Q1 2023 Terex Corp Earnings Call

Speaker 2: time all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. As a reminder this conference is being recorded. It is now my pleasure to introduce your host Paritosh Mishra, Head of Investor Relations. Please go ahead.

Speaker 3: Good morning and welcome to the TARX Plus Quarter 2023 earnings conference call.

Speaker 3: A copy of the press release and presentation slides are posted on over in Mr. Relations website at www.investors.charix.com.

Speaker 3: In addition, the Reflame slide presentation will be available on our website.

Speaker 3: We are joined by John Garrison, Chairman and Chief Executive Officer, and Julie Beck, Senior Rights President and Chief Financial Officer. Their prepared remarks will be followed by Q&A.

Speaker 3: We start to slide two of the presentation which reflects our safe harbor statements. Today's conference call contains forward-looking statements which are subject to risk that report actual results to be materially different from those expressed or implied. In addition, we will be discussing non-gap information we believe is useful in evaluating the company's operating performance.

Speaker 3: by thanking all TRX team members for their exceptional efforts in this challenging global macroeconomic environment and for their continued commitment towards their arms safety culture in TRX way values.

Speaker 3: Safety remains the top priority of the company driven by think-safe, work-safe, home-safe.

Speaker 3: Charisky members continue to work tirelessly to improve our performance for our customers, dealers and shareholders while maintaining a safe working environment.

Speaker 3: Sales of $1.2 billion were up 23% from last year and up 27% on an FX neutral basis. Operating margins of 12% expanded 460 basis points from the prior year. And earnings per share of $1.60 more than doubled year over year. As a result of our team members continued strong execution in the first quarter and our strong backlog.

Speaker 3: We are raising four-year earnings per share outlook to a range of $5.60 to $6.00. Please turn to slide five. I'm excited about the future of Terrex and the opportunities in front of us. Our NP and AWP segments participate in global diverse end markets and are well positioned for profitable growth.

Speaker 3: In construction, deathings are increasing throughout the world, but in particular in the United States.

Speaker 3: In fact, the infrastructure investment and job deck alone is expected to drive $1.2 trillion in dollars is stemming over 10 years.

Speaker 3: In addition, the Chips Act and Inflation Reduction Act are going to be supported of additional spending in construction and infrastructure that should drive growth for our businesses.

Speaker 3: Our power screen and family brands have leading positions in global mobile crushing and screening markets that will benefit from growth in aggregates.

Speaker 3: Our gene products are needed for general maintenance, infrastructure and construction projects, and will benefit from increased government sponsored spending throughout the globe.

Speaker 3: Another important growth driver are initiative that support circular economy goals.

Speaker 3: The global demand for waste recycling solutions is increasing.

Speaker 3: driven by regulatory and societal changes.

Speaker 3: or empty brands including EcoTech.

Speaker 3: CBI, Cheris washing systems, and our recycling systems are at the forefront of meeting demand for sustainability initiatives. The increasing reliance on electrification to reduce greenhouse gas emissions requires greater capacity expansion. Cheris utilities have the wide portfolio of products.

Speaker 3: well-presisions to capitalize on the investments needed to enhance the electrical grid.

Speaker 3: And our genie business in particular will benefit from increasing digitization, including data warehouses and chip manufacturing, on-chrome projects in the United States.

Speaker 3: Despite the near term macroeconomic issues, we continue to be optimistic and excited about the opportunities for tariffs growth.

Speaker 3: Please turn to slide six to review our backlog.

Speaker 3: Our Q1 backlog remains strong at $4.1 billion, up 2% from year-end.

Speaker 3: In fact, our backlog has remained relatively consistent for the last five quarters.

Speaker 3: and look at minimal customer endure push-ups and cancellations.

Speaker 3: Our current level of backlog is consistent with Q1 of 2022.

Speaker 3: The high effect love for Q1 in a recent history.

Speaker 3: Our backlog demonstrates the strength of our end markets and support throughout look for the remainder of the year and gives us visibility into early 2024. Our baby customer fleet ages and a stirrup low dealer inventory levels continue to support real-life demand.

Speaker 3: consolidated Q1 bookings remained healthy at $1.3 billion.

Speaker 3: Resulting in a book to bill ratio of 105%.

Speaker 3: Turning the slide 7 for update on our strategic operational priorities. We continue to make progress on our institute, innovate, and grow strategic initiatives that continue to strengthen our company.

Speaker 3: Our operations team had excellent execution in the first quarter.

Speaker 3: demonstrating adaptability and flexibility to overcome the dynamic supply chain environment.

Speaker 3: Affirmative, Mexico, facilities, on time and on budget.

Speaker 3: The new facility is an important element of our strategy to improve Genie's through-cycle performance.

Speaker 3: Starting in March, Jean began to transfer product lines from our temporary facility in Monterey to our new permanent facility.

Speaker 3: Move some other factories that are network will take place over the next 12 to 18 months. While these moves will have significant long-term benefits, this process will result in short-term manufacturing inefficiencies, which the Genie team is working hard to overcome. The company continues to make capital investments in our facilities around the world. These investments are paying off, and we are proud of a return on invested capital of 24 percent.

Speaker 3: which remain significantly above our cross-the-capital. We shall case 20 new innovative products at ConExpo, the R.A., World of Countries, and Dominion D.A.

Speaker 3: Our investments in the development and environmentally friendly new products with superior performance will help to deliver growth.

Speaker 3: Our parking service teams are investing in digital offerings for dealers and customers, including mycaras and Lyric Connect. We now have more than 70,000 machines fitted with our telematics technology.

Speaker 3: Execution of our EIG strategy enable our strong organic sales growth for the quarter.

Speaker 3: In addition, we continue to supplement organic growth with inorganic investments.

Speaker 3: We recently acquired Marko, a manufacturer of both material handling compares.

Speaker 3: For the growing empty seconds offerings, the products that complement the existing portfolio.

Speaker 3: In February , we completed an equity investment in that tronic.

Speaker 3: or robotics company, reaffirming our commitment to investing technologies that enhance our product and solution offerings. Turn to the slide 8.

Speaker 3: During the quarter, our team members were active in trade shows. We saw high attendance and interest in our products. In fact, attendance hit a new record at two of the biggest trade shows.

Speaker 3: During the quarter, our team members were active in trade shows. We saw high attendance and interest in our products. In fact, attendance hit a new record at two of the biggest trade shows. ConExpo in Dhamma India.

Speaker 3: The attitude of our customers of feet. The MP team displayed a power screen, radiator product, the con echo, a fully electric.

Speaker 3: Wheel Pressing is green machine.

Speaker 3: After significant success with this product in North America, we recently launched the Gladiator World Series this year for sales around the world.

Speaker 3: The gene gene introduced our highest capacity telegram we're at the area in SHILD.

Speaker 3: The 12-pound tele-enlighted engineer offers superior productivity and low total cost of ownership.

Speaker 3: We also introduced our first all-electric mini-mixer of context build, expanding MPs, concrete offering.

Speaker 3: Similar to our electric utility truck, the many mixture of leverages are investment and biotic to develop zero emission products.

Speaker 3: Turn to the slide 9. At TRIC, we are in a gently focused on developing and delivering sustainable solutions for our customers. In this example, TRIC's recycling system sold the first all-electric powered waste separation solution to a customer site in the UK. The installation reminds our waste-eater, conveyors, screens, sooters, and separators. The system efficiently recovers products of higher value, including metals, air and gas, plastics, and cardboard from waste.

Speaker 3: That's the burning more material from the landfill. This is another example of terrorist violence making the circular economy a reality.

Speaker 3: Our environmental, social, and governance programs deliver stakeholder value. We continue to progress on our ESC journey and recently completed our maternity assessment. We heard from our stakeholders that product development, stewardship, and innovation are core business differentiators. Stakeholders would better product quality and safety as critical for meeting regulatory requirements and customer expectations. Team member health, safety, and well-being are important.

Speaker 3: We know that zero harm is possible. It's not just an aspiration. We designated April as safety month for change across the globe and scheduled a variety of events to reinforce and re-deticate ourselves to zero harm. I want to thank our stakeholders who participated in our materiality assessment, was provided us valuable insights. Please turn the slide 11.

Speaker 3: We continue to operate the challenging macroeconomic environment with inflationary pressures in supply chain constraints. We did see slight supply chain improvements. However, our hospital inventory is increased in the first quarter after declining in the fourth quarter of last year. It's a clear indication.

Speaker 3: of the level of disruption our teams continue to face and overcome. Overall, our market demand remains strong, and I am confident in the team's ability to continue to adapt and overcome the macroeconomic challenges that we have been facing. And with that, let me turn over to Julie.

Speaker 3: Thanks, John , and good morning, everyone. Let's take a look at our first quarter financial performance found on slide 12.

Speaker 3: Terracies in a strong financial position, we demonstrated excellent execution in a dynamic environment.

Speaker 2: Sales of $1.2 billion worth of 23% year-over-year on higher volume and improved price realization necessary to mitigate rising costs. Sales in constant currency were up 27% as foreign currency translation negatively impacted sales.

Speaker 2: help to offset cost increases and the negative impact of foreign exchange rates. Health segments recorded a year-over-year increase in gross margins. SGNA was 10.6% of sales and decreased by 50 basis points from the prior year as business investment and marketing costs were coupled with continued expense management. SGNA increased over the prior year due to inflation, unfavorable foreign exchange, incremental spend on new acquisition, and increased marketing expenses on trade shows.

Speaker 2: income from operations of $148 million was up 98% year-over-year.

Speaker 2: Operating margin of 12% was at 460 basis points compared to the prior year. Our incremental margin was 31% compared to last year.

Speaker 2: Interest and other expense of $15 million increased $4 million from the prior year due to increased interest rates.

Speaker 2: The first quarter global effective tax rate was 17.5%. First quarter earnings per share of $1.60 more than doubled, representing an 86th set improvement over last year.

Speaker 2: This drawn performance was driven by increased volume, discipline pricing, and continued cost management.

Speaker 2: This quarter includes an unfavorable earnings per share impact of 10 cents from foreign exchange translation.

Speaker 2: Free cash flow for the quarter was negative $11 million, representing a significant improvement over the prior year. I will discuss free cash flow later in more detail.

Speaker 2: Let's look at our segment results, starting with our material processing segment found on slide 13.

Speaker 2: MP had yet another excellent recorder with consistently strong operational execution.

Speaker 2: Sales of $554 million increased 22% compared to the first quarter of 2022, with healthy demand for our products across multiple businesses.

Speaker 2: On a foreign exchange neutral basis, sales were up 28%.

Speaker 2: Booking through up 6% sequentially, MP ended the quarter with backlog of $1.2 billion. The backlog remains robust and is approximately three times historical norms.

Speaker 2: MP delivered operating profit of 15.4% up 120 basis points over the prior year driven by higher sales volumes, favorable product mix, and discipline cost management, resulting in an incremental margin of 21%. And slide 14

Speaker 2: See our aerial work platforms segment financial results.

Speaker 2: AWP had an excellent quarter with sales of $686 million, up 24% compared to the prior year on higher demand.

Speaker 2: On a foreign exchange neutral basis, sales increased 27%.

Speaker 2: Backlog at quarter end was $3 billion, up 4% from the prior year. Bookings remained strong with a book to bill ratio of 112%.

Speaker 2: AWP more than doubled their operating profit and delivered operating margins of 12.1% in the quarter, up 620 basis points from last year with an incremental margin of 38%.

Speaker 2: The improvement was a result of higher sales volume, favorable mix.

Speaker 2: CAUS reduction initiatives, manufacturing efficiencies, and discipline-pricing actions to offset material supplier costs.

Speaker 2: Please leave slide 15 for an overview of our discipline capital allocation strategy. The company's strong balance sheet provides us with financial flexibility for the future.

Speaker 2: As a reminder, although tariffs does provide customer financing solutions through our banking partners, in February of 2021, we sold our TFS assets and no longer carry this exposure on our balance sheet.

Speaker 2: We remain diligent in monitoring counterparty exposure and risk as well as regional, customer, and supplier risk. To date, we have not seen a negative impact due to current market conditions.

Speaker 2: Free cash flow for the quarter was negative $11 million compared to negative $72 million a year ago.

Speaker 2: The $61 million year improvement and free cash flow was due to increased operating profit.

Speaker 2: Hospital inventory at the end of the first quarter was $48 million, an increase of $12 million from the fourth quarter of last year, and down slightly from a year ago, reflecting continued supply chain disruptions.

Speaker 2: We continue to invest in our business with capital expenditures and investments of $30 million. We increased our quarterly dividend per share to a 15% increase over the prior year.

We repurchased $3 million of shares in the first quarter. In April , we have continued our share repurchase program and purchased 14 million of shares partially offsetting the dilution from our compensation programs in March.

Through April , we have returned $28 million to shareholders and have $175 million remaining on our share repurchase program. We will offset dilution and take advantage of market dislocation in these volatile times.

We have no debt maturities until 2026, and 77% of our debt is at a fixed rate of 5% until the end of the decade.

Our net leverage remains low at one time, which is well below our two and a half times target through the cycle. We have ample liquidity of $677 million. The company is in an excellent position to run and grow the business.

Now turning to slide 16 and our updated full year outlook.

It is important to realize we are operating in a challenging macro environment with many variables and geogluentical uncertainties, so results could change negatively or positively. With that said, this updated outlook represents our best estimate as of today.

Thanks to the strong execution of our team members and our robust backlog, we are pleased to raise our 2023 outlook. We now expect earnings per share of $5.60 to $6. Our increased sales outlook of $4.8 to $5 billion incorporates the latest dialogue with our customers and our suppliers.

We anticipate higher volumes as customer demand remains strong. Our sales are expected to be relatively consistent in Q2 and Q3 and down slightly in Q4 due to lower production days. Our operating margin outlook has increased to a range of 11.4 to 11.8%.

This reflects our excellent performance in the first quarter, continued strong customer demand, the latest information from our supply chain, cost-out benefits, and continued strict expense management.

We expect improved free cash flow in the next three quarters and we are raising our outlook to $300 to $350 million primarily due to higher earnings.

Let's take a look at our updated segment outlook. Based upon MP's continued strong execution, which includes continued mitigation of cost pressures and supply chain challenges, we are increasing our sales outlook to a range of $2.1 to $2.2 billion.

with an increased operating margin of approximately 15.8%. We expect MP sales and margins to be relatively consistent for the remainder of the year.

The AWP team has increased their factory output and as a result we are increasing our sales outlook to a range of $2.7 to $2.8 billion.

Incorporating the increased volumes, the team's cost reduction activities, pricing actions, and improved manufacturing efficiencies, we are raising our whole-year operating margin outlook to approximately 11.5%.

We anticipate AWP sales to be relatively consistent in Q2 and Q3 and down slightly in Q4 due to normal seasonality and lower production days.

AWP margins are expected to be negatively impacted by manufacturing inefficiencies due to schedule production lose to our monoray facility, which will have a greater impact in the second half of the year.

And with that, I will turn it back to you, John .

Thanks, Ely. Turn the slide 17 to conclude my prepared remarks. Territors' well-positioned for growth to deliver value for stakeholders in 2023 and beyond. Because we participate in strong end markets, including infrastructure, electrification, and environmental.

We'll continue to execute our disciplined capital allocation strategy while investing in new products and manufacturing capability along with strategic and organic growth.

We have demonstrated resiliency and adaptability in a challenging environment.

And most importantly, we have great team members, businesses, strong grants, and strong market positions. And with that, let me turn to that peritosh. Thanks, Sean. As a reminder, during the question and answer session, we ask you to look to the question to the market. And I'm sure we enjoy it. So, let me now.

Stanley Elliott at Stiefel. Good morning everyone. Congratulations. Can you talk about the 250 point increase for the AWP? How much of that is?

There you go. How much of that is priced, how much of that is throughput, and to what extent is the Mexico shift going to be a negative detractor there? Thanks so much for the questions, Stan. Good morning. The AWP just did a great job in executing this quarter.

The first volume, they also had favorable manufacturing efficiency. So they had just strong execution, successful cost-out actions, and so that led to an incremental margin of 38%. So the Genie team had very strong volume in the quarters we mentioned.

And so we're able to raise in terms of the G impact on the Monterey move. You know, we started that move from the permanent to the new facility in March. More moves are going to happen over the coming quarters, and we expect their second half of the year to be impacted by the G impact.

being exactly low. You're looking at your backlogs three times, kind of what normal would end up being. When do we think that we'll get right sized? Within that channel, I'm assuming that most of those orders still are for retail use as opposed to any sort of stocking. But it just sounds like there's a lot of visibility for that part of the business going.

changing our order policies within within the business for example in our aggregate business in the quarter our work was an open for the whole quarter to fill you know Q3 and Q4 because we're still in the position of slotting orders that we have received and the reality of he is in this business and it's not just similar in the B.P. business we really are in an allocation vote so as yours come in we have to allocate to ensure that all dealers have the opportunity to take product that we don't

into rental purchase type contracts, RPO type, you know, contracts. And again, the challenge for them is those contracts has been converting to sales, and we haven't been able to get the product back to them that they need, so they're seeing that depletion in their network, in their rental fleets. And so that's helping to sustain. And again, it's global strength.

Quite strong backlog, extended visibility, historic level of visibility going forward. And I think it's also important, Stan, that it's really important in both businesses and the backlog, and we comment on this, is what happens within the backlog in terms of order push outs and order cancellations. And we're just not seeing that at this time. So, you know, good robust back...

And we'll be continuing to open up the order book as we progress through the remainder of the year. Perfect. Thanks so much for the time and best of luck.

Again here, if you look at the AWS Peace segment, again, I get against the very top comp in 2022. Our bulk of bill ratio was 112% in this segment. So, a bad lot of good recovery. And again, the reality here is that we're still in an alley.

patterns for the nationals and the independent. And again, I think that speaks to the relative tightness that would have in the market. So still constrained, and the team is working to reduce the constraints. But again, back off, market environment continues to appear robust across the customer base.

I usually sort of assume hospital inventory means headwinds to margin. So maybe you can square that with us. And specifically, I'm trying to think about as those hospital inventories normalize, is there a margin upside that might be sort of in our back pocket here?

It's really starting with her comments. You know, the team really did execute well in your rights. We did see a lot of the increase in our hospital women to rate to about $48 million, up from $36 million at the end of Q4. So I think that speaks to the level of disruption. The team is seeing that they're continuing.

work is is is occurring despite that because we're in the business where you need a hundred percent of the parts to ship a product despite that we still saw a slight increase in the hospital inventory in the corner in the corner that does create disruption but as Julie said in her comments they had good efficiency on the higher output that we were able to get that that that we were able to take the team of the

for us not to be able to shift to a customer.

Thank you. We'll move to our next question from Steve Barter at Keybank. Hey, good morning. Sorry, I missed your prepared comments, but with you already guiding this year above FY24 consensus. Thank you.

People are going to be wondering around longer term thoughts on your ability to drive growth. So to the extent that you can, what are your general thoughts on cycle longevity and just how you're positioning tariffs for the next few years? Yeah, thanks. And it's a good question. And again, it's early, you know, talk about 2024. But again, if you look at our...

what's transpiring in the US, and I mentioned this, Steve, in my opening comments about the Infrastructure Act, the Inflation Reduction Act, the CHIP Act, those are massive sums of money that our tailwinds against the current headwind of the macroeconomic rising interstate environment. And so if you look at the

the mega trends that we're dealing with in that area if you look at the consistent performance of our empty business and then the increase in sustainability what we're doing in some of our environmental you know as we highlighted one of the solutions you know this time and so the mega trends provide some degree of tailwind for us to potentially offset the headwinds that we have overriding interest rates.

replacement cycle both in North America and in Europe has been constrained by overall market supply. Again, the backdrop of those, you know, major infrastructure bills provide a tailwind against the headwind of a rising interest rate environment. And so as we look out with the replacement cycle rental companies continuing to win the industry, continuing to grow.

You know, yes, we do believe as we lay out in December that we can be a growth company over the coming period of time. Now, we all know, and as I said in December , it's not always linear, but as we set the company up, we believe we're set up to take advantage of the mega trends that are ahead of us to drive growth into the future. Obviously, too early to talk about 2024 from a financial standpoint, but we have $1.1 billion of backlog for 2024.

guidance for 2024 and outlook, but we also never have 1.1 billion dollars booked for the subsequent year. And so I think that also indicates there's an opportunity to potentially grow despite, and we're not naive, despite the macroeconomic headwinds of a rising interest rate environment.

Yeah, that's a really great context. And to your point about the interest rate environment, I know this will be hard to answer, but there's a lot of concerns around commercial real estate and specifically office. Have you ever tried to quantify your end market exposure by project type or do you have a guess how much of your fleet has been allocated in the past to office construction? And I'm just wondering, do challenges in that specific area create a fleet overhang for your customers?

clearly office and retail is going to have a headwind in a rising interest rate environment and that part of the business will be impacted. However, if you look at non-resignity in totality, 40 plus percent of that is public. That's not going to be impacted in a rising interest rate environment.

If you look at the shift act and the on-shorting of shift manufacturing, the on-shorting of battery manufacturing, those are being done for geoflocal reasons to improve the surety of supply. Arriving in just a environment is not going to adversely impact those projects. They're going to go forward. So that's why I say there's clearly a cross-current out there. There's the headwind of arriving in just a environment and it definitely will impact things like.

commercial real estate, office, no doubt, but the other parts of the business are larger and that's the macro tailwinds and that's the headwinds tailwinds that we have and we'll continue to position the business to be able to take advantage of that. But overall non-resi construction, especially in North America, we think is going to be strong for the next couple of years as a result of these mega investments. My predecessor is Ron.

He said, John , I'll never talk about the infrastructure bill because I talked about it for 20 years and it never happened. This is the first time we've actually had it. And so that's, and I get it, and Chris, and Chris on serve you, we understand that with position of business, we will take the appropriate actions irrespective of the environment, but we believe we'll position the business to take advantage of some positive end wins. If they tailwinds us and say if they don't materialize, we'll take the appropriate action.

But right now, $1.1 billion going into 2024 is highly unusual for us. We think that speaks to the overall strength of the non-reasy market.

That's great. Appreciate the time. We'll go next to Timothy Stein at Citigroup.

Great. Thank you. Good morning. So, John , the first one just is on AWP. And I totally get it's very early to talk anything about 24. But I'm just curious how the team at Gini is planning with respect to that fourth quarter production levels as you look in the next

into 24 and there's a lot of moving pieces with what's going on in Mexico. But just curious, you know, your initial thoughts, you have to be informed to some degree by what you've seen in terms of order intake and backlogs. I'm just curious how the plan is currently kind of laid out in terms of...

of expectations as to how you're exiting the year, and thus the inventory position going into 24.

As the supply chain begins to improve and we're able to improve our lead times, because that's the other issue going on, we have excessive lead times right now across the industry. And as those begin to improve, I think you'll see a return to some normalcy in customer order patterns because customers, especially in the larger customers, they were taking gear

more return to some degree of normalcy in production and rental companies in terms of in the northern hemisphere where they take their products. So we're planning on in the fourth quarter for now, I mean that could change, you know lower production volumes in Q4 if for no other reason than lower number of production days due to holidays but we're you know.

have the same margin profile. I'm just curious, as you mentioned, how you reconfigured that or they're changed the order of policy. Is that resulting in any, should we think about any, you know, from a mixed standpoint, is there any major differences as we move to the balance of the year in terms of what you're, you know, what you expect to deliver out of that backlog?

No, not anything fundamentally different. As Julie said, we did have some favorable mix in the quarter in the aggregate segment, and anticipating that continues through the year. But no substantive change, I would say, in the makeup. We did see some favorability in aggregates. Yes, sir. All right. Thank you. Thank you very much.

We'll go next to Stephen Fisher at UBS.

I'm wondering if you can comment on the price versus cost gap for the rest of the year. Are you expecting that to be wider, narrower, or steady? And I guess to maybe make it meaningful, how would that look excluding any of the Monterey costs that you're going to be incurring.

Thanks for the question, Steve. When you think about us in 2022, we were, as a total company, we were price cost negative in the first six months and then we became price cost neutral for the year of 2022. And so in particular, we were able to get the price of the year of 2022. So we were able to get the price of the year of 2022. So we were able to get the price of the year of 2022.

see RO-RO increasing. So we've taken multiple pricing actions throughout 2022. We took further pricing actions in 2023 across the company. And so we're being transparent with our customers and distribution partners regarding that level of inflation we're seeing and why we need to take pricing actions. If I look at it by business, the MP group is that they do dynamic pricing. And so they

of being price cost neutral for the whole year. So again, we're being transparent and we expect to be price cost neutral for the year.

Okay, and then, John , you mentioned a steady backlog, and when you look at the picture on slide 20, it really shows that well, kind of a general leveling off. What's your expectation for how this is going to trend from here? I know you said there's going to be some more normalization of ordering. So does that mean just generally kind of a continued steady backlog or?

if it were to break out from here, what would be the most likely driver of that? Great question and you know let me answer it this way. Right now we're not as reliable as suppliers we'd like to be for our customer because a lot of what we're continuing to deliver is late to our original customer promise and as the supply chain improves we will you know we'll get back to our historic ability.

Our lead times are extended. So over time, I think, you know, as the supply chain improves, we'll get to more normal ability to deliver on our delivery commitments. Our lead times will come into more normal levels. And as a result, you know, it's clearly possible, backlog does decline to more historic levels.

while the overall market remains buoyant. So, you know, that would not surprise me if that were to continue, because it's showing that supply chain's finally coming back in balance. We're finally getting out of the disruption mode and getting back to what we normally do, which is to deliver on our commitments to our customers. And I think an improving supply chain is going to help us do that.

it remains buoyant. So that would not surprise me if that were to continue, because it's showing that supply chain's finally coming back in balance, we're finally getting out of the disruption mode and getting back to what we normally do, which is to deliver on our commitments to our customers. And I think an improving supply chain is gonna help us do that. Terrific, thank you.

We'll go to our next question from David Rosso at Evercore ISI. Yeah, hi, thank you. Picking up on the order of thoughts, just curious, are you starting to see enough normalization of what you can promise on lead times? Or...

for whatever reason customers a little skittish about 24 that are they having conversations now that said hey look if that's now the situation on lead time or whatever may be let's push that conversation to you know September just trying to get a read here in level expectations about book to bill particularly in AWP of course the backlogs abnormally high and people like the visibility on 23 even and

starting 24, but just so we understand, are we starting to get what you're hearing around the sector broadly? With supply chains normalizing, you're going to see orders come down as people kind of rethink how early they need to order for 24, or have you not seen any change in behavior from your customers? Because the punchline, I think people try to figure out how much is book the bill go below one? And are you seeing that already for 2Q? Just trying to level set those expectations.

Right. You know, thanks David and you're right, and the AWP segment in the quarter, you know, our full tabill is 112 percent. And so we saw those, a strong book tabill in the quarter. Over time, I think that probably does come down as the pledging continues to improve. Right now customers are taking because they're still a percentage of what we're delivering, which is, which is way to our original delivery commitments.

That will translate to customer buying behavior getting back to the more seasonal pattern that would seem historically. And so I think as things improve, I think we will see a more return to more seasonal normal discussions with customers. Now I will say we do have customers, especially the larger ones that are looking out beyond the year.

I do think, you know, the book that will probably come down is, you know, with the backlog is supply chain continues to improve. But I don't again, I don't think David you need to read in that that's a, you know, a significant reduction in demand in the marketplace. I think that's returning to a more normal environment. I don't see that in the next quarter. All right, but I do see, you know, improvement in supply chain or anticipating that in our outlook. We are seeing improved supply chain improvement over the course of the year.

That's our assumption today. Yeah, that's all logical. And so I think we're all just trying to dance with these backlogs are so big. The order comps are hard. It makes sense they're down. But how much is it really a reflection of 24 demand? Or is it just normalizing behavior because supply chains are normalizing a bit. So theoretically normalizing behavior. I mean, we're not hearing that per se. People.

pushing out conversations to think about the point. In the AWP segment, we're pretty much booked out for 2023 with potential conversations with, if we're able to get a little bit better production, customers would actually take more than we're committed to. That's the current environment we're in right now within the AWP segment. All right. Thank you for that. Thank you, Chris. Thank you.

We'll go next to Michael Senniger at Bank of America. Hey, guys. Thanks for taking my question. Apologies if you already got a hit on this, but with your access revenue now approaching about $2.8 billion for the year, you're kind of almost back in that 18-19 period. Obviously, there's been a lot more price, it feels like, this year in that revenue number. I'm just curious if production units are still below that 18-19 level.

be able to get increased production out of the water town facility. So right now we're producing at lower levels than we produced in 2018 and 2019. On the monoray facility, I think this is very important. The monoray facility for tariffs and genies specifically was to improve our global competitiveness and diversify our global footprint.

Yes, it will provide some incremental capacity, but that's not why we made the investment. We made the investment to improve our global cost competitiveness and then to utilize a Mexico supply chain as well. And we think that will put us in a strong position both for supplying our moderate facilities but also supplying gases, hardware, chemical,iance, energy, early stain,colors.

our U.S.-based manufacturing. So, Monterey was to diversify our global footprint to improve our global cost competitiveness to compete globally around the world from a cost competitiveness standpoint and modest incremental capacity. We have the capacity we need to support the growth that we have. We'll look to add in

global economic environment and that's why we made the investment in in Monterrey and and it's going to be a major source over the next 10 years and beyond for Genie from a source of production not just North America but ultimately potentially global export as well and but that's again we invested to be globally cost competitive for the next decade not for incremental capacity.

We're not at 2018 and 2019 levels within the Gini footprint as we are today. We have an opportunity to expand. Very helpful. And just on materials processing, you highlighted how inventory of the dealers is still low. Just curious how that should finish the year for 2023. Why is 2024 about replenishing those estates?

we get all the way back to historical levels, no, not at this time, but we will improve the situation. And again, the order book for the MP business and our aggregate business was not open for the entire quarter because we were still slotting orders. And again, they're having to ensure that we don't cut off any dealers so that there's equal

Tammy Zakarian at JP Morgan.

Hi, good morning. Thank you so much for taking my questions. So just to clarify, and I'm sorry if you've already mentioned this, but price cost in the first quarter, was it positive? So my understanding was that the first half would see price cost sort of positive, but then it tapers in the back half to get you to a neutral.

level for the year. Is that the right way to think about it? I think if you think about that, you know, as we go through the year, what you see is you see that we took pricing actions throughout 2022 and that pricing comes through into 2023. So there's a greater impact in the first half to the second half when you're thinking about, you know, incremental pricing for the AWP. For MP, it's the...

logistics class.

Got it. And so you raised the full year guidance by, call it, about $200 million. How much of that is a better volume outlook versus incremental pricing? So from our original outlook, almost all of that is incremental pricing.

Just wanted to ask about the utility business, what some of the dynamics there in terms of what you're seeing with demand and supply chain and order trends. So the utility's business remains quite strong. And in terms of backlog, we're pretty much covered up for 2023 and booking into well into 2024 in the utility's business especially.

given everything that transpired in California, the street there. So really across all four segments, we're continuing to see strong growth and tailwinds. Supply chain has started to improve there. We were significantly impacted in that business, especially around chassis and bodies. And the sequencing of receiving chassis bodies and then the booms that we put in.

and just very strong market demand across the segments that we compete in. And that makes sense as we talk about the electrification and the needs in North America are quite expensive. The investments are significant and we anticipate that to be a strong market a multi-year.

going to be a multi-year tailwind given the needs of the electrical grid in that business. And we see that in our backlog.

Okay, great. That's great color. Appreciate it. And just switching gears a little bit, just in terms of your expectations for price cost neutrality for the year, what are your expectations for steel prices that are embedded in your guide? And if you could remind us how you manage, you know, the movement in steel prices. Thanks for the question. So we do have a hedging program. And so we hedge.

about a $950 per ton of assumptions for remainder of the year.

Okay, great. Thanks so much. I appreciate the color. We'll go next to Jamie Cook at Credit Suisse. Hi, I'm getting more congrats on a nice quarter. I mean, most of the questions have been asked. I guess one, you know, Julie, just on the guidance. If you look at your guidance.

It implies the first quarter is probably the highest EPS quarter where generally it's the lowest and earnings generally improve sort of sequentially. So outside of Monterey, I'm just trying to understand why the first quarter would be one of the highest quarters versus normal seasonality for your business. Thanks.

Thanks for the question. We increased our sales outlook to $4.8 to $5 billion, which includes all the latest dialogue with our customers and suppliers. We anticipate that higher volume because customer demand remains strong and we saw some slight improvement in supply chain. Our sales are expected to be relatively consistent in Q2 and Q3.

The AWV margins are expected to be negatively impacted, you know, primarily due to the manufacturing inefficiencies due to those scheduled production moves to our moderate facility. And that will have a greater impact in the second half of the year than it does in the second quarter. So, you know, relatively, you know, so that's what we're thinking and that's where we're at. So, overall, we're pleased that we were able to increase the outlook and the team executed really well. Thank you.

Thank you. And that does conclude our question and answer session. At this time, I would like to turn the conference back over to John Garrison for closing remarks. Thank you, operator. And please, if there are additional questions, we know you have to drop and get on a couple more calls here this morning. If you have additional questions, please follow up with Julie and John or Paratosh. Stay safe, stay healthy, and thank you.