Q3 2023 Oshkosh Corp Earnings Call

Zero on your telephone keypad.

Unknown Attendee: As a reminder, this conference is being recorded.

As a reminder, this conference is being recorded.

It is now my pleasure to introduce your host Pat Davidson Senior Vice President of Investor Relations for Oshkosh Corporation. Thank you Sir you may begin.

Patrick Davidson: It is now my pleasure to introduce your host, Pat Davidson, Senior Vice President of Investor Relations for Oshkosh Corporation. Thank you, sir, you may begin. Good morning, and thanks for joining us. Earlier today, we published our third quarter results. The copy of that release is available on our website at oshkoshcorp.com. Today's calls being webcast is accompanied by a slide presentation, which includes a reconciliation of gap to non-gap financial measures that we will use during this call, and is also available on our website.

Good morning, and thanks for joining US earlier today, we published our third quarter results a copy of that release is available on our website at Oshkosh Corp Dotcom.

Today's call is being webcast is accompanied by a slide presentation, which includes a reconciliation of GAAP to non-GAAP financial measures that we will use during this call and is also available on our website.

In connection with the Aerotech acquisition, we are now excluding amortization of purchased intangibles in calculating adjusted operating income and adjusted EPS for all periods presented which is highlighted in the appendix.

Patrick Davidson: In connection with the Arrow Tech acquisition, we are now excluding amortization of purchased intangibles, and calculating adjusted operating income, and adjusted EPS for all periods presented, which is highlighted in the appendix. The audio replay and slide presentation will be available on our website for approximately 12 months. Please refer now to slide two of that presentation. Our remarks will follow, including answers to your questions, contain statements that we believe to be forward-looking statements within the meaning of the Private Security's Litigation Reform Act.

The audio replay and slide presentation will be available on our website for approximately 12 months. Please refer now to slide two of that presentation, our remarks that follow including answers to your questions contain statements that we believe to be forward looking statements within the meaning of the private Securities Litigation Reform Act. These four.

Patrick Davidson: These forward-looking statements are subject to risks that could cause actual results to be materially different from those expressed or implied by such forward-looking statements. These risks conclude, among others, matters that we have described in our Form 8K file with the FCC this morning, and other filings we make with the SEC.

Unknown Attendee: We describe any obligation to update these forward-looking statements, which may not be updated until our next quarterly earnings conference call, if at all.

We're looking statements are subject to risks that could cause actual results to be materially different from those expressed or implied by such forward looking statements.

These risks include among others matters that we have described in our form 8-K filed with the SEC. This morning, and other filings we make with the SEC. We disclaim any obligation to update these forward looking statements, which may not be updated until our next quarterly earnings conference call if at all.

Patrick Davidson: Our presenters today include John Feifer, President and Chief Executive Officer, and Mike Pack, Executive Vice President and Chief Financial Officer. Please turn to slide three and I'll turn it over to you, John.

Our presenters today include John Pfeifer, President and Chief Executive Officer, and Mike Pack Executive Vice President and Chief Financial Officer, Please turn to slide three and I'll turn it over to you John.

Thank you Pat and good morning, everyone I'm pleased to report another quarter of strong results for Oshkosh Corporation with significant year over year growth in revenue and earnings.

John Pfeifer: Thank you, Pat, and good morning, everyone. I'm pleased to report another quarter of strong results for Oshkosh Corporation, with significant year-over-year growth in revenue and earnings. For the third quarter, we grew revenue by 21% and more than double-adjusted operating income and adjusted EPS to $276 million, and $3.04 respectively. We are continuing to gain momentum as supply chains improve, and we are benefiting from the many actions we've taken over the past several quarters to drive revenue and earnings growth.

For the third quarter, we grew revenue by 21% and more than doubled adjusted operating income and adjusted EPS to $276 million and $3.04 respectively.

We are continuing we are continuing to gain momentum as supply chains improve and we are benefiting from the many actions we've taken over the past several quarters to drive revenue and earnings growth.

John Pfeifer: In particular, both the access and vocational segments posted double-digit adjusted operating margins in the quarter, leading to a consolidated adjusted operating margin of 11%. Importantly, we expect further opportunities to grow revenue and earnings as supply chains continue to improve, as we continue to integrate our recent acquisitions, and as we benefit from higher pricing in the vocational backlog over the next year and return to pre-inflationary price-cost dynamics. Demand for Oshkosh products continues to be healthy, and we're pleased with the pace of orders as infrastructure spending, mega projects, and solid municipal budgets continue to bolster demand. We expect that 2024 will be largely booked as we exit 2023, including expected strong orders in the fourth quarter for our access segment.

In particular, both the access and vocational segments posted double digit adjusted operating margins in the quarter, leading to a consolidated adjusted operating margin of 11% importantly.

Importantly, we expect further opportunities to grow revenue and earnings as supply chains continue to improve as we continue to integrate our recent acquisitions.

And as we benefit from higher pricing in the vocational backlog over the next year and returned to pre inflationary price cost dynamics.

Demand for Oshkosh products continues to be healthy and we're pleased with the pace of orders as infrastructure spending mega projects and solid municipal budgets continue to bolster demand. We expect that 2024 will be largely booked as we exit 2023 <unk>.

<unk> expected strong orders in the fourth quarter for our access segment.

John Pfeifer: Department. This is our first quarter with Arrow Tech as part of the Oshkosh family, and we are pleased with our integration progress to date. We will share some highlights in a few moments when we discuss the vocational segment in greater detail. During the quarter, we were named to Newsweek's 2023 list of the world's most trustworthy companies, ranking number 19 globally and number one in the US in the vehicle and components services category.

This is our first quarter with aerotech as part of the Oshkosh family and we are pleased with our integration progress to date, we will share some highlights in a few moments when we discuss the vocational segment in greater detail.

During the quarter, we were named to Newsweek's 2023 list of the world's most trustworthy companies ranking number 19 globally and number one in the U S. In the vehicle and components services category. This award reflects our exceptional track record over the last century of doing business the right way.

John Pfeifer: This award reflects our exceptional track record over the last century of doing business the right way and supports our purpose of making a difference in people's lives. It is a testament to how Oshkosh team members embrace and live our core values. As a result of continued strength in our end markets, strong third quarter performance and our positive outlook, I am pleased to announce that we are raising our full year adjusted EPS expectations to be in the range of $9.50. Up from our most recent estimate of approximately $8, or $8.35 when you adjust our most recent estimate for the impact of the market. The impact of amortization of purchased intangibles.

And supports our purpose of making a difference in People's lives.

It is a testament to how Oshkosh team members embrace and live our core values.

As a result of continued strength in our end markets.

Strong third quarter performance and our positive outlook I am pleased to announce that we are raising our full year adjusted EPS expectations to be in the range of $9 50.

Up from our most recent estimate of approximately $8 or $8 35, when you adjust our most recent estimate for the impact of amortization of purchased intangibles.

Unknown Attendee: Please turn to slide four and we'll get started on our segment updates.

Please turn to slide four and we'll get started on our segment updates.

John Pfeifer: Our access team delivered another quarter of strong performance with year over year revenue growth of 27% and an adjusted operating margin of 17.6%. Notably, we grew revenue in all major global regions. Our positive results stem from excellent operational execution as well as continued investments in products and technologies. As we have discussed over the past several quarters, demand for access equipment has remained healthy. The strong demand environment is driven by the large number of mega projects, infrastructure investments and industrial construction projects across the US and the globe. Demand is also benefiting from expanded use cases and aged fleets that need to be refreshed.

Our access team delivered another quarter of strong performance with year over year revenue growth of 27% and adjusted operating margin of 17, 6%, notably we grew revenue in all major global regions are positive results stem from.

Excellent operational execution as well as continued investments in products and technologies.

As we have discussed over the past several quarters demand for access equipment has remained healthy the strong demand environment is driven by the large number of mega projects infrastructure investments and industrial construction projects across the U S and the globe demand is also benefiting from expanded.

Use cases, and aged fleets that need to be refreshed again, we expect these drivers to continue for the foreseeable future.

John Pfeifer: Again, we expect these drivers to continue for the foreseeable future. Orders in the quarter were solid at $932 million, leading to a backlog of nearly $4 billion. Further, we believe our visibility to demand extends well beyond our current backlog as we are actively working with customers to slot the remainder of 2024. As such, we expect that 2024 new equipment sales will be substantially booked as we exit 2023.

Orders in the quarter were solid at $932 million, leading to a backlog of nearly $4 billion. Further we believe our visibility to demand extends well beyond our current backlog as we are actively working with customers to slot the remainder of 2024.

As such we expect that 2020 for new equipment sales will be substantially booked as we exit 2023.

We hosted an investor field trip to <unk> in August and many of you had the opportunity to see firsthand <unk>, leading innovations and visit our factory of the future in Shippensburg, where we have invested in technology and automation to improve our manufacturing processes support our customers.

John Pfeifer: We hosted an investor field trip to JLG in August and many of you had the opportunity to see firsthand JLG's leading innovations and visit our factory of the future in Schippensburg where we have invested in technology and automation to improve our manufacturing processes, support our customers and position the business for success well into the future. We are also investing in our Jefferson City Tennessee facility to accelerate production of JLG Telehands. We are already shipping telehandlers from the facility this year and expect to continue to ramp production throughout 2024.

And positioning the business for success well into the future.

We are also investing in our Jefferson City, Tennessee facility to accelerate production of J LG Teller handlers were already shipping tell handlers from the facility. This year and expect to continue to ramp production throughout 2024 with strong market dynamics and ongoing investments in innovation.

John Pfeifer: With strong market dynamics and ongoing investments in innovation, we expect to better support our customers as well as drive further growth and strong financial performance. We are a company and particularly his last 11 years leading JLG in the access segment.

We expect to better support our customers as well as drive further growth and strong financial performance.

I'll close access with a thank you to Frank Nir in housing for his many years of dedicated service and outstanding leadership to our company and particularly.

His last 11 years, leading J LG and the access segment, we wish Frank all the best in his well deserved retirement, we are a world class leadership team at access and we are pleased to welcome Mahesh Nerang, who is a perfect complement to our strong team and leading the segment forward.

John Pfeifer: We wish Frank all the best in his well-deserved retirement.

John Pfeifer: We have a world-class leadership team at access and we are pleased to welcome Mahesh Narang, who is a perfect complement to our strong team in leading the segment forward. Mahesh is an accomplished executive with extensive global and industrial experience. He and Frank will be working closely over the next few months to ensure a smooth transition. I am confident that Mahesh will build upon the exceptional work and strong momentum underway at access and we look forward to benefiting from his deep knowledge and experience.

Mahesh is an accomplished executive with extensive global and industrial experience he and Frank will be working closely over the next few months to ensure a smooth transition.

I am confident that Mahesh will build upon the exceptional work and strong momentum underway at access and we look forward to benefiting from his deep knowledge and experience.

John Pfeifer: Please turn to Slide 5 and I will review our defense segment. Defense revenue in the quarter was down compared to the prior year as expected. Nevertheless, we delivered stronger operating income in line with expectations.

Please turn to slide five and I'll review, our defense segment.

Defense revenue in the quarter was down compared to the prior year as expected. Nevertheless, we delivered stronger operating income in line with expectations. We expect the fourth quarter will be strongest of the year as a result of anticipated contract awards and a richer aftermarket parts.

John Pfeifer: We expect the fourth quarter will be strongest of the year as a result of anticipated contract awards and a richer aftermarket parts mix. We received good news from the US Army during the quarter as we were selected to compete in phase one of the robotic combat vehicle program. Our approach leverages our Pratt Miller team as well as our partner Kinetic to offer a mature and proven solution with demonstrated durability and flexibility while incorporating new technologies to meet the demands of an evolving battlefield. We expected to deliver two track autonomous prototypes for testing in August of 2024.

Mix.

John Pfeifer: The Army has announced its intent to select one vendor for phase two full system prototype design and build in late 2024.

We received good news from the U S Army during the quarter as we were selected to compete in phase one of the robotic combat vehicle program our approach Leverages, our Pratt Miller team as well as our partner kinetic to offer a mature and proven solution with demonstrated durability and flexibility while.

Incorporating new technologies to meet the demands of an evolving battlefield, we expected that we expect to deliver two tracked autonomous prototypes for testing in August of 2020 for the Army has announced its intent to select one vendor for phase two full system prototype design in.

Build in late 2024.

John Pfeifer: In late September, we were pleased to receive a $40 million contract award for Rogue Fires. Our unmanned ground vehicle that leverages the JLTV's extreme off-road mobility payload capacity and advanced autonomous vehicle technologies to support ground-based anti-ship missile operations. The unmanned technology associated with Rogue Fires allows the vehicle to operate in teleoperator or leader follower mode and allows for integration of scalable weapon system payloads to meet mission requirements.

In late September we were pleased to receive a $40 million contract award for Rogue fires are unmanned ground vehicle that leverages. The J Ltvs extreme off road mobility payload capacity and advanced autonomous vehicle technologies to support ground based anti.

Ship missile operations, the unmanned technology associated with Rogue fires allows the vehicle to operate in tele operator or leader follower mode and allows for integration of scalable weapons system payloads to meet mission requirements.

John Pfeifer: We continue to move toward the production phase of the USPS's next generation delivery program and are currently building and testing design certification vehicles.

We continue to move towards the production phase of the USPS is next generation delivery program and are currently building and testing design certification vehicles, we will deliver vehicles beginning in mid 2024 with production ramping to full rate in 2026.

John Pfeifer: We will deliver vehicles beginning in mid 2024 with production ramping to full rate in 2026.

John Pfeifer: And lastly, as part of our focus on profitable growth and discipline portfolio management, we sold our snow removal equipment business in July. This action allows us to better focus on growing our core business.

And lastly, as part of our focus on profitable growth and disciplined portfolio management, we sold our snow removal equipment business in July this action allows us to better focus on growing our core business, let's turn to slide six for a discussion of the vocational segment.

John Pfeifer: Let's turn to slide six for a discussion of the vocational segment. We've been building strong momentum in our vocational segment over the past two quarters. For the third quarter, we delivered 35% of revenue growth, including $116 million benefit from Arotech for two months of Oshkosh ownership. Vocational also delivered an adjusted double digit operating margin for the second straight quarter with margin of 11%. Including a solid contribution from Arotech. Improves supply chain and operational execution enabled our strong results.

We've been building strong momentum in our vocational segment over the past two quarters for the third quarter, we delivered 35% revenue growth, including $116 million benefit from Aerotech for two months of Oshkosh ownership.

Vocational also delivered an adjusted double digit operating margin for the second straight quarter with margin of 11%, including a solid contribution from aerotech improved supply chain and operational execution enabled our strong results. We expect further improvement as we return.

John Pfeifer: We expect further improvement as we return to our planned production levels and benefit from stronger pricing in our backlog in 2024 and beyond. Turning to Arotech, we are pleased with our integration progress since the close of the transaction on August 1 and expect it to be a meaningful contributor going forward. Our outlook for Arotech is strong as global passenger traffic is expected to grow in the high single digits over the next several years, and airport spending is expected to accelerate with legislation and aging infrastructure.

To our planned production levels and benefit from stronger pricing in our backlog in 2024 and beyond.

Turning to Aerotech, we are pleased with our integration progress since the close of the transaction on August 1st and expect it to be a meaningful contributor going forward our outlook for aerotech as strong as global passenger traffic traffic is expected to grow in the high single digits over the next several years.

And airports spending is expected to accelerate with legislation and aging infrastructure.

In late September Aerotech participated in the international GSE Expo, which is the airport ground support equipment industry's Premier event. This show was a great opportunity for us to for us to display our industry, leading technologies, such as the Amp cart tolerable charging platform.

John Pfeifer: In late September, Arotech participated in the International GSEExpo, which is the airport ground support equipment industry's premiere event. This show was a great opportunity for us to display our industry leading technologies, such as the Amp-Cart Toable Charging Platform, a mobile charging solution that supports current and future airport infrastructure. Also in the airport space, we announced two significant striker Volterra Electric Arf orders during the quarter, as interest in EVs continues to grow around the globe.

<unk>, our mobile charging solution that supports current and future airport infrastructure.

Also in the airport space, we announced two significant Stryker volt Tara electric RF orders during the quarter as interest in Evs continues to grow around the globe. The new airport under construction in Sydney, Australia placed an order for four Stryker Stryker volt.

John Pfeifer: The new airport under construction in Sydney, Australia placed an order for four striker Volterra Arfs to service the airport and support its carbon neutral sustainability initiatives. And in September, longtime customer Dallas Fort Worth International Airport issued a purchase order to add six striker Volterra Arfs, as well as two traditional striker Arfs to its fleet. We are confident that there will be many more airports ordering our industry leading striker Volterra Electric Arfs in the future.

Arps to service the airport and support its carbon neutral sustainability initiatives and in September longtime customer Dallas Fort Worth International Airport issued a purchase order to add six Stryker Voltaire arps as well as to traditional Stryker arps towards fleet we.

We're confident that there will be many more airports ordering our industry, leading Stryker Voltaire electric arps in the future.

John Pfeifer: Finally, we received an order from Republic Services for 50 McNeilis Volterra ZSL units, North America's first fully integrated zero emission electric refuse collection vehicle. We are confident in the long-term attractiveness of fully integrated EVs for the refuse collection industry.

Finally, we received an order from Republic services for 50, Mcneil US both Terra Z S. L units North America's first fully integrated zero emission electric refuse collection vehicle. We are confident in the long term attractiveness of fully integrated Evs.

For the refuse collection industry.

Mike Pack: With that, I'm going to turn it over to Mike to discuss our results in more detail and our updated expectations for 2023. Thanks, John. Please turn to slide 7. Consolidated sales for the third quarter were $2.5 billion in increase of $443 million or 21% over the prior year quarter. The increase was primarily driven by a $280 million or 27% increase in sales at access as a result of higher volume, improved pricing and the benefit of Penoa sales.

With that I'm going to turn it over to Mike to discuss our results in more detail and our updated expectations for 2023.

Thanks, John Please turn to slide seven.

Consolidated sales for the third quarter were $2 $5 billion, an increase of $443 million or 21% over the prior year quarter. The increase was primarily driven by a $280 million or 27% increase in sales that access as a result of higher volume improve.

Pricing and the benefit of <unk> sales and a $181 million sales increase that vocational driven by a combination of the benefit of two months of aerotech sales totaling $116 million as well as the benefit of higher volume and improved pricing.

Mike Pack: And a $181 million sales increase that vocational driven by a combination of the benefit of two months of aerotech sales totaling $116 million as well as the benefit of higher volume and improved pricing. Adjusted operating income increased $149 million over the prior year quarter to $276 million or 11% of sales, a 490 basis point improvement versus the prior year. The improvement in adjusted operating income was largely driven by favorable price cost dynamics, higher sales volume at access and vocational and improved mix offsetting part by a higher incentive compensation cost.

Adjusted operating income increased $149 million over the prior year quarter to $276 million or 11% of sales of 490 basis point improvement versus the prior year. The improvement in adjusted operating income was largely driven by a favorable price cost dynamics.

Higher sales volume at access and vocational and improved mix offset in part by higher incentive compensation costs. As previously noted current and prior year adjusted operating income excludes amortization of purchased intangibles, which isn't highlighted in our GAAP to non-GAAP reconciliations in the appendix.

Mike Pack: As previously noted, current and prior year adjusted operating income excludes amortization of purchased and tangibles which isn't highlighted in our gap to non-gap reconciliation in the appendix. Adjusted operating income exceeded our most recent expectations as a result of favorable mix, lower spending at access and vocational and favorable price cost. Also, excluding amortization of purchased and tangibles had the effect of increasing adjusted operating income by $10 million during the quarter versus our most recent expectations which equates to $11 cents of adjusted EPS net of tax. Adjusted earnings per share were $3.04 cents in the quarter versus $1.15 cents in the prior year.

Adjusted operating income exceeded our most recent expectations as a result of favorable mix lower spending at access and vocational and favorable price cost.

Also excluding amortization of purchased intangibles had the effect of increasing adjusted operating income by $10 million during the quarter versus our most recent expectations, which equates to <unk> 11 of adjusted EPS net of tax adjusted.

Adjusted earnings per share were $3.04 in the quarter versus $1 15 in the prior year now, let's turn to our outlook for 2023, please turn to slide eight.

Unknown Attendee: Now let's turn to our outlook for 2020-3.

Mike Pack: Please turn to slide 8. We expect the strong performance we delivered through the first three quarters of 2023 to continue. Additionally demand for our products remains strong and supply chain conditions are improving. Based on these factors, we are increasing our expectations for 2023. On a consolidated basis, we are estimating 2023 sales and adjusted operating income to be in the range of $9.65 billion in $875 million respectively up from our most recent sales and adjusted operating income expectations of approximately $9.5 billion in $750 million respectively.

We expect a strong performance we delivered through the first three quarters of 2023 to continue Additionally demand for our products remains strong and supply chain conditions are improving based on these factors we are increasing our expectations for 2023 on a consolidated basis, we are estimating 2023 sales and adjusted Oi.

Operating income to be in the range of $9 $65 billion and $875 million, respectively up from our most recent sales and adjusted operating income expectations of approximately $9 $5 billion and $750 million respectively.

We are estimating adjusted earnings per share will be in the range of $9 50.

Mike Pack: We are estimating adjusted earnings per share will be in the range of $9.50 up from our most recent estimate of adjusted EPS in the range of $8 per share. The exclusion of non-cash amortization of purchased and tangibles increases adjusted operating income and adjusted EPS expectations for 2023 by approximately $30 million in $35 cents net of tax respectively compared to our most recent expectations. At a segment level, we are estimating excess sales and adjusted operating margin to be in the range of $5 billion in $15.15 respectively up from our most recent estimate of sales and operating margin of $4.9 billion in $14% respectively.

Up from our most recent estimate of adjusted EPS in the range of $8 per share.

The exclusion of noncash amortization of purchased intangibles increased adjusted operating income and adjusted EPS expectations for 2023 by approximately $30 million and 35 net of tax respectively compared to our most recent expectations.

The segment level, we are estimating access sales and adjusted operating margin to be in the range of $5 billion and 15%, 15% respectively up from our most recent estimate of sales and operating margin of $4 $9 billion and 14% respectively.

Mike Pack: Turning to defense, we continue to expect sales and adjusted operating margin to be in the range of $2.1 billion and 3% respectively for the year. The exclusion of amortization of purchased and tangible increases adjusted operating margin expectations by approximately 75 basis points versus our most recent expectations. Our estimates for corporate expenses, tax rate and average share count remain generally in line with our most recent expectations. Our estimates for catmax is decreased by approximately $50 million to $300 million while our expectations for free cash flow increase by approximately $50 million to $250 million.

Turning to defense, we continue to expect sales and adjusted operating margin to be in the range of $2 1 billion and 3% respectively for the year.

We expect 2023 vocational sales and adjusted operating margin will be in the range of $2 5 billion and nine 5% respectively versus our most recent expectations of sales and adjusted operating margin of approximately $2 5 billion and 725%.

<unk> of amortization of purchased intangibles increases adjusted operating margin expectation by approximately 75 basis points versus our most recent expectations.

Our estimates for corporate expenses tax rate and average share count remained generally in line with our most recent expectations or estimate for Capex has decreased by approximately $50 million to $300 million, while our expectations for free cash flow increased by approximately $50 million to $250 million.

Looking to the fourth quarter, we expect consolidated sales will be down versus the third quarter by approximately $50 million due to fewer production days in the quarter as a result of several holidays. We also expect a few notable mix shifts.

Mike Pack: Looking to the fourth quarter, we expect consolidated sales will be down versus the third quarter by approximately $50 million due to fewer production days in the quarter as a result of several holidays. We also expect a few notable mixed shifts. Access revenue is expected to be down by approximately $150 million due to fewer production days while defense is expected to be up as a result of the timing of aftermarket parts deliveries. Vocational is expected to be roughly flat as an additional month of aerotech sales largely offsets the impact of fewer production days.

Access revenue is expected to be down by approximately $150 million due to fewer production days, while defense is expected to be up as a result of the timing of aftermarket parts deliveries vocational is expected to be roughly flat as an additional month of aerotech sales largely offset the impact of fewer production days.

Mike Pack: We expect adjusted earnings for share to be in the range of $2.10 which is lower than the third quarter as a result of the lower sales, unfavorable manufacturing absorption due to fewer production days, higher investments in NPD and facility ramp up costs and access related to the Jefferson City telehandler facility and invocational related to the Murphy's borough ERCV facility.

We expect adjusted earnings per share to be in the range of $2 10.

Which is lower than the third quarter as a result of the lower sales unfavorable manufacturing absorption due to fewer production days higher investments in NPD and facility ramp up costs and access to related to the Jefferson City, Hello, handler facility and in vocational related to them Murphy's Borough E RCV facility.

Yeah.

John Pfeifer: I'll turn it back over to John now for some closing comments. We delivered strong results in the third quarter and continue to make progress with supply chain and production throughput, demand is robust and we are investing in capacity and new products that we expect will drive profitable growth. We are in the process of integrating our accretive aerotech acquisition and we are already seeing the considerable value it brings to our company. Once again, we are meaningfully raising our expectations for 2023 as our investments in operations and product technologies are paying off with our transition to a more resilient business. This is an exciting time for Oshkosh and we are confident we are taking the right steps to drive growth and deliver enhanced shareholder value as we move forward with positive momentum.

I'll turn it back over to John now for some closing comments.

We delivered strong results in the third quarter and continue to make progress with supply chain and production throughput demand is robust and we are investing in capacity and new products that we expect will drive profitable growth. We are in the process of integrating our accretive aerotech acquisition and we.

We're already seeing the considerable value it brings to our company. Once again, we are meaningfully raising our expectations for 2023 as our investments in operations and product technologies are paying off with our transition to a more resilient business.

This is an exciting time for Oshkosh, and we are confident we are taking the right steps to drive growth and deliver enhanced shareholder value as we move forward with positive momentum.

Patrick Davidson: Okay Pat, let's get started with the Q&A. Thanks John. I'd like to remind everyone to please let me your questions to one plus a follow-up and please stay just following down the follow-up question. After that follow-up, we ask that you get back in queue if you'd like to ask additional questions.

Okay, Pat let's get started with the Q&A. Thanks, John I'd like to remind everyone to please limit your questions to one plus a follow up and please stay disciplined on the follow up question.

After that follow up we ask that you get back in queue, if you'd like to ask additional questions. Operator. Please begin the question and answer period of this call.

Unknown Attendee: Operator, please begin the question and answer period of this call. Thank you. We will now be conducting a question-and-answer session.

Thank you we will now be conducting a question and answer session. We ask that all callers limit themselves to one question and one follow up if you have additional questions you may re queue and those questions will be addressed time permitting.

Unknown Attendee: We ask that all callers limit themselves to one question and one follow-up. If you have additional questions, you may recue, and those questions will be addressed time permitting. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation telephone will indicate your line is in the question queue. You would press star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we pull for questions. Thank you.

If you would like to ask a question. Please press star one on your telephone keypad.

Information tone will indicate your line is in the question queue.

<unk>, if you would like to remove your question from the queue.

All participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.

One moment, please while we poll for questions.

Thank you. Our first question comes from the line of Steven Fisher with UBS. Please proceed with your question.

Steven Fisher: Our first question comes from a line of Steven Fisher with UBS. Please receive it with your question. Thanks.

Hey, Thanks, Good morning, Nice quarter, you mentioned being sold out for access in 2024 by year end can you maybe just clarify what the implied volumes are at that sold out levels is that higher volumes in the plan next year.

John Pfeifer: Good morning, nice quarter. You mentioned being filled out for access in 2024 by year-end. Can you just clarify what the implied volumes are at that sold out levels? Is that higher volumes in the plan next year? Any comment on sort of the price versus cost that you have embedded in that? Yeah, I guess bottom line is we're not providing guidance yet for next year, but obviously based on all of our commentary, our view and outlook is strong.

And any comment on sort of the price versus costs that you have embedded in that.

Yeah.

I guess the bottom line is we're not providing guidance yet for next year, but obviously based on all of our commentary our view and outlook is strong. So I would take that into consideration. So you would expect that the book to bill ratio to achieve that is going to be.

John Pfeifer: I would take that into consideration, so you would expect that the book to bill ratio to achieve that's going to be strong in the quarter, well about one to one. I think that's the bottom line. From a price-cost perspective, we're delivering very strong margins across our business, and I think the bottom line is we would expect that we continue to deliver strong margins in our business. We're going to continue to monitor inflation.

Be strong in the quarter, while well above one to one.

That's the bottom line from a price cost perspective, we're delivering very strong margins across our business.

And I think the bottom line is we would expect that we continue to deliver.

Strong margins in our business, we're going to continue to monitor inflation.

Ultimately, we're continuing to get more volume through our facilities, that's certainly helping.

John Pfeifer: Ultimately, we're continuing to get more volume through our facilities. That's certainly helping from an absorption standpoint and just a manufacturing efficiency standpoint. So as we look forward to next year, we see continued strength in our margins. Yes, Steve, we'll give you guidance next quarter on what we expect for access in 2024, but suffice it to say the market's strong. Our customers are doing well. Our customers have equipment needs, and that long-term equipment needs I'm talking about. So stay tuned and we'll give you an update, but we've got a healthy outlook for sure.

From an absorption standpoint, and just a manufacturing efficiency standpoint, so as we look forward to next year, we see continued strength in our margins, yes, Steve as John will give you guidance next quarter on what we're going to what we expect for access in.

2024, but suffice it to say the market is strong and our customers are doing well our customers have equipment needs.

And long term equipment needs I'm talking about so stay tuned and we'll give you give you an update but we've got we've got a healthy outlook for sure.

Okay, and then maybe just on the vocational side really strong orders in the quarter I'm curious what the visibility you have on orders is from here and where do you see perhaps more momentum in the next few quarters is it on the fire apparatus side or on the refuse collection side.

John Pfeifer: Okay, and then maybe just on the vocational side, really strong orders in the quarter. I'm curious what the visibility you have on orders is from here, and where you see perhaps more momentum in the next few quarters. Is it on the fireapp radicide or on the refuse collection side? Yeah, we have really strong orders in the fire and emergency segment primarily, but strong orders across the entire vocational business. I mean, you'll look at the arrow tech business, which is a new business for us.

Yes, we have really strong orders in the fire and emergency segment, primarily in it but strong orders across the entire vocational business. I mean, you look at the Aerotech business, which is a new business for us we've only we've only had it for a couple of months.

John Pfeifer: We've only had it for a couple of months. That's a market that we're seeing long-term growth as well, but you'll see a lot of improvement continue in that segment in 24. You'll see nice margin improvement in 24. A lot of it driven by the fire and emergency side. Thank you.

That's a market that we're seeing long term growth as well, but youll see a lot of a lot of improvement continue in that segment and 24, you'll see nice margin improvement in 'twenty four.

A lot of it driven by the fire and emergency side.

Thank you. Our next question comes from the line of Tami Zakaria with Jpmorgan. Please proceed with your question.

Tami Zakaria: Our next question comes from a line of Tammy Zakario with JP Morgan. Please continue to see with your questions.

Hi, good morning, great quarter, Thanks for taking my question.

John Pfeifer: Hi, good morning, great quarter. Thanks for keeping my questions. So my first question is similar to what Steve asked. Since we have some visibility into next year, given orders, they're going to be pretty much booked by the end of this year for 24 24. What kind of pricing do you expect to get on transition for orders for active government? Yeah, Tammy, I think if you look at, so our pricing very much correlates with what we're seeing for inflation.

So my first question is similar.

Similar to what.

Steve.

I think we have some visibility into next year.

Given orders theyre going to be pretty much booked by the end of this year, it's more tied to any floor.

What kind of pricing do you expect to get on a plane.

For <unk> equipment.

Equipment.

Yes, Tammy I think if you look at.

So our pricing very much correlates with what were seeing for inflation. So we had very significant price increases really over.

John Pfeifer: So we had very significant price increases really over leading up to the beginning of this year over that 18 month period prior. With certainly inflation continues, but it's at a more moderate pace, so I'd expect that our pricing will follow suit with that. So again, aligned with inflation. And again, we don't view price cost as a headwind going into the future.

Leading up to the beginning of this year over that 18 month period criner.

Unknown Attendee: Okay, great, perfect.

Certainly inflation continues but it's at a more moderate pace. So I would expect that our that our pricing will follow suit with that so again aligned with inflation and again, we don't view price cost as a headwind going into the into the future.

Okay, great perfect.

Mike Pack: And then my second question is on defense. What is the outlook? How should we model defense margins going forward, especially since you expect a ramp in NGTV production in the back half of next year? How would margins look like when that volume hit?

And then my second question is on defense.

What is.

How should we.

Model defense margins going forward, especially since you expect a ramp in <unk> production in the back half of next year.

Margins look like when that volume.

Sure just in general and this is consistent with what we've said the last the last several quarters that.

John Pfeifer: Sure, just in general, and this is consistent with what we've said the last several quarters that not going to be a lot of change in the core underlying business. We'll start ramping up at the back half of the year next year, but you can imagine that's going to be, that'll be lower quantities will continue to ramp up through 2025. So I would say I would think about defense next year, not necessarily notable incremental volume.

Not not going to be a lot of change in the core underlying business will start ramping up at the back half of the year.

John Pfeifer: It's really when we get to 2025 and beyond that we're going to see the more meaningful benefits to that ramp. You know, there's some give and take of course with jail TV, but we do expect some good, solid, possible growth as we get into 2025.

Next year, but you can imagine that's going to be belvieu lower quantities will continue to ramp up through 2025. So I would I would say I would think about defense next year not necessarily.

Notable incremental volume, it's really when we get to 2025 and beyond that we're going to see that.

Meaningful benefits of that ramp.

Some gives and takes of course book J L. P D.

But we do expect some good solid profitable growth as we are as we get into 2025 and Tammy is John I, just want to point out that the defense business you know the headline as Mike just talked about as we ramp J LTV down in 'twenty four we ramp up the postal vehicles starting next year.

John Pfeifer: And Tammy, I just want to point out that the defense business, you know, the headline is Mike just talked about is we ramped jail TV down in 24. We ramp up the postal vehicle starting next year into 25 and get the full production in 20 by 26. But within the defense business, there's a lot of really good programs in our defense business. And, you know, we talked about new programs that we're bidding for that are advanced technology programs like the robotic combat vehicle.

<unk>.

225, and get to full production in 2026.

But within the defense business Theres, a lot of really good programs in our defense business.

And we talked about new programs that were that were bidding for that our advanced technology programs like the robotic combat vehicle. So we're going to go through a period of a couple of years to get the defense business margins.

John Pfeifer: So we're going to go through a period of a couple of years to get the defense business margins on a trajectory that we all expect. But there's some really good business on the base business, about a billion dollars, a really healthy base business in there that sometimes gets overlooked.

On a trajectory that we.

All expect but there's some really good business on the base business about $1 billion of really healthy base business in that in there that sometimes gets overlooked.

Our next question comes from the line of Mig <unk> with Baird. Please proceed with your question.

Mike Delbray: Our next question comes from a line of Mike Delbray, we've spared.

Mike Delbray: Please proceed with your question. Yes, thank you. Thank you for taking the question. Good morning.

Yes. Thank you. Thank you. Thank you for taking my question good morning.

I'm curious if we can talk a little bit more about aerotech.

John Pfeifer: I'm curious if we can talk a little bit more about arrow attacks. This is looking at the backlog that you disclose there, and it's frankly quite a bit higher than what the former owner, GBT reported last, so maybe you can give us some context in terms of where you're seeing demand there, is it on fixed equipment, is it mobile equipment, and I'm also kind of curious from an integration standpoint, what have you learned in the first few months of ownership?

Looking at the backlog that you disclosed there.

Frankly quite a bit higher than what.

The former owner JBT reported last so maybe you can give us some.

Some context in terms of.

Where youre seeing demand there or is it on fixed equipment is it mobile equipment.

And I'm also kind of curious from an integration standpoint, what have you learned in the first few months of ownership.

Sure I cannot I'll start with that and then we can and.

John Pfeifer: Sure, I'll start with that, and then we can certainly John can add in, just from a comfortability standpoint, we're reporting backlog essentially in the same manner, so it's based on firm orders, that's not a, you know, that's not a difference of view of what represents backlog, so we are seeing strong orders, and it's really across the board, and it's tied to a lot of the tailwinds that we talked about, and why the business is excited us, regarding just airport growth in general.

Certainly John John can add and just from a comparability standpoint, we're reporting backlog essentially in the same manner. So it's based on firm orders. So that's not a that's.

That's not a difference of view of what represents backlog, but we are seeing strong orders and it's really across the board and it's tied to a lot of the tailwind that we've talked about why the business has excited us.

Regarding just airport growth in general Yeah.

John Pfeifer: Yeah, and Meg talking about the integration of it, first of all, go back to why we acquired Aerotech, we acquired Aerotech because it's a business that, you know, we've already been in the airport markets, JLGs in the airport markets, our vehicles are in the airport markets, so we've always looked at this as a near adjacency, almost right, almost even, not even adjacent, like right in the middle of our sweet spot, it's all purpose-built equipment, that where you have the opportunity to continuously apply technology, in the form of autonomous technology, intelligence product technology, electrification, to continue to drive productivity improvement for customers, so it's kind of right in the middle of our sweet spot. That is, so the biggest thing that we have learned, which is very positive, is culture and people can make or break any acquisition.

Meg talking about the integration of it first of all go back to why we acquired Aerotech, we acquired Aerotech, because it's a business that we've already been in the airport markets <unk> in the airport markets are our vehicles are in the airport markets. So we've always looked at this as a near adjacency almost right almost even 90 minutes anything like right in the middle of our.

Sweet spot its all purpose built equipment.

Where you have the opportunity to continuously apply technology in the form of autonomous technology intelligence products technology electrification to continue to drive productivity improvement for customers. So it's kind of right in the middle of our sweet spot.

That is so the biggest thing that we have learned which is very positive as is culture and people can make or break any acquisition. If you get the culture right on the fifth and the people right and things go really really well and this is a fantastic cultural fit for us.

John Pfeifer: If you get the culture right and the fit, and the people right, then things go really, really well, and this is a fantastic cultural fit for us. In terms of the values of the company, how the people on both sides have embraced the acquisition, the Aerotech people, the Ashkosh people, that's a really important part of a successful acquisition, and that is going extremely well, and we're really pleased, and look to a very, very strong long-term future for this business. Understood.

In terms of the values of the company, how we how the people on both sides have embraced the acquisition of the Aerotech people. The Oshkosh people. That's a really important part of a successful acquisition and that is going extremely well and we're really pleased and look to a very very.

Very strong long term future for this business.

Understood.

Mike Delbray: My follow-up is on Refuse Business. I appreciate the announcement that you had on Volterra orders. I'm curious, as you're looking at that particular customer, how you expect that EV demand to ramp up for them, and are there any other ones that are considering similar-type vehicles?

My follow up is on the rent.

Refuse business.

I appreciate the announcement.

Announcement that you had on Voltaire orders.

I'm curious as you're looking at that particular customer how you expect that the EV demand to ramp up for them and are there any other ones that are.

That are considering similar type vehicles.

Maybe you can comment a little bit how that impacts our margin as well from a mix standpoint, yes.

Yeah, we're really excited about this of Altera electric.

John Pfeifer: Maybe you can comment a little bit how that impacts the margin as well from the mixed standpoint. Yeah, we're really excited about this Volterra Electric Refuse and Recycling Collection vehicle. We'll start producing and selling production units by the end of this year, like imminently, like right now. We'll do a prudent ramp up of production in our plant and Murphy's Barot Tennessee, and we'll be doing, of course, dozens and dozens of units next year, and we'll continue to ramp it from there, but this product is not just an electric vehicle.

Refuse and recycling collection vehicle will start producing and selling production units by the end of this year like imminently like right now.

And we will do a prudent ramp up of production in our plant in Murphy's Borough, Tennessee.

And we'll be doing.

Of course, dozens and dozens of units next year and will continue to ramp it from there, but this product is not just an electric vehicle. It's a fully integrated vehicle that drives an enormous amount of productivity benefits for our customer benefits for the driver, making it easier safer.

John Pfeifer: It's a fully integrated vehicle that drives an enormous amount of productivity benefits for our customer, benefits for the driver, making it easier, safer, more productive for them at every single stop. So this is a huge amount of interest in this vehicle. It's almost a new category for the industry because it's not a body on chassis. Again, it's a fully integrated purpose-built vehicle, like we know how to do, and we think this is a really strong driver of growth in margins consistently year over year, probably for the next 10 years. It's hard for me to say exactly what's the adoption rate going to be, but we expect it's going to be very good over a long period of time, of Time.

More productive for them at every single stop.

This is there's a huge amount of interest in this vehicle.

It's almost a new category for the industry, because it's not a body on chassis again its a fully integrated purpose built vehicles like we know how to do and we think this is a.

With a really strong driver of growth and margins consistently year over year, probably for the next 10 years you know it's hard for me to say exactly what's the adoption rate going to be but we expect it's going to be very good over a long period of time.

Yeah.

Our next question comes from the line of Steve Volkmann with Jefferies. Please proceed with your question.

Steve Volkmann: Our next question comes to line of Steve Volkmann with Jeffries. Please receive with your question. Hi, good morning guys. Maybe backing up a little bit, a big picture. I think one of you sort of mentioned that supply chain has improved. Can you just characterize sort of where we are now? Are you able to get sort of full production through your plants now, or is there still some upside as supply chain normalizes?

Hi, Good morning, guys, maybe backing up a little bit Big picture I think one of you sort of mentioned that supply chain has improved can you just characterize sort of where we are now or are you able to get sort of full production through your plants now or is there still some upside as supply chain normal.

Wise.

Well great question, Steve because we have definitely benefited through this year by improved supply chain conditions, but I will also say the supply chain is not back to normal.

John Pfeifer: Well, a great question, Steve, because we have definitely benefited through this year by improved supply chain conditions. But I will also say that supply chain is not back to normal. You know, if you look at our on-time delivery, expire on-time delivery rates right now, that's one kind of high level metric. You know, it's kind of around 80 percent. You know, typically we'd expect it to be at least in the low 90s.

You look at our on time delivery supplier on time delivery rates right now that's one kind of high level metric.

Kind of around 80% you know typically we would expect it to be in the at least in the low nineties. So it has improved a lot over the past year, but its not back to normal. So so I think one of the important things is we've done an enormous amount of work.

John Pfeifer: So it's improved a lot over the past year, but it's not back to normal. So I think one of the important things is we've done an enormous amount of work in re-engineering, in resourcing, dual sourcing, using analytics and digitizing the supply chain inputs. So we know where problems are going to be before they disrupt our plants. I think all of that is also paying a lot of dividends to us. It's been most evident in our access business to date.

In reengineering and Resourcing dual sourcing.

Using analytics and digitizing the supply chain input. So we know where problems are going to be before they disrupt our plants. I think all of that is also paying a lot of dividends to us. It has been most evident in our access business to date, our vocational business has more complexity and longer bills of.

John Pfeifer: Our vocational business has more complexity and longer bills and material. They've made improvements because of supply chain. No question about that. But we have a little bit more runway with, I think, the vocational business on operating efficiency as supply chain continues to improve. But we expected to continue to gradually improve going forward as it has over the past few quarters.

Cereal they've made improvements because of supply chain no question about that but we have a little bit more runway with I think the vocational business on operating efficiency, our supply chain continues to improve but we expect it to continue to gradually improve going forward as it has over the past few quarters.

Great and that was kind of my follow up maybe you answered it but I was trying to figure out if there's additional productivity upside as we get to whatever normal looks like at some point in the future. It sounds like you're saying maybe more in vocational then access that's correct yes.

John Pfeifer: Great, and that was kind of my follow-up. Maybe you answered it, but I was trying to figure out if there's additional productivity upside as we get to whatever normal looks like at some point in the future. It sounds like you're saying maybe more invocational than in access. That's correct. Yeah, we've seen a nice productivity benefit over the last few quarters that access. Okay, thank you, guys. Thanks, Steve.

Yeah, we've already we've seen a nice.

Productivity benefit over over the last few quarters that access.

Okay. Thank you guys.

Thanks, Steve.

Our next question comes from the line of David Raso with Evercore. Please proceed with your question.

David Raso: Our next question comes from line of David Rasseau with Evergore.

David Raso: Please receive it with your question. Hi, thank you. I was impressed the access book to Bill for the third quarter was able to achieve, sort of, historical norms. I'm just given a supply chain normalization, tough comps. You know, we've thought maybe that'd be a little lower than the average we've seen historically. You made a comment about the fourth quarter book to Bill back above one. Can you put a little finer comb on that?

Hi, Thank you.

I was impressed the axis book to Bill for the third quarter was able to achieve sort of historical norms I'm just given the supply chain normalization.

Tough comps you know, let's call it maybe that'd be a little lower than the average we've seen historically.

You made the comment about the fourth quarter book to Bill back above one can you put a little finer.

Come on that in use.

David Raso: And usually it's almost 1716. Just to get a perspective on the new order flow versus what you're shipping. And given, I assume you're decently into those conversations already for next year. Do we think that both the bill and fourth quarter could be back to the more seasonal traditional above one and a half times? Yeah, I think the bottom line David is, I think if you implied we've said that we expect the back half of the year to be at one to one.

It usually it's almost $1 716, just to get a perspective on the new order flow versus what you're shipping.

Given I assume you are decently into those conversations already for next year.

Do we think the book to Bill in the fourth quarter could be back.

So the more seasonal traditional above one and a half.

Times.

Yeah, I think the bottom line David is I think if you.

Implied we've said that we expect the back half of the year to be at one to one so if you sort of do the math around that you can start getting some higher book to bill ratios.

David Raso: So if you sort of do the math around that, you can start getting to some higher book Yeah, that's the whole thing. Yeah, I'm just trying to understand, it looks like the backlog then the year, I don't know, definitely know up to four and a half billion. I mean, four, five, four, six, he, you know, he's that number. And I'm just sure it's that that size of backlog. How much of that is expected to show you?

Okay. So just so that we clearly affected that would be about one David I you know I know I don't know that we've calculated it to $1 five but we definitely expect it would be fourth quarter, but above one mhm.

Yes.

Yes, that's the whole thing, yes, I'm just trying to understand it looks like the backlog at the end of the year.

Definitely north of $4 5 billion I mean 4546, you can name a exact number and I'm just curious at that size of backlog.

How much of that is expected to ship in 'twenty four obviously, the large majority, but are we ready having conversations about 25.

David Raso: How much of a ship in 24? Obviously the larger majority, but are we ready having conversations about 25? And to the extent you would actually start to put it in the backlog. I'm just trying to understand how far this stretch is out and how comfortable your customers are even willing to, you know, put, put something on the dotted line for 25. Not not saying they can't cancel, but I'm just curious how to interpret that backlog.

And to the extent you would actually start to put it in the backlog I'm just trying to understand how far this stretches out and how comfortable you are customers are even willing to.

Put put something on the dotted line for 25, and I'm not saying they can't cancel so I'm just curious how to interpret that backlog, we'll see in three months.

David Raso: We'll see in three months. I would say, David, that generally the focus right now is on, on 2024. And you're right, we're way into those conversations. And really, it comes down to just the pio timing as, as we work through it, that we have good visibility to the ears. I think that, you know, 2025 conversations, of course, we see strong demand well out into the future, but the bottom line is, is right now the focus is on 24.

I would say David that generally the focus right now is on 2024, and Youre right, where we're way into those conversations and really it comes down to just the pure timing.

As we work through it but we have good visibility to the year, So I think that.

2025 conversations of course, we see strong demand.

Well out into the future, but bottom line is right now the focus is on 24, but I would expect again back with to our prepared remarks, we're going to be largely booked as we expect for new equipment as we exit the year, so that that implies that.

David Raso: That expect again back with to our prepared remarks. We're going to be largely booked as we expect for new equipment as we exit the years that that implies that, really, that that's the years essentially booked. Yeah, they just, you know, just to make sure it's clear the orders we're booking now are essentially for the end of 2024 delivery. So is Mike just said as we said our prepared remarks, we expect to be fully booked for 2024 in the fourth quarter. So it won't be long before we're booking orders for 2025.

John Pfeifer: I guess maybe that's a simple answer to your question.

Really that that's essentially booked yes.

Just a minute.

Just to make sure it's clear the orders we are booking now are essentially for the the end of 2024 delivery.

So as Mike just said and as we said in our prepared remarks, we expect to be fully booked for 2024.

In the fourth quarter, so it won't be long before we're booking orders for 2025, I guess, maybe that's a simple answer to your question.

Yeah.

Our next question comes from the line of Steve Barger with Keybanc capital markets. Please proceed with your question.

Steve Barger: Our next question comes from a line of Steve Barger with KBANG Capital Markets.

Unknown Attendee: Please receive your question.

Good morning, everyone. This is actually Christian dialogue on for Steve Barger. Thank you for taking my questions.

Unknown Attendee: Good morning, everyone. This is actually Christians Island for Steve Barger. Thank you for taking my questions. First question. Morning. My first question is on your capacity across all segments. I know you are guiding to 24, but what is the average capacity utilization of your factories and what do you think the upper limit on revenue for all the segments combined is? And then where are you tightest on capacity and is there currently a capacity expansion plan?

Sure first of all.

Good morning, Mike.

First question is on your capacity across all segments I know you aren't guiding to 'twenty four.

What is the average capacity utilization of your factories and what do you think the upper limit on revenue for all of the segments. Combined is and then where are you tied us on capacity and is there currently a capacity expansion plans.

Well I mean, I'll kind of give you. Some general ideas you know, we're we're essentially at full capacity and a lot of our facilities and so that's why you see us announcing manufacturing capacity expansion and we've got a few of them going on we've done a lot of work in existing factories, we had a J L. G event with with many of our.

Unknown Attendee: Well, I mean, I'll kind of give you some general ideas. You know, we're we're essentially at full capacity and a lot of our facilities. And so that's why you see us announcing manufacturing capacity expansion. And we've got a few of them going on. We've done a lot of work in existing factories. We had a JLG event with with many of our of you in August where we showcase Chippensburg, quote unquote factory of the future.

Our view in August where we showcased shippensburg I quote unquote factory of the future you saw a lot of investments we're doing to improve our throughput but in addition to that we've got a new facility or a repurpose facility in Tennessee to increase output.

Unknown Attendee: You saw a lot of investments. We're doing to improve our throughput. But in addition to that, we've got a new facility or a repurposed facility in Tennessee to increase output for JLG. We've got a new facility in Murphy'sboro, Tennessee to do firetruck cabs and our new BRCB refuse collection vehicle product. And of course we've got the Big Spartanburg plant, which is getting ready as producing postal vehicles today and getting ready to go into production vehicles over the next several months.

Output for J L. G. We've got a new facility in Murfreesboro, Tennessee to do fire truck cabs, and our new E. RCB refuse collection vehicle product and of course, we've got the big Spartanburg plant, which is getting ready is producing postal vehicles today and getting ready to go into production vehicles Oh.

Over the next several months. So we are we are adding capacity because we see long term growth trends in these markets. You know, we when we look at J L. G.

Unknown Attendee: So we are we are adding capacity because We see long-term growth trends in these markets. When we look at JLG, we look at a lot of events that are coming together. It's a very unique thing that's happening, where you have huge infrastructure builds that have been passed by the government. You have technology transformation happening with regard to EVs and battery plants, chip plants because of the digital revolution that we continue. We continue to be in energy transformation.

Look at a a a lot of events that are coming together very unique thing that's happening where you have huge infrastructure.

Bills that have been passed by the government you have technology transformation happening with regard to Evs and battery plants chip plants because of the digital revolution that we continue to be in energy transformation.

Unknown Attendee: We have geopolitical concerns causing on-shoring to continue. We've got also an age fleet. So all of these things come together. It's a very unique thing for all of these big macro things that we come together. And what it tells us is that there's a lot of long-term demand that is underway. And that's why we're putting more manufacturing capacity. And because we know we have to meet that demand long-term.

We have.

<unk> political concerns, causing onshoring to continue we'd got also an aged fleet. So all of these things come together, it's a very unique thing for all of these big macro things will be coming together and it put what it tells US is that there was a lot of long term demand.

<unk> is underway and that's why we're putting more manufacturing capacity and because we know we have to meet that demand long term.

Great and then as a quick follow up your backlog coverage is hold up really well with all that said do you think this level of backlog relative to your revenues are sustainable or do you think you'll be able to monetize some of that backlog at a quicker pace next year and in 25, given those capacity expansions and everything you just said thank you so much.

Stanley Elliott: Great. And then it's a quick follow-up. Your backlog coverage has held up really well. With all that said, do you think the level of backlog relative to your revenues is sustainable? Or do you think you'll be able to monetize some of that backlog at a quicker pace next year and in 25, given those capacity expansions and everything you just said? Thank you so much. Yeah. I think ultimately what we'd expect is that over time as productions normalize that you will have backlog trends and order trends normalize a bit more.

Yeah, I think ultimately what we'd expect is that over time as productions normalize that you will have backlog trends and order trends normalize a bit more I think where you'll see a decrease over time as in vocational because that's where we've we see pent up demand and as John said <unk>.

Stanley Elliott: I think where you'll see a decrease over time is invocational because that's where we've we see pent up demand. And as John said earlier, we see some more. They're a little bit later working through the supply chain challenges given that complexity to the product. So I would expect to see some normalization over time as we go through next year there. Yeah. I mean, a little bit more color on that. So you see the big backlog that we have today, $16 billion.

Earlier, we see some more a little bit later working through the supply chain challenges given the complexity of the product. So I would expect to see some normalization over time as we go through next year there.

I mean, a little bit more color on that and so you see the big backlog.

We have today at $16 billion.

Stanley Elliott: As I talked about earlier, we continue to increase capacity. We're increasing capacity not because we have a big backlog. We're increasing capacity because we see strong order rates continuing into the long-term future. Now that will that will also help us to bring those backlogs into a more realistic level from a lead time perspective. So we, you know, we want to we want to provide lead times that are a little lower than we have right now with our JLG business.

As I talked about earlier as we continue to increase capacity, we're increasing capacity not because we have a big backlog.

We are increasing capacity because we see strong order rates continuing into the long term future now that will that will also help us to bring those backlogs into a.

Into a more to a more realistic level from a lead time perspective.

We want to we want to provide lead times that are a little lower than we have right now with our <unk> business, we want to bring our fire and emergency lead times to under a year and they're well over a year today, so that that'll happen as we go but we're putting that capacity in place because we see the demand continuing long term not.

Stanley Elliott: We want to bring our fire and emergency lead times to under a year and they're well over a year today. So that will happen as we go, but we're putting that in place because we see the demand continuing long term, not just because we have a big backlog. As a reminder, if you would like to ask a question, press star one on your telephone keypad. Again, we ask that all callers limit themselves to one question and one follow-up.

Just because we have a big backlog.

As a reminder, if you would like to ask a question press star one on your telephone keypad.

Again, we ask that all callers limit themselves to one question and one follow up.

Our next question comes from the line of Jerry Revich with Goldman Sachs. Please proceed with your question.

Jerry Revich: Our next question comes from line of Jerry Revich with Goldman Sachs. Please receive your question. Yes. Hi. Good morning, everyone. I'm Brian Derek. Hi.

Yes, hi, good morning, everyone.

Hi, good morning Derek.

Brian Derek: I'm wondering if you just share what you're seeing in the telematics data that you track, you know, on burials versus telehandlers. We're hearing about a different range. Yep. Yes, so you're basically talking about product utilization. We see utilization of product at a very healthy level today. You know, it ebbs and flows, right? And certainly, as we've made progress, putting a little bit more equipment into the marketplace as it's certainly been needed, you might see ebbs and flows to that utilization rate.

Hi, I'm wondering if you could just share what <unk>.

You are seeing in the telematics data that you track.

Burials versus tell handlers were at a different range yes.

Yeah, So you're basically talking about product utilization, we see utilization of product at a very healthy level today.

It ebbs and flows right and certainly as you've put as we've made progress putting a little bit more equipment into the marketplace. As it's certainly been needed you might see ebbs and flows to that utilization rate, but the utilization rates are still at a very healthy level and our customers still need a lot of equipment and I think that you've.

Brian Derek: But the utilization rate is still at a very healthy level, and our customers still need a lot of equipment. And I think that you, you know, some of the customers that we have that are publicly traded, you can see that there's still a need for more equipment. There is a healthy dynamic in the market right now.

You know some of them some of the customers that we have that are publicly traded you can see that there's still a need for more equipment.

There is a.

There's a healthy dynamic in the market right now.

Well, yes, and maybe just put a finer point on it sounds like the telescopic and is still extremely tight but there is some loosening on scissors and tell the handlers is that right and can you comment on what Youre seeing in Europe, specifically I think there are some concerns around utilization slowing there.

John Pfeifer: Well, and maybe just put a final point in. It sounds like the telescopic end is still extremely tight, but there's some loosening on scissors and telehandlers. Is that right? And can you comment on what you're seeing in Europe specifically? I think there are some concerns around utilization slowing there. You know, I think when you say loosening, I mean, we don't see loosening as a bad thing. You know, we're able to produce more equipment.

You know I think when you say loosening I mean.

We don't see loosening as a bad thing and where we're able to produce more equipment, we're able to get more equipment into the hands of our customers who are deploying that equipment in some cases theyre starting to replace older equipment, which is a good thing and you see that in the used market. So I think you'll continue to see that.

John Pfeifer: We're able to get more equipment into the hands of our customers who are deploying that equipment. And in some cases, they're starting to replace older equipment, which is a good thing. And you see that in the used market. So I think you'll continue to see that replacement dynamic happen over a long period of time. So, you know, the scissors and the AWPs that are the booms that are continue on the market.

<unk> dynamic happen over a long period of time, So you know the scissors and the and the Awp's. The booms that are continuing to go in the market. That's that's a it's a healthy thing our customers want to see that they want to see it continue that the <unk> handler production. We continue to see expanded use cases for the product.

John Pfeifer: That's a healthy thing. Our customers want to see that. They want to see it continue. That the telehandler production, we continue to see expanded use cases for the product. And that's why we're continuing to increase our output in that in that segment.

And that's why we're continuing to increase our output and that are in that segment.

Our next question comes from the line of Seth Weber with Wells Fargo. Please proceed with your question.

Seth Weber: Our next question comes from a line of Seth Weber with Wells Fargo. Please receive it with your questions. Hey, guys.

Oh, Hey, guys good morning.

Mike Pack: Good morning. I wanted to go back to an earlier question about defense margin. I think it looks like, you know, you're pedaling in something in the, you know, 6% range or so for the fourth quarter. I think I heard you say something about mixes going to be, you know, more towards parts and stuff like that. So, you know, again, I'm just trying to understand is this 6% ish number for the fourth quarter, a good number to use going forward. You know, because this is, you know, this has been an area where margin. We, you know, a lot of us have had a hard time trying to get arms around margin for this business.

I wanted to go back to an earlier question about defense margin.

It looks like Youre penciling in something in the <unk>.

The 6% range or so for the fourth quarter I think I heard you say something about mix is going to be more towards parts and stuff like that so.

Again, I'm just trying to understand is this 6% ish number for the fourth quarter, a good number to use going forward.

Because this is you know this has been an area where margins were you know a lot of us have had a hard time trying to get arms around margin for this business.

Yeah, I would say the fourth quarter margin, it's mix, but then I'd also expanded to typically in quarters that we have larger orders, particularly with the Ltvs and we do expect the <unk> order.

Mike Pack: Thanks. Yeah, I would say the fourth quarter margin, it's mixed, but then I'd also expanded to typically in quarters that we have larger orders, particularly with jail TVs. And we do expect a jail TV order. We do benefit from that in the, in the, the, the quarters. So I would say the fourth quarter is higher than what our run rate is right now if you versus like a full year. So I would say that, you know, again, we're not providing guidance yet for next year, but we're, we're sort of still operating in the, the Lord amid single digits and that business and the turning point is when we start really ramping up NGV at scale.

We do benefit from that in the end.

The quarter, So I would say the fourth quarter is higher than what our run rate is right now if you will versus like a full year, so I would say that.

You know I.

Again, we're not providing guidance yet for next year, but we're sort of still.

Still operating in.

The lower to mid single digits in that business and that turning point is when we start really ramping up and GDP at scale.

Okay. That's helpful. And then can you just comment.

John Pfeifer: Okay, that's helpful. And can you just comment, you know, given the geopolitical events, have you seen it pick up in conversations for NP International JLTV interests? Well, sure, we have, I'll remind everyone, you know, while we have the DOD contract ramping down, we'll continue to produce JLTVs for international customers for the foreseeable future. Yes, there is demand there. I mean, with regard to the current conflicts that are going on, you know, I can't comment on the specifics, but I will say that we, of course, closely monitor it. And we will always be standing ready to support the Department of Defense and our allies. I can't say more than that. Other than to say, yes, of course, there is international demand for these products.

Given the geopolitical events.

Have you seen it pick up and are in conversations for any.

International J L T V.

Interest.

Well sure we Oh I'll remind everyone you know, while we have the D. O D contract ramping down we will continue to produce J ltvs for international.

Customers for the foreseeable future.

Yes, there is demand there I mean with regard to the current conflicts that are going on.

You know I can't comment on the specifics, but I will say that we of course closely monitor it and where we will always be standing ready to support the the department of defense and our allies I can't say more than that other than to say, yes of course there is.

International demand for these products.

Our next question comes from the line of Stanley Elliott with Stifel. Please proceed with your question Hey, good.

Stanley Elliott: Our next question comes from a line of Stanley Elliott with Steeple. Please begin with your question. Hey, good morning, everyone. Thanks for fit me in. The past two years, you guys had kind of been running at an elevated CAPEX number. You've done a lot to expand the footprint.

Good morning, everyone and thanks for fitting me in.

The past few years, you guys had kind of been running at an elevated capex number you've done a lot to expand the footprint.

Mike Pack: Just curious, if we start thinking out over the next several years, do we think the CAPEX piece kind of moves back to more of what you've done historically, or we need kind of a continued higher level of spend to support some of the EV sort of facilities that are going to be out there. Sure, I can take that Stanley. I think from a CAPEX perspective, certainly last year was relatively higher with our investments, particularly in NGDV and some of our other facilities.

Just curious if we start thinking out over the next several years do we think the capex piece kind of moves back to more of what you've done historically.

Or will we need kind of a continued higher level of spend to support some of the the E. B sort of facilities that are that are going to be out there.

Sure I can I can I can take that family I think from a capex perspective, certainly last year was was relatively higher with our investments, particularly in N. G. D V. In some of our other facilities I. This year again because of N GT D as well as our Murphy's borough in Jefferson City facilities as well as some of the.

Mike Pack: High this year, again, because of NGDV, as well as our Murphy'sboro and Jefferson City facilities, as well as some of the other capacity for fire trucks. I would say next year we'll be wrapping up many of those projects, so probably still a little bit higher than typical times, but I would expect, once we get into 2025 and beyond, a lot of that electrification infrastructure is going to be in place from a facilitation perspective, so I would expect that to start normalizing. Not really different than what we talked about a year and a half ago on our analyst day, that it would be higher these first few years.

Other capacity for fire trucks, I would say no.

Next year.

We'll be ramping up our wrapping up.

Many of those projects will probably still a little bit higher than typical times, but I would expect once we get into 2025 and beyond a lot of that electric electrification infrastructure is going to be in place.

Sortation perspective, so I would expect that to start normalizing that not really different than what we talked about.

About a year and a half ago at our analyst day that it would be higher these first few years.

And I guess is that because the next question would end up being kind of you talk about maybe some of the longer term plans for the for the balance sheet right it'll be you know.

Mike Pack: I guess because the next question would end up being kind of, you know, talk about maybe some of the longer term plans for the balance sheet, right? You'll be approaching kind of a net net neutral in the next 18 months to years. Do you want to carry leverage? Do you want to increase the share we purchased? It seems like there's going to be a lot of free cash flow generating in the next several years.

Approaching kind of a net debt neutral in the next 18 months two years do you want to carry leverage B one of increased the share repurchase just it seems like there's going to be a lot of free cash flow generating in the next several years.

Sure you know if you go back to really our targets that we've talked about for capital allocation, we expect over the for the foreseeable future really operate in that 65% to 75% of our our cash deployment to be going towards growth initiatives, whether M&A or our investments internally. So that's going to continue to be.

Mike Pack: Sure, you know, if you go back to real air targets that we talked about for capital allocation, we expect over the foreseeable future really operating at 65 to 75% of our cash deployment to be going towards growth initiatives, whether M&A or investments internally. At least that's going to continue to be a significant piece. I would say this year, it's obviously been a bit heavier than that with the arrow tech acquisition and Hinoa and some of the investing in the NGDV facility.

A significant piece I would say this year. It was it's obviously been a bit heavier than that.

With the the Aerotech acquisition, and who know and some of the investing in the N GT D facility.

Mike Pack: But again, that's how we think about it over time. And so I think to extent that we see we're going to continue to look at acquisitions and expect to be, you know, look for those opportunities. I think from a share of buyback perspective, again, going back to our analyst day, in periods of higher M&A, you'd expect less buybacks, but it's still a very important part of our capital allocation strategy. So in periods when we're lost, the positive you would expect to see more share of buyback activities, but you know, our target leverage is still two times, two times or less, we're under that still. So we certainly have capacity to continue to play our balance. Sheep.

But again, that's how we think about it over time.

And so I think to the extent that we see we're going to continue to look at at acquisitions and expect to be you know.

Look for those opportunities I think from a.

A share buyback perspective, again going back to our analyst day in periods of higher M&A, you would expect less buybacks, but it's still a very important part of our capital allocation strategy. So in periods, when where lots of acquisitive you would expect to see more share buyback activity, but you know our target leverage is still too tight.

<unk> two.

A few times or loss, where we're under that still so we certainly have capacity to continue to deploy our balance sheet.

Perfect guys. Thanks, so much.

Stanley Elliott: Perfect, guys. Thanks so much. Thanks, Stanley.

Thanks Stanley.

Mr. Davidson, we have no further questions at this time I would now like to turn the floor back over to you for closing comments.

Patrick Davidson: Mr. Davidson, we have no further questions at this time. I would now like to turn the floor back over to you for closing comments. Great. Thanks, Christine. Thanks everybody for joining us today. We're very pleased to be entering the final quarter of 2023 with momentum in a very strong outlook. Please reach out to us if you have any follow-up questions and have a great day.

Great. Thanks, Christine and thanks, everybody for joining US today, we're very pleased to be entering the final quarter of 2023 with momentum and a very strong outlook. Please reach out to us. If you have any follow up questions and have a great day.

Ladies and gentlemen, this does conclude today's teleconference. You may disconnect. Your lines at this time. Thank you for your participation and have a wonderful day.

Unknown Attendee: Ladies and gentlemen, this does conclude to today's teleconference. You may disconnect your lines at this time. Thank you for your participation and have a wonderful day.