk>.

Speaker 3: That coupled with David the other investment we made was in our utilities business. We have a brand new facility there. We went from 11 buildings to one. So we've increased our installed capacity there as well. Now we've got the same supply chain issues so we've got to we've got to break through those constraints.

Speaker 3: But if you look at the utilities business and the growth prospects of the utilities business, you know, infrastructure bill, even without the infrastructure bill, there's significant investment required in the electrical grid, transmission, distribution and.

Utilities business and the growth prospects of the utilities business infrastructure Bill even without the infrastructure Bill there's significant investment required in the electrical grid transmission distribution and maintenance and so we think we're in a strong growth period as well and the utilities business. So we are committed cap.

Speaker 3: as well in the utilities business. So we've committed capital over the last three to five, you know, three to five years to improve our manufacturing capability, improve our manufacturing capacity, because we do believe we're entering a good tailwind period of time for the next couple of years in that AWP segment. And I might add, we're also bullish on our MP business. You know, we've made capacity expansions in Northern Ireland, we've made capacity expansions in India. And so we're investing in our MP business for growth, because we also believe those macro trends are going to continue in a positive fashion for the MP business. And as a result, we have, you know, had a fair

<unk> over the last three to five three to five years to improve our manufacturing capabilities improve our manufacturing capacity because we do believe we are entering the good a good tailwind period of time for the next couple of years and that AWP segment and I might add we're also bullish on RMP business, we've made capacity.

<unk> and Northern Ireland, we've made capacity expansions in.

In India, and so we're investing in our MP business for growth because we also believe those macro trends are going to continue in a positive fashion for the MP business and as a result, we have had a fairly substantial capex budget. The last couple of years is going to extend into 2022 with our Mexico investment and we.

Speaker 3: And as a result, we have, you know, had a fairly substantial CapEx budget the last couple of years. It's going to extend into 2022 with our Mexico investment. And we're doing that because we believe there's good growth opportunities in both segments going forward.

We're doing that because we believe there is good growth opportunities in both segments going forward.

Speaker 8: I'm trying to quantify it a little bit, right? I know some of these moves were not just incremental capacity, they were a more efficient, lower-cost manufacturing. But can you help us with, if my numbers are right, and by the end of 22, we're still, you know, almost 20% below where we were in 18 on revenues?

And trying to quantify it a little bit I know some of these moves were not just incremental capacity that we're a more efficient lower cost manufacturing, but can you help us with if my numbers are right and by the end of 'twenty. Two we're still almost 20% below where we were in 2018 on revenues.

Where is your capacity at the end of this year like water towns already built essentially dropping running Mexico zoom up and running fully by the end of this year, where is your capacity exiting 'twenty two versus 2018 just.

Speaker 8: ballpark. Is it similar, just more efficient? Is it 15, 20? I'm just getting a sense of how you must be viewing the cycle to be adding that capacity and where you're at.

On a ballpark is it similar just more efficient is it 15 20 I was just getting a sense of how you must be viewing the cycle to be adding that capacity and where your revenues are exiting 'twenty two versus that last that long.

Peak.

Speaker 3: So, again, David, near term and, you know, for the next 12 months or so, it's really supply chain. So, as you've said, we've got demonstrated capacity above. I don't want to necessarily say how much, all right, but, you know, if you just look at Watertown, we've substantially increased the capacity there for that business. We sit on the order of magnitude of 50%, you know, for a utilities business, and we believe that's, you know, that's achievable over a couple-year period of time. We expanded our Changzhou facility that gives us a good export for the China market.

Right, So again, David and their near term and for the next 12 months or so it is really supply chain. So as you've said, we've got demonstrated capacity above I don't want to necessarily say how much but if you just look at Watertown with substantially increase the capacity there for that business. We said on the order of magnitude of 50% for our utilities business.

And we believe that that.

Thats achievable over a couple year period of time, we expanded our changzhou facility that gives us a good export.

The China market and an export market and the only thing David I won't want to be clear on our Mexico facility would stood up our temporary facility right now we've got our team in place we're growing our team we're producing tele handlers. There. We are building a special purpose center that will take the next two to three years to complete.

Speaker 3: be clear on. Our Mexico facility, we've stood up our temporary facility right now. We've got our team in place. We're growing our team. We're producing telehandlers there. We are building a special purpose center that will take the next two to three years to complete in Mexico. So we believe we've got plenty of capacity, given the market needs, David. And that's why we're working so hard on the supply chain, not just the immediate, but working with the CEOs of our suppliers to have them understand that we believe we're in a strong growth cycle, and we need product not just for 22, but 23, 24, and 25.

In Mexico. So we believe we've got plenty of capacity given the market needs David and that's why we're working so hard on the supply chain not just the immediate but working with the Ceos of our suppliers to have them understand that we believe we're in a strong growth cycle and we need product not just for 'twenty two 'twenty three 'twenty four 'twenty.

Five.

Speaker 9: David, thank you. Operator, next question.

David Thank you operator next question.

Speaker 10: If your next question comes from Jamie Cook with CreditSys, please go ahead.

Your next question comes from Jamie Cook with Credit Suisse. Please go ahead.

Speaker 11: Hi, good morning. I guess my question is, I'm just trying to square your.

Hi, good morning.

I guess my question is I'm, just trying to square your top line guide for Ariel Ariel I think it's like implied at the midpoint up 8% to 9% so sort of what are you assuming for price versus volume.

Speaker 11: top-line guide for aerials. I think it's like implied at the midpoint up 8 to 9 percent. So sort of what are you assuming for price versus volume? I'm assuming little or not a lot of volume in that forecast. I'm just trying to square it relative to your competitor who's, you know, I think implying double-digit growth.

I'm, assuming little or.

Not a lot of volume in that forecast and just trying to square it relative to your competitor.

I think implying double digit growth.

Speaker 12: So I guess that's my first question. And then my second question, can you just provide a little more color on, I know the free cash flow was a little short of expectation. You talked about inventory build, sort of what's the strategy for inventory, you know, in 2022 and just, you know, what happened during the quarter? Thanks.

So I guess, that's my first question and then my second question can you just provide a little more color on I know the free cash flow was a little short of expectations, you talked about inventory build sort of what's the strategy for inventory.

In 2022, and just what happened during the quarter. Thanks.

Speaker 4: Thanks, Jamie, for the question. When we look at 2022 and compared to 2021, we're seeing far more price increase than we are volume increase. And again, you know, the volume increase, again, it's due to those supply chain constraints, you know, that are holding back, you know, some of that production. So far more again, far more on price.

Thanks, Jamie for the question.

We look at 2020.

And compared to 2021, and we're seeing far more price increase than we our volume increase and again.

<unk> increased again exceeded the supply chain constraints, they are holding back some of that production.

Far more again far more on price than <unk>.

Speaker 4: In terms of free cash flow, yes, we had a disappointment in shortfall for Q4. We had an approved IRS refund. We have an approval letter for $39 million, and we still have yet to receive that. And then we also had an increase in inventories in the quarter. And this, again, is due to those supply chain disruptions.

Volume.

In terms of free cash flow, yes, we had a disappointment.

In.

The shortfall for Q4.

We have an approved IRS refund, we have an approval letter for $39 million.

We still have yet to receive that.

Matt.

And then we also had an increase in inventories in the quarter and this again is due to the.

Supply chain disruption.

Speaker 5: There's, you know, we have a machine sitting in the hospital being ready to ship, waiting for parts that haven't shown up yet, causing production disruptions as well, and we have lots more inventory on the water and in transit than we have had in the past.

There.

We have.

<unk> sitting in the hospital being ready to ship waiting for parts that haven't shown up yet.

Production disruptions as well and we have lots more inventory on the water and in transit and we have had in the past. So we did have an increase in.

Speaker 13: So we did have an increase in inventory. When we looked at 2022, you know, we expected another strong free cash flow year. We're expecting, anticipating our fourth year in a row of strong free cash flow. And when we talk about it, we'll have, we talk about increased earnings. And in terms of a working capital, you know, if sales increase, but that working capital and inventory level will increase some right along.

In inventory when we look to 2022, we expect another strong free cash flow here.

We're expecting anticipating our fourth year in a row of strong free cash flow.

And when we talk about it we'll have we talk about increased earnings and in terms of our working capital.

The sales increase that working capital and inventory level increased greatly.

Great luck with that.

Speaker 11: And just to follow up, though, on the top line guide, more price versus volume.

And just to follow up though on the on the topline guide more price versus volume.

Speaker 11: John , just to be clear, this is more, or you as well, just to be clear, it's not you're assuming you're going to lose market share. It's more of a function of we're being conservative with the guide because of the challenges that are out there.

John just to be clear this is more our E U as well just to be clear its not youre, assuming youre going to lose market share. It's more of a function of we're being conservative with the guide because of that.

Is that are out there.

Speaker 3: Yeah, thanks, Jamie. In terms of market share, we held market share in the genie business, you know, throughout 2021. We're not assuming any significant market share or any market share rose. And we actually think in a couple of product lines, we can gain some market share. For one product category, we did have some significant disruptions was in telehandlers, and we're working with our supply base to improve that. So no, we're not anticipating any significant changes in market share on a year-over-year basis. It's basically based on a current strength.

Yes, thanks, Jamie in terms of market share, we held market share in the Genie business.

2021, we're not assuming any significant market share or any market share erosion. We actually think in a couple of product lines. We can we can gain some market share for one product category. We did have some significant disruptions as was impella handlers and we're working with our supply base.

To improve that so now we're not anticipating any significant changes in market share on a year over year basis.

Basically based on our current constraints by GM environment, and we've got to work to break those constraints alright.

Speaker 11: All right. Great. I appreciate the call. Thanks. Thanks, Jim.

Alright, great. Thanks appreciate the color. Thanks.

Thanks I appreciate it.

Speaker 1: Your next question comes from Stephen Fisher with UBS. Please go ahead.

Your next question comes from Steven Fisher with UBS. Please go ahead.

Speaker 3: Great. Thanks. Good morning. Thanks, Julie, for the Q1 color in the first half, second half on incrementals. I guess with a low single-digit margin in AWP and Q1, it seems like you should have a double-digit margin somewhere in the year. Would you agree with that? And with the normal seasonality not as applicable this year, what do you think or what are you planning for is likely to be your highest margin quarter of the year in AWP?

Great. Thanks, good morning. Thanks.

Thank you Julie for the Q1 color in the first half second half on Incrementals, I guess with a low single digit margin in AWP in Q1. It seems like you should have a double digit margin somewhere in the year would you agree with that.

With the normal seasonality not as applicable this year, what do you think or what are you planning for us is likely to be your highest margin quarter of the year in AWP.

Speaker 4: So from, you know, you're exactly correct. In the first quarter, we expect the AWC margins to be in the low single digits and need to improve each quarter on a sequential basis throughout the year. So it just improves as we go.

Okay.

Youre exactly correct in the first quarter, we expect the AWP margins to be in the low single digits.

And meaningfully improve each quarter on a sequential basis throughout the year. So it just improves as we go every quarter.

Speaker 3: Okay, so fourth quarter should be the highest quarter of the year, you think, then? Okay. Great. And then your AWP...

Okay, So fourth quarter should be.

The highest quarter of the year, you think okay, yes.

Great and then your AWP backlog.

Speaker 3: is almost 85% of your revenue target just because of that supply chain constraint on the revenues. I guess, how much of that backlog is for 2023 at this point?

Is almost 85% of your revenue target just because of that supply chain constraint on the revenues I guess, how much of that backlog is for 2023 at this point.

Speaker 3: and if very little is for 2023, are you expecting to be fully booked on your revenue plan by the end of March?

And if it's very little is for 'twenty three.

Are you expecting to be kind of fully booked on your.

Your your revenue plan by the end of March and I guess, if the supply chain doesn't allow for any more upside are you just going to sort of stopped taking orders.

Speaker 3: And I guess if the supply chain doesn't allow for any more upside, are you just going to sort of stop taking orders?

Speaker 3: Or are you going to take orders and just give a 2023 delivery date on them?

Or are you going to take orders and just give a 2023 delivery date on them.

Speaker 6: So you're right, in terms of our coverage, it's.

So youre right in terms of our coverage.

Speaker 6: historically high, based on the constraints that we've described. In terms of our backlog, we only report backlog that's for 12 months, and so we do have some backlog that extends beyond that.

Historically high based on the constraints.

That was described in terms of our backlog, we only report backlog. This for 12 months and so we do have some backlog that extends beyond that not excuse me.

Speaker 14: It's not in our backlog because we only say what we expect to deliver in the next 12 months. We will be taking pricing actions as we go through 2022. Again, our pricing objective is to offset material and freight costs.

In our backlog because we only state what we expected to deliver in the next 12 months, we will be taking pricing actions as we go through 2022 looking at our pricing.

Objective is to offset material and freight cost increases so we're.

Speaker 6: So we're booking deliveries in 2023. Those would be at a 2023 price level, not at a 20.

Booking deliveries into 2023, those would be at in 2023 price level not at the 2022 price limit.

Speaker 6: Thanks. Okay. Very helpful. Thank you. Appreciate it. Operator, next question.

Okay very helpful. Thank you.

Operator next question.

Speaker 15: Thank you. Next question comes from Nicole DeBlasi with Deutsche Bank. Please go ahead. Yeah, thanks. Good morning, guys. Hi, everyone. My name is Nicole DeBlasi. I'm with Deutsche Bank. I have a question.

Your next question comes from Nicole <unk> with Deutsche Bank. Please go ahead.

Yes. Thanks, Good morning, guys. Good morning morning Corning.

Speaker 16: You mentioned during the prepared remarks, Julie, that the quarterly cadence of revenue is going to look different this year, which makes sense. Is this kind of similar to what it feels like the margin progression is, where you start off at a low point and each quarter gets better? Is it the same path for revenue?

And so you mentioned during the prepared remarks, Julie that quarterly cadence of revenue is going to look different this year, which makes sense is this kind of similar to what it feels like the margin progression is where you start off at a low point in each quarter gets better is it the same pass through revenue.

Speaker 4: Yeah, really the revenue stretch is about half. The first half and second half are relatively consistent.

Yes, it really the revenue strength.

That half the first half and second half are really a relatively consistent.

Speaker 17: Um, you know, what really happens is that price cost mix gets better throughout the year So the first quarter again is really challenged as we ship stuff But still, you know, we have some things in backlog at 2021 prices Um, and and we're experiencing the higher cost in in q1. So, um, really it improves throughout the year But it's more because of the price cost as opposed to the revenue mix. They're relatively equal in the first half

What really happens is that price cost mix gets better throughout the year. So the first quarter again is really challenged as we shifted investments.

Some things in backlog in 2021 prices.

And we're experiencing the higher cost.

Q1, so really it improves throughout the year, but it's more because of the price cost as opposed to the revenue mix.

It's equal in the first half of the second half.

Speaker 18: Got it. Okay, that's clear. Thanks. And then on the SG&A to sales, so you're guiding it a little bit below 11% in 2022. This is the second year in a row that the guidance looks well below the original 12.5% target. How do we think about the sustainability of 11% SG&A to sales beyond 2022?

Got it okay. That's clear thanks, and then on the SG&A to sales so you're guiding it a little bit below 11% in 2022 units in the second year in a row that.

The guidance looks well below like the original 12, 5% target how do we think about like the sustainability of 11% SG&A to sales beyond 2022.

Speaker 6: Yeah, thanks, Nicole. You know, it's an internal debate. And we actually would think that 11 to 11 and a half percent range, you know, given a growing revenue environment is, is perhaps a more reasonable target. Yes, we were at 12 and a half. That was in the past. We've gotten a lot more efficient.

Yes.

Thanks Nicole.

Internal debate and we actually would think that 11% to 11, 5% range given a growing revenue environment is is perhaps a more reasonable target. Yes. We were at $12 five that was in the past we've gotten a lot more efficient our systems and our processes.

Speaker 6: And so I would I would say, you know, that 11 to 11 and a half range is probably a more realistic range for us, you know, you know, subject to change. But as we look at our strategic plan now, I would say 11 to 11 and a half is a better target for us than that, than the 12 and a half percent. And just to add, you know, the team.

So I would I would say that 11% to 11 five range is probably a more realistic range for us.

Subject to change, but as we look at our strategic plan now.

I'd say, 11% to 11 happens a better target for us and then the 12, 5%.

And just to add this team has been really.

Speaker 5: done a great job of lowering SDMA costs, down $100 million from where they were in 2019.

Done a great job of lowering SG&A costs were down $100 million from where they were in 2019.

Speaker 5: And so we're going to be very disciplined about anything that we add, and only add on those value-creating projects. Very, very prudent in expense management always going forward as well.

We're going to be very disciplined about anything that we add when.

When we add value creating.

Okay.

Very very prudent expense management always going forward as well.

Thanks, Operator next question.

Speaker 1: Your next question comes from Courtney Yakavonis with Morgan Stanley . Please go ahead. Hi, good morning, guys.

Your next question comes from Courtney <unk>.

With Morgan Stanley . Please go ahead.

Hi, Good morning, guys. Thanks for the question.

Speaker 5: If we could just go back, John , to your comments that we're going to see an improvement in some of the cost pressures as we go through the year. I think you mentioned you didn't see that improvement in the fourth quarter. So is the right way to understand that that if you were carrying forward the fourth quarter's cost pressures?

If we can just go back John to your comments that we're going to see an improvement.

In some of the cost pressures as we go through the year.

You mentioned you didn't see that improvement in the fourth quarter. So is the right way to understand that that if you were carrying forward the fourth quarter as cost pressures that $2 30. That's in your outlook would be significantly higher and you are baking in improvement or is that improvement mostly from lapping the tough.

Speaker 5: that $230,000 that's in your outlook would be significantly higher and you are making an improvement or is that improvement mostly from lapping the easier compares that you're going to have in the third and fourth quarter?

The easier compares that youre going to have in the third and fourth quarter.

Of the year.

Speaker 6: It reflects the cost increases that we're expecting in the year, in 2022. Part of those cost increases were as a result of.

It reflects it reflects the cost increases that we're expecting in the year in 2022 part of those cost increases were as a result of the <unk>.

Speaker 6: Inflationary increases that we saw in the back half of the year you remember and a lot of the contracts field for example It takes 120 days or so for flow to the P&L And so it reflects the higher cost basis that we saw in Q4 And it reflects some of the amelioration or their abatement in costing

<unk> increases that we saw in the back half of the year. If you remember in a lot of the contracts field. For example, it takes 120 days or so forth flow through the P&L and so it reflects the higher cost basis that we saw in Q4 and reflects some of the amelioration of the abatement and cost increases that we're anticipating.

Speaker 6: that we're anticipating based on certain key indices that we follow.

Capacity based on certain key indices that.

We followed.

Speaker 5: Okay, but to be clear, it is not the run rate from Q4. You are expecting the abatement, and is it primarily on the material side where you're baking in that improvement, or are you also baking in an improvement in the logistics? And I think Meg had asked earlier just the breakdown, if you could give us, you know, of that 230, you know, what's logistics versus materials so we can, you know, put some of our own assumptions in.

Okay, but to be clear it is not the run rate from Q4. You are you are expecting the abatement and is it primarily on the material side, where you're baking in that improvement or are you also baking in an improvement in our logistics and I think makes asked earlier just the breakdown if you could give us.

Of that $2 30, whats logistics versus raw materials. So we can.

Put some of our own assumptions.

Speaker 6: I would say, you know, just looking at it really is the material, the underlying material. We're not necessarily assuming any significant improvement in the logistics world right now. It's still significantly constrained. So it really is material play. We'll see on the material side, but that's not our operating assumption right now. And if we look at the cost pressure and what's there for 2022, you know, a vast

I would say just looking at it really as the material of the underlying material, we're not necessarily assuming any significant improvement.

Logistics World right now, it's still it's still a significantly constrained. So it really is a material play we will see on the materials side, but thats not our operating assumptions.

And as we've looked at.

Pressure and what's there for 2022.

Vast majority of that is increased material costs.

Transportation.

Thanks, Courtney operator.

Okay.

Speaker 19: And your last question for today comes from Jerry Rivich with Goldman Sachs. Please go ahead.

And your last question for today comes from Jerry Revich with Goldman Sachs. Please go ahead.

Yes, hi, good morning, everyone and Julie welcome Terry.

Speaker 20: I'm wondering if you folks can talk about the implications of your growing electrification mix within the portfolio. Are there any incremental opportunities that are coming up for you folks in terms of helping with on-site charging or anything along those lines that's coming up as an opportunity as the electrification mix in the portfolio?

I'm wondering if you folks can.

I'm wondering if you could talk about the implications of your growing.

Electrification mix within the portfolio are there any incremental opportunities that are coming up for you folks in terms of.

Helping with onsite charging or anything along those lines that's coming up.

As an opportunity as deliver electrification mixing the portfolio rises and can you comment now that you are scaling the business what the margin profile is if there is any difference between <unk>.

Speaker 21: rises and you know can you comment now that you're scaling the business what the margin profile is if there's any difference?

Speaker 8: electrified powertrains for you folks versus a.

Electrified powertrains for you folks versus diesel.

Speaker 22: Sherry just you know longer term our product portfolio across across the businesses really looks at electrification as we said a lot of the products.

Thanks Jerry.

Longer term our product portfolio across across the businesses really looks at electrification as we said.

A lot of the Genie products.

Speaker 6: are already electrified. What's changing there is going all electric and electric.

Our already electrified whats changing there.

Going all electric and electric drives changing from deep cycle batteries lithium ion batteries, and so youre seeing the evolution of battery technology, that's playing a role in the in the Genie business as the evolution of that technology continues you will see that to be adopted.

Speaker 6: changing, you know, from deep cycle batteries to lithium-ion batteries. And so you're seeing the evolution of battery technology that's playing a role in the genie business. As the evolution of that technology continues, you will see that be adopted even into more product lines.

Going into more product lines.

Speaker 23: you know, booms, scissors, and someday I think telehandlers will be the laggard in that given their duty cycle. But we will see that as well in the future. So as lithium-ion...

Booms scissors and someday I think Chelsea handlers will be the laggard in that given their duty cycle, but you will see that as well in the future. So.

<unk> continues to be adopted across other industries, we will see that adoption in our in our industries as well and the MP business. It really depends on what specific products. We're talking about there is a lot of times, we have an electric option if the electric with the.

Speaker 6: continues to be adopted across other industries, we'll see that adoption in our.

Speaker 24: in our industries as well. In the MP business, it really depends on what specific products we're talking about. There is a lot of times we have an electric option if the electric, what the Irish friends would say, the mains are available, or the electric distribution is available. If it's not.

Pirate's brands, let's say the mains are available of the electric distribution is available. If it's not then youre going to youre going to remain with large large diesel engines, but again across the product portfolio on every product line, we have in electrification.

Speaker 6: then you're going to remain with large diesel engines. But again, across the product portfolio, on every product line, we have an electrification product development plan for those products.

Product.

Development plan for those products.

Speaker 6: as the world continues to move towards electrification. So, you know, incremental, Jerry, I don't know if it's necessarily incremental or not. I think it's just how the market is moving. And then in terms of.

As the world continues to move towards <unk>.

Electrification So inc.

Incremental Jerry I don't know, if it's necessarily incremental or not I think it's just how the market is moving and then in terms of the.

Speaker 25: You know, the margin side and cost side, you know, originally, you know, you know, lithium, you know, was, was more expensive, frankly, and the battery solutions were more expensive.

The margin side and cost side.

Originally.

Yeah.

It was more expensive frankly in the battery solutions, where more expensive, but as that cost is coming down the cost curve, because it's being utilized and so many other industries now youre getting to the point, where that lithium ion solution on a lifecycle cost basis is competitive.

Speaker 6: But as that cost is coming down, the cost curve, because it's being utilized in so many other industries, now you're getting to the point where that lithium ion solution, on a lifecycle cost basis, is competitive to other alternatives, especially internal combustion engine alternatives. So as you see that continue, I think that will also precipitate the greater move towards electrification as the lifecycle costs come down with it. So that's how we're handling it. It's a key part of our product development efforts across our business lines, looking at what's going to happen in the next three, five, 10 years. And that's incorporated into our development.

Two other alternatives, especially internal combustion engine alternatives. So as you see that continue I think that will also precipitate the greater.

The move towards electrification as a lifecycle costs come down.

With it so that's how we're handling it.

It's a key part of our product development efforts across our business lines looking at whats going to happen in the next three 510 years and Thats incorporated into our development plan incremental Im not sure Gerry I wouldn't say that I think it's where the world is gone.

Speaker 6: incremental. I'm not sure, Jerry, I wouldn't say that. I think it's where the world is going.

Okay terrific.

Speaker 8: Terrific. Separately, on the supply chain side, can you talk about what are the critical components that you're concerned about today, if that's any different from three months ago? You alluded to having supplied components on the water. To what extent is that driving the outlook for production to ramp up over the year because you have the visibility in terms of that?

Currently on the supply chain side can you talk about what are the critical components that youre concerned about today, if that's any different from three months ago and you alluded to.

Having supplied components on the water to what extent does that driving of outlook for production to ramp up for the year because you have visibility in terms of what's the ports et cetera.

Speaker 6: So Jerry, I think similar to what other manufacturers have talked about, electronic components, we've had to do a lot there to modify chips, boards, circuits, and the like. So electronic components continue to be a challenge.

So Jerry I think similar to what other manufacturers have talked about electronic components, we've had to do a lot there.

<unk> chips board circuits in the life. So electronic components continues to be a challenge.

Speaker 6: Tied to electronic components is engines, the ECUs or ECMs, whichever manufacturer choice is used. So engine availability is the near-term constraint that I think will work itself out, but right now that's a near-term constraint. Hydraulic systems, there's several hydraulic systems that have been constraints for us and that's caused a challenge. And then our utility business, it's the only business where we use chassis.

Hi to electronic components and engines.

The user Ecm's whichever manufactured choice as you so engine availability as the near term constraint.

We will work itself out but right now.

A near term constraint hydraulic systems. There are several hydraulic systems that have been strengths for us.

And Thats caused a challenge and then our utility business the only business, where we use chassis that was adversely impacted with the chassis supplier. So those are the primary commodities that we're dealing with is the odds and ends that creep up as well, but those are the key ones that that were working on to improve supply up so that we can.

Speaker 26: that was adversely impacted with the chassis supplier. So those are the primary, you know, commodities that we're dealing with. There's the odds and ends that creep up as well, but those are the key ones that we're working on to improve supply of so that we can increase our production to meet the needs of our customers.

To increase our production to meet the needs of our customers.

Thanks, Gerry operator.

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Yeah.

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