Q4 2024 Oshkosh Corp Earnings Call
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Speaker Change: Greetings, and welcome to the Oshkosh Corporation Fiscal 2024 Fourth Quarter and Full Year Results Conference Call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation.
Speaker Change: If anyone should require operator assistance during the conference, please press star zero on your telephone keypad.
As a reminder, this conference is being recorded.
Speaker Change: It is now my pleasure to introduce your host, Pat Davidson, Senior Vice President Investor Relations for Oshkosh Corporation. Thank you, sir. You may begin.
Pat Davidson: Good morning, and thanks for joining us. Earlier today, we published our fourth quarter and full year 2024 results.
Pat Davidson: A copy of that release is available on our website at OshkoshCorp.com. Today's call is being webcast and 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 it's also available on our website.
Pat Davidson: The audio replay and slide presentation will be available on our website for approximately 12 months
Please refer now to slide 2 of that presentation.
Pat Davidson: 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.
Pat Davidson: These risks include, among others, matters that we have described in our Form 8K filed with the SEC this morning and other filings we make with the SEC.
Pat Davidson: 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.
Speaker Change: Our presenters today include John Pfeifer, President and Chief Executive Officer, and Matt Field, Executive Vice President and Chief Financial Officer. Please turn to slide three, and I'll turn it over to you, John.
John Pfeifer: Thank you, Pat, and good morning, everyone. I'm pleased to announce strong results for Oshkosh Corporation with 2024 revenue and adjusted earnings per share for the full year of $10.8 billion and $11.74 respectively.
John Pfeifer: We achieved an adjusted operating income margin of 10.5%, a 110 basis point increase over 2023.
John Pfeifer: This is an exciting time for our company as we work to capitalize on solid growth opportunities, particularly in our vocational segment.
Speaker Change: I'm also happy to welcome our new CFO, Matt Field, to the company. Matt brings exceptional leadership to our team as well as extensive financial and international experience.
Speaker Change: I look forward to working with him as we continue to execute our Innovate, Serve, Advance growth strategy. Let's get started with a recap of the fourth quarter.
Speaker Change: We delivered another solid quarter of growth with a revenue up 6.3%.
Speaker Change: compared to the fourth quarter of 2023. Our adjusted operating income margin was 9.4%. Our adjusted EPS of $2.58 reflected strong sales growth and margin expansion in our vocational segment.
Speaker Change: And, while our access segment is experiencing softer near-term market conditions,
Speaker Change: We expect to deliver robust, resilient margins, and the long-term prospects for this business remain favorable with megaprojects, infrastructure build-out, and data centers driving demand for our equipment.
Speaker Change: Earlier this month, we participated at CES in Las Vegas, where we showcased Oshkosh's innovative products and technologies aimed at making the work of everyday heroes safe, intuitive, and more productive.
Speaker Change: We demonstrated our strong capabilities, including AI, autonomy, and connectivity, as well as our practical and thoughtful approach to applying these technologies to deliver meaningful benefits for our customers.
Speaker Change: Our display featured the job site of the future, the airport of the future, and the neighborhood of the future incorporating these innovations.
Speaker Change: We also featured our next generation delivery vehicle, which we started building for the United States Postal Service in 2024. This is one of the most significant new products in the history of our company.
Speaker Change: We're pleased with the early positive feedback on the NGDV from postal carriers and look forward to ramping production throughout 2025.
Speaker Change: Our hairy concept designed for an on-demand, autonomous refuse collection robot was recognized with a CES PICS award as one of the best new products at the show.
Speaker Change: With Harry, residents of neighborhoods will be able to request refuse and recycling pickup with a smartphone app or a virtual home assistant.
Speaker Change: The robot will autonomously navigate to homes, collect refuse or recycling, and return to a central collection base to unload and recharge. We believe this technology has significant potential, especially for large planned residential communities.
Speaker Change: Lastly, I'm pleased to share that we were named to the Dow Jones Sustainability World Index for the sixth consecutive year.
Speaker Change: Companies must be rated in the top 10% of their peer group for sustainable business practices to be considered for the index. This recognition reflects our commitment to driving profitable, sustainable growth that benefits our people, communities, and environment, as well as shareholders.
Speaker Change: Please turn to slide four for a recap of 2024 and our 2025 expectations.
Speaker Change: I'm proud of our performance in 2024. Our 18,000 plus team members continue to deliver strong results, positioning us to be a growing, more resilient company for the future.
We are pleased with our progress.
Speaker Change: We are also announcing our 11th consecutive double-digit percent increase in our dividend, raising the quarterly dividend by $0.05 to $0.51 per share, a nearly 11% increase.
Speaker Change: This reflects our expectation of strong, long-term cash flow generation and our board's confidence in our ability to sustain profitable growth.
Speaker Change: Turning to our outlook for 2025, we expect to deliver adjusted EPS in the range of $11.
Speaker Change: This reflects a balanced assessment of near-term outlook in access equipment, opportunities in vocational, and the expected ramp-up of the NGDV program in defense and investments in new products and technologies.
Speaker Change: Please turn to slide 5 and we'll get started on our segment updates.
Speaker Change: The ACCESS team delivered solid fourth quarter sales as the industry continues to normalize.
Speaker Change: We're seeing demand moderate in response to softer non-residential construction activity and elevated interest rates
Speaker Change: As we've previously mentioned, we anticipate lower sales in 2025, particularly in the first half of the year.
Speaker Change: Our team is focused on execution in this environment, and we are confident that we can deliver resilient margins for the year. We expect improving conditions in the second half of 2025, which are expected to provide momentum going into 2026.
Speaker Change: We ended the year with a healthy backlog at 1.8 billion dollars.
after booking orders of $856 million in the quarter.
Speaker Change: We continue to engage with customers on 2025 requirements and expect to book additional annual purchase orders in the first quarter. Furthermore, we remain confident in the market's long-term health.
Speaker Change: Our ACCESS team continues to advance its products with state-of-the-art technology and job site connectivity.
Speaker Change: Clear Sky Smart Fleet was also featured at our Job Site of the Future CES Exhibit, Driving Job Site Productivity.
Speaker Change: We now have over 100,000 connected assets as part of this technology platform.
Speaker Change: This is one of the world's largest fleets of connected equipment on the job site. Customer adoption is strong and enthusiasm continues to build for ClearSky's ability to enhance productivity, boost efficiency, and maximize machine uptime.
Speaker Change: CES attendees also experienced our Galileo all-electric boom lift and rotating telehandler concept, as well as its companion, our autonomous mobile recharging robot.
Speaker Change: These advanced concepts demonstrate potential opportunities to enhance safety and productivity for the job site of the future.
Speaker Change: Please turn to slide 6, and I'll review our vocational segment.
Speaker Change: Our vocational segment achieved strong year-over-year revenue growth of nearly 20% in the fourth quarter, and a robust, adjusted operating income margin of 14%.
Speaker Change: Increased volume and strong price realization drove double-digit revenue growth and key product lines in the segment.
Speaker Change: The backlog is also robust, providing excellent visibility into demand. We remain focused on increasing production levels across the segment to support strong demand and a healthy backlog, which we expect will deliver meaningful revenue and income growth over the coming years.
Speaker Change: Another important announcement from CES was the launch of our all-new Volterra ZFL-ERCV, the industry's first purpose-built, fully integrated electric front-end loader refuse and recycling collection vehicle.
Speaker Change: This joins our Volterra ZSL side loader refuse and recycling vehicle to provide the most capable electric refuse vehicles on the market.
Speaker Change: We also highlighted future technologies, including our advanced AI capabilities to identify waste and recycling stream contamination, as well as our all-electric side loader refuse collection arm, which eliminates hydraulics and features autonomous operation.
Speaker Change: We believe these innovations will continue to revolutionize safety and productivity in the industry, which we expect will drive future growth.
Speaker Change: Global air passenger metrics continue to strengthen, with the International Air Transport Association's November figures showing growth of 8.1% year-over-year. We believe strong market conditions, combined with technology and innovations in our IOPS-connected solutions,
Speaker Change: Electrified product offerings and autonomy are fueling growth for our market-leading products at Aerotech, where we saw revenue grow more than nine percent compared with the fourth quarter of 2023.
Speaker Change: Let's turn to slide 7 for a discussion of the defense segment.
Speaker Change: Defense results continue to be impacted by legacy fixed price contracts. In the future, we expect better results with improved pricing terms on TWV programs and the launch of the next generation delivery vehicle.
Speaker Change: We look forward to finalizing our FM-TV three-year contract extension in the first half of 2025. This sole-source contract is expected to include improved pricing and economic price adjustment provisions.
Speaker Change: similar to our recently announced FHTV contract extension, which will improve the resiliency of margins over time.
Speaker Change: We expect to complete domestic JLTV production in early 2025. International interest in tactical-wheeled vehicles, including JLTVs, remains solid, and we see the potential for additional international orders during the year.
Speaker Change: We are pleased with the progress on the production ramp-up for the NGDV program, which will be an important component of Oshkosh's growth over the next decade.
NGDVs are the delivery industry's most state-of-the-art vehicles.
Speaker Change: and are modernizing and decarbonizing USPS's fleet while dramatically enhancing driver safety and productivity. These purpose-built vehicles are equipped with the latest safety features that will support the success of USPS for the next two decades.
Speaker Change: We expect to increase our NGDV production rates throughout the year and achieve full rate production by the end of 2025, which should provide strong revenue growth during the year and into 2026.
Speaker Change: When we combine the NGDV ramp with revised pricing on the FM-TV and FH-TV programs, it's clear why we have a strong outlook for profitable growth in 2026 and beyond.
Speaker Change: With that I'll turn it over to Matt to discuss our results in more detail including our expectations for 2025
Matt Field: Thanks, John. I'm grateful to join the team at Oshkosh and excited by the growth opportunities for the company, including those highlighted at CES. I also want to thank Mike Pack and the finance and accounting team for their support and patience during my transition.
Please turn to slide 8.
Matt Field: Consolidated sales for the fourth quarter were $2.62 billion, an increase of $157 million, or 6% over the same quarter last year. Our top-line growth primarily reflected increased volume and improved pricing in our vocational segment.
Matt Field: In fact, solid performance at vocational is the primary driver for our strong Q4 results.
Matt Field: Adjusted operating income was $245 million, or 9.4% of sales, an increase of $5.5 million over the same quarter last year.
Matt Field: The improvement in adjusted operating income was largely driven by higher sales volume and improved price-cost dynamics, offset in part by CCAs in defense.
Matt Field: Adjusted earnings per share was $2.58 in the fourth quarter, essentially in line with $2.56 in the prior year.
Matt Field: The roughly flat adjusted earnings per share on higher operating income reflected the impact of higher interest expense on our revolving credit facility.
Matt Field: We repurchased nearly 500,000 shares of our stock during the quarter at a cost of approximately $50 million.
Matt Field: Full year free cash flow was about $270 million for the year, including capital expenditures of approximately $280 million. This was lower than our expectation due, in part, to timing delays on unit deliveries and defense that we expect to reverse in 2025.
Matt Field: Turning to our expectations for 2025 on slide 9, we expect consolidated sales to be approximately $10.6 billion.
Matt Field: We are estimating adjusted operating income to be approximately 1 billion and we estimate that adjusted earnings per share will be approximately $11
Matt Field: While we expect lower sales and access, we expect to grow both sales and adjusted operating income for the vocational and defense segments.
Matt Field: These estimates assume that present levels of tariff rates, raw material prices and supply chain performance continue into 2025 without significant disruption.
Matt Field: At a segment level, we are estimating access sales to be approximately $4.4 billion, with an adjusted operating margin of about 13%, reflecting market conditions in North America and Europe.
Matt Field: We expect the decline in revenue will be most pronounced in the first and fourth quarters, reflecting market softness as well as traditional seasonality.
Matt Field: In vocational, we see sales of approximately $3.8 billion, with expectations for adjusted operating margin to be approximately 15%.
Matt Field: We expect a continuation of favorable price-cost dynamics and volume growth to drive our improved margin outlook.
Matt Field: For defense, we expect sales to be approximately $2.3 billion, with expectations for an adjusted operating margin of approximately 4%, reflecting less adverse CCAs and the ramp-up of NGDV production.
Matt Field: We expect to invest about $250 million in CapEx, and our estimate for free cash flow is in the range of $300 to $400 million.
Matt Field: This cache reflects the projected adverse impact of timing differences from vocational deposits on units produced as we work down the backlog. These can vary from year over year and normalize over time.
Matt Field: We expect first quarter results to be the lowest of the year, with adjusted EPS to be approximately $2. This reflects our expectations around the access industry dynamics, as well as the impact from the progressive ramp-up in NGDV production and defense.
John Pfeifer: With that, I'll turn it back over to John for some closing comments.
John Pfeifer: We reported another solid quarter to finish off an impressive year at Oshkosh, and we expect to continue to deliver healthy results moving forward.
John Pfeifer: We have excellent visibility to grow revenue in our vocational segment, and our planned NGDB ramp-up supports growth in our last mile delivery business.
John Pfeifer: Additionally, we remain confident across the company in the long-term growth opportunities driven by our people, innovative products, and strong businesses.
John Pfeifer: which we expect will continue to deliver shareholder value. We just announced our guidance for 2025 which we believe is balanced and realistic given current business conditions. Furthermore, we plan to share more details about our longer-term outlook at our investor day later this year.
John Pfeifer: This will be an outstanding opportunity to learn about our company and industry leading technologies from our business leaders We look forward to speaking with you at the event. I'll turn it back to you Pat for the Q&A
John Pfeifer: 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 your follow-up, we ask that you rejoin the queue if you have additional questions. Operator, please begin the Q&A session.
Speaker Change: Thank you. We will now be conducting a question and answer session. Again, we ask that all callers limit themselves to one question and one follow-up.
Speaker Change: If you have additional questions, you may requeue, 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 tone will indicate your line is in the question queue.
Speaker Change: You may press star 2 if you would like to remove your question from the queue
Speaker Change: For 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.
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Speaker Change: Thank you. Our first question comes from the line of Jerry Ravitch with Goldman Sachs. Please proceed with your question.
Speaker Change: Yes, hi. Good morning, everyone. Good morning, Jared. Hi. What obviously stands out in the quarter is the outstanding performance and vacation in the fourth quarter and the outlook for 25. I'm wondering if you could just...
Speaker Change: Talk a little bit more about what the growth outlook in the core of Pierce business versus the other parts of the portfolio, how broad-based is the top line and margin strength that you're looking for in that business with a bit more context, please, if you don't mind.
Speaker Change: Yeah, sure, Jerry. Thanks for the question. Yeah, vocational is just continuing to do what we expect it to do, which is be a really resilient, growing business, continuing to grow margins. We expect to continue to grow margins going forward.
Speaker Change: Our municipal fire truck business is a really, really important part of that business. We have big backlogs across all of our businesses and vocational, but I think that that the fire, the municipal fire truck business kind of is the leader in terms of.
Speaker Change: The strong water intake that we've had and we've built up this big backlog.
Speaker Change: So what we're doing in our fire business is we're really driving investment and effort in getting throughput.
through our four manufacturing plants. We're even adding some capacity.
Speaker Change: at our new Murfreesboro plant, which is primarily building environmental vehicles, but we're also doing some cabs down there to continue to increase throughput. But we've got, you know, we'll continue to drive growth in both units as we continue to get better throughput.
and we'll get continued pricing.
Realization, which is in the backlog.
Speaker Change: That's also going to help us continue to perform really, really well in this business.
Speaker Change: You know, the market in general for municipal fire trucks is strong. Municipalities want new technology, and we're giving them new technology. And they're upgrading their fleets, and this is a really foundational part of that vocational story.
Speaker Change: for the segment and is it fair to think about that exit rate as the run rate into 26 or what other moving pieces should we be thinking about in terms of the margin cadence exiting this year?
Speaker Change: Hi, Jerry. It's Matt. So we're really pleased with the ramp-up we're seeing, and as you mentioned,
will progressively grow the pace of production across the year.
While we don't provide specific guidance on USPS,
Speaker Change: We do see it as a creative to our overall defense business and so we will talk more about that at our investor day But also obviously once we get closer to 2026
Thank you.
Thanks, Sherry.
Speaker Change: Our next question comes from the line of Stephen Fisher with UBS. Please proceed with your question.
Speaker Change: first half versus the second half and and how that compares to to usual at this time of the year and Maybe some of the key drivers in your mind of the improving conditions you mentioned in in the second half of the year in access
Yeah, thanks, Steve. I'll take your question.
Speaker Change: So, you know, I'll kind of give you a quick rundown of the market. You know, we look at the market from a lot of different angles, but the primary angle that we have on the market is our relationship and communication with our customers. And we're always...
Speaker Change: Our customers have really good forecasting capability, they've got good visibility. Of course, we look at all the metrics. We look at from the Dodge Momentum Index to non-residential construction metrics. But customers give us a lot of insight into the market.
Speaker Change: So it's a combination of that that really goes into what we're expecting.
Fleet metrics in terms of fleet utilization is healthy.
It's not unhealthy.
Speaker Change: Our fleet metrics are healthy, but you but combined with that you've got non-residential construction Primarily private non-residential construction that's under a bit of pressure and that's why we're seeing more a lot more
Fleet replacement happening, because fleets are still aged.
but not so much fleet growth happening.
Speaker Change: And when we look at the market, we pay attention to what our customers are expecting, and that gives us the insight to say, hey, more typical seasonality, a little bit lower in the first half, but building momentum in the second half.
Speaker Change: Okay, that's helpful. And then, just to follow up on the vocational side of things,
maybe looking at the the Aerotech business in particular.
I'm just curious.
Speaker Change: you know how you see the evolution of that integration and and the synergies
Speaker Change: Looking like in 2025 as you embark on this third year of ownership, we had a sense at CES that maybe still some of the best things are still to come here. How do you see the incremental contributions from Aerotech here relative to other parts of vocational?
Speaker Change: Yeah, thanks for that question. Aerotech's a really strong business for us.
that's doing what we had expected it would do.
in secular growth, we're the leader across North America.
Speaker Change: way to view what we see the future of AeroTek being and why we acquired AeroTek. I mean, AeroTek, we showed cutting-edge technology like autonomous jet bridges and our IOPS connected solutions. Those are available today, by the way, to future concepts like
Speaker Change: Autonomous vehicles on the tarmac, like carrying luggage autonomously, that will happen.
Speaker Change: in the near-term future. But that's really the biggest synergy that we saw when we.
Speaker Change: We decided that Aerotech was a great fit to our portfolio as the technologies that we know and that Aerotech knows and needs are common and we can accelerate them by working together. We're really excited about Aerotech. We see a continued healthy future for this business.
Perfect, thank you.
Speaker Change: Our next question comes from the line of Angel Castillo with Morgan Stanley, please proceed with your question
Angel Castillo: Hi, good morning. Thanks for taking my question and congrats on a strong quarter.
Angel Castillo: Maybe just wanted to dive a little bit deeper into the access sales decline. I was hoping you could give us some color or specifics as to maybe how much price decline versus volume decline is kind of embedded in the guidance. And if you could split that also in kind of first half versus second half, that would be helpful.
Matt Field: Hi Angel, it's Matt. So overall we do see this more pronounced in the first half. I think that's embedded in our guidance for Q1 with our EPS.
Matt Field: In terms of price cost, we're not going to provide specific guidance, but we do obviously take a disciplined approach to pricing.
Matt Field: in the access as we think the first half is going to be weaker. We've had good dialogues with our customers, and so we have good visibility into how we think the year is going to shape up, but that's kind of how we see access for the year.
Speaker Change: got it and then maybe just on the point or the commentary around what you're hearing from your customers
Speaker Change: Could you maybe parse that out or split it up between what you're hearing from nationals versus the independents and how the different channels might be suggesting the activity or the demand level is shaping up across your key customers?
Yeah, sure, Angel.
When we talk to nationals versus the independents,
Speaker Change: It can you know the Nationals tend to get the lion's share of the mega Projects that we all talk and hear about every day, and that's real and it's continuing and it's actually continuing to accelerate
Speaker Change: So, with the independents, you know, it really is dependent upon the market that they're serving.
Speaker Change: And some are serving markets that are very healthy, or they might be getting a part of the big megaprojects. And others might be exposed to a lot of private construction where they're under a little bit of pressure. So it's a bit inconsistent between...
Speaker Change: Some of the rental companies, depending on the end market that they're serving.
Speaker Change: I think the most important thing, though, is that equipment utilization is healthy.
Speaker Change: It's come down from all-time highs, but it is at a healthy level. Our customers are comfortable with what their utilization rates are.
Speaker Change: And we think that 2025 is, again, mostly just pressured by
Speaker Change: Private non-residential construction being off due to due to persistent interest rates where they are
Speaker Change: So, just to clarify, is it fair to assume then that the independence and maybe some of those kind of smaller markets that don't have as much medical projects, that's where you're seeing that's what's driving the volume move more than anything or any difference in replacement demand there?
Speaker Change: In 2025, I think that you'll see, you know, we had mix that kind of went towards the independent rental companies in 2024. I think in 2025, it's going to come back to more national, a little bit more national mix and independence. That's what I can tell you, but, you know, it's very different from 1 independent rental customer to the next.
Thanks, Angel.
Speaker Change: Our next question comes from line of Tammy Zakaria with JP Morgan. Please proceed with your question.
Tammy Zakaria: Hi, good morning. Thank you so much and very nice results. So my first question is on...
Speaker Change: and Angie Davies. I think I heard you say you're going to hit round rate by the end of the year. I'm curious what's embedded in terms of the mix of ICE versus BEV and that assumption?
Tammy Zakaria: Yeah, it's business as usual. Tammy, you know, this is a contract for 165,000 units and they've given us the first order for 50,000 that we've talked about for a little while that makes us consistent with what it's been it's
Tammy Zakaria: It's all, it's business as usual. We're on schedule with production. We talk to the Postal Service all the time about...
Tammy Zakaria: our current pace of continuing to increase production. The Postal Service is delighted with the vehicles that they have that are delivering mail and delivering e-commerce today.
Tammy Zakaria: In terms of the productivity benefits that they get out of this vehicle, which is really the first time the industry has ever seen a vehicle like this. So there's nothing really to report on the mix. It's consistent with what we've always talked about.
Tammy Zakaria: got it that is very helpful to know and then my second question is I know the situation around tariffs remain remain fluid but could you just remind us
Speaker Change: What your exposure is in terms of imports from Mexico and Canada and how you're thinking about it.
Tammy Zakaria: there be any tariffs on imports from any of those countries?
Speaker Change: Yes, I will. I think it's a great thing to bring up, so thank you. First, I want to emphasize that we are an American manufacturer.
Speaker Change: The vast majority of products that we sell in the United States are made in the United States
Speaker Change: So, I just want to make sure that that part of it is clear. Most of what we sell in the U.S. is made in the U.S.
Speaker Change: Sure, we're a global company, so we have some movement of...
Speaker Change: certain categories in and out of the U.S. and a global supply chain.
Speaker Change: We tend to be a pretty resilient company in terms of we use our global footprint to adapt based upon how we can get the best cost that we need to get. So I'll give you an example. If we have to move something
Speaker Change: from one manufacturing plant to another, we typically can do that relatively quickly. Europe instituted tariffs.
Speaker Change: Recently, from access equipment coming from China to Europe, we were supplying product from China to Europe. Essentially, we understood what the Europeans were telling us. We want you to make product for Europe in Europe.
Speaker Change: We've already shifted our production of product from our China operations to our European existing operations, no new bricks and mortar, to serve the European market because the Europeans want us to serve Europe from Europe.
If there's tariffs that affect us,
Speaker Change: In terms of our supply chain or products that we might be bringing in from a
Speaker Change: from an operation outside the U.S., we will make similar adjustments to mitigate the impact of the tariff and do what
Speaker Change: what the U.S. is telling us to do, manufacture more in the U.S., but the vast majority of what we do in the U.S. is made in the U.S.
Got it. Thank you.
Thanks, Tammy.
Speaker Change: Our next question comes from the line of Steve Volkman with Jeffries. Please proceed with your question.
Steve Volkman: Thank you guys. Curious if there's any commentary around how we should think about the defense margin sort of trajectory through the year here.
Speaker Change: It sounds like the timing of FM TV contract maybe is a catalyst, but just anything we should think about sort of as the quarters progress relative to your 4% guidance.
Speaker Change: Hi Steve, it's Matt. So, as we said, we got into 4% as this is a transition year ramping up NGDV. So, accordingly, I would expect that margin to ramp up across the year. So, 4% is obviously the average, starting lower and ending higher.
you know, a little bit higher.
Speaker Change: Okay, all right, thanks. And then back to access specifically, any commentary around what you're seeing in telehandlers? I think you have a bit of a potential hole to fill in that business. Just how should we think about that in 25?
Speaker Change: Yeah, thanks. I'll take that, Steve. First of all, we're encouraged with our telehandler business in total.
Speaker Change: Really encouraged with it. We've been encouraged by share gains that we've been
Speaker Change: getting recently, which we expected to get. We've got a new line of agricultural telehandlers that we organically developed. And then we made an acquisition of AUSA in Spain that also complements and gives us other agricultural telehandler product.
Speaker Change: So that's another area that gives us a lot of optimism as we continue to be the number one provider of telehandlers in the marketplace.
So we kind of finished 2020.
Speaker Change: on a high note, and we think that that's good momentum going into 2025, especially with a new market that we're entering in the ag space. Now, the other comment here is, of course, we've had a change in agreement with CAT.
Speaker Change: I'll just bring that up. That's a bit of, it's a speed bump. This is not unexpected. We've known about this for a few years.
Speaker Change: So we've got great relationship with CAT, we still do, we've got a really good relationship with our dealers.
Speaker Change: We supply their dealers with a full line of product. We will continue to supply their dealers with product as we go forward. And we'll continue to execute on our telehandler priorities. And we feel very good about it.
Great, thank you guys.
Thanks.
Speaker Change: Our next question comes from the line of Jamie Cook with Truist. Please proceed with your question.
Jamie Cook: Hi, good morning and congrats on a nice access margin guide this year, given the sales decline, but so John question for you. Obviously, the access margins are healthy here, but just trying to understand again under.
Speaker Change: under possibility of tariff, what your pricing strategy will be, you know, I mean, with access equipment relative to what happened last time, like, how do you think about firm pricing versus using escalators? So question there. And then I guess my second question,
Speaker Change: on the Postal Service Award. Obviously, it doesn't sound like you see any risk to that contract, but just under DOJ and things that are coming out under the new administration, do you see any risk to that contract in terms of change and
Speaker Change: Ice versus EV or, you know, push out as, you know, just given risk of dode. So anything you could provide from that context. Thank you.
So, going to your first question, which is on access.
Tariffs, I'm sorry.
Speaker Change: I'd go back to your first question on tariffs and pricing. So, you know, our access, our JLGs are really, is becoming more resilient every year that goes by.
Speaker Change: And that's why they're continuing to deliver healthy margins in the face of a downturn that you can see in our guidance.
Because of the resiliency that they have
Speaker Change: So, we believe that we've got a whole playbook on potential different scenarios that might unfold with regard to tariffs.
and AXS has a very good...
Speaker Change: mitigation plan depending on what may or may not occur with tariffs. So we think that we can mitigate a lot of it. Now, within the supply chain, we've got global supply chains.
Speaker Change: Sometimes there's things that you have more difficulty mitigating, and we'll try to minimize or even potentially eliminate any need for price increases as a result of tariff.
That's essentially kind of the general...
Speaker Change: MO that we have with regard to tariffs is what we did in Europe, right? We we were able to mitigate most of those tariffs by using our footprint to manufacture differently
Speaker Change: What I can tell you is that We're happy with whatever mix the United States Postal Service orders from us. This is a great contract It's a lot of vehicles the Postal Service needs these vehicles. They're using high-cost
Speaker Change: unproductive vehicles today that were designed 40 plus years ago, and so every time they take a new vehicle with us, from us, their productivity goes up. So this is a really important program for the United States Postal Service. We are in contact with them every day.
Speaker Change: We, again, will deliver the mix that they want us to deliver to them. And we're pretty pleased with progress on this program. And I think the United States Postal Service is pleased with the vehicles that they're getting. They're absolutely delighted with it.
That's what I'll tell you.
Thank you.
Thanks, Jamie.
Speaker Change: Our next question comes from the line of Kim Stein with Raymond James. Please proceed with your question.
Thank you. Good morning. John, back to the
Speaker Change: You know, how you think the year plays out and, you know, presumably, or largely influenced and educated by what you're hearing from your customers.
Speaker Change: Do you, and not that you want to be in the business of forecasting orders, but I guess I'll ask it anyways, just how you expect, you know, the seasonality of orders has gotten kind of thrown around in post-COVID, but...
Speaker Change: I guess just quite bluntly, would you expect you see maybe a year-over-year pickup as we get into the second quarter?
Speaker Change: And then maybe a little stronger and accordingly in the back half of the year or just any kind of thoughts with respect to the timing and how you think that.
Speaker Change: looks as we go through the year from an order standpoint.
Speaker Change: Yeah, I think in general what's happening is the industry is reverting to more normalized seasonal order patterns And I think that's why you've seen some unusual
Speaker Change: the last few quarters. I think the thing to pay most attention to with our
Speaker Change: A $1.8 billion backlog for JLG and our access business is a healthy backlog. A healthy backlog in normal times with JLG is three to six months of backlog, and we're right in the middle of that at our current size with $1.8 billion.
Speaker Change: And so our customers look at our lead times and they say, okay, we're gonna order in accordance with your lead times, your lead times are good right now, they're normal, we'll order in accordance with those.
Speaker Change: We did get annual purchase orders in the fourth quarter, but we've got a lot more annual purchase orders coming in the first quarter right now that we're in today. So I think the most important thing to pay attention to is what does the backlog look like? And we're happy with a $1.8 billion backlog today.
www.microsoft.com.ca
Speaker Change: Okay, and then just on vocational, as you think of it, you mentioned.
Speaker Change: in 24. Is that a similar number we should be thinking about, higher or lower? How would you kind of characterize that in terms of the pricing benefit you're expecting in 25 versus what you realized in 24?
Speaker Change: Hi, Tim. It's Matt. So we're still working through the pricing and the backlog. So...
Speaker Change: The price, cost, the team's done a nice job managing and vocational. The other thing I would just highlight...
Speaker Change: We talk a lot about Pierce, but what you saw in the sales numbers and what we're really proud of as well is our refuse and recycling business, which has performed extremely well, specifically in the fourth quarter and is also a nice, healthy business for us.
All righty, thank you.
Thanks, Tim.
Speaker Change: Our next question comes from the line of Meg Dobre with Baird. Please proceed with your question.
Speaker Change: Thank you. Good morning. I'm going to try Steve Volkman's question one more time on defense margin in terms of cadence. I guess the way I'm going to ask it, when I'm thinking about the Q1 EPS guidance,
Speaker Change: What sort of defense margin do you have baked in there? Is it going to be lower sequentially versus what we saw in the fourth quarter?
Speaker Change: So, hey Meg, it's Matt. So, thanks for taking a second stab at a good question. So, first quarter, obviously, that's kind of our lowest production quarter of the year on USPS.
Speaker Change: So you can expect that, at least we would expect that to be our lowest quarter in defense as well. I'm not going to comment specifically on quarter over quarter dynamics, but I think you should think about that as the lowest quarter for defense.
Okay and I guess my follow-up sticking with this segment
Speaker Change: If we're thinking about you getting to full production on the NGDB, it sounds like the other defense contracts that you've got are starting to normalize from a pricing standpoint.
Speaker Change: Should we be thinking in 2026 this segment will be operating as you previously deemed as normalized margins or is that still pretty premature to factor in at this point?
Speaker Change: So, I'll take that, Meg. I think, you know, one of the big movers of defense, of course, is new pricing contracts. We've taken some of our big programs and we've gone to what's called a sole-source contract, which allows us to reset price to the realities of input costs.
Speaker Change: So, when you look at it, we've got the heavies that we've already done, and the mediums will be done shortly.
Speaker Change: in terms of the pricing contracts, we start to get the benefit of the heavies not until sort of the late part of 2025 and then in through 26 and beyond. And then the mediums that will be starting in 2026 in terms of getting the benefit of those pricing contracts.
Speaker Change: It's a little bit slower to get the benefit there, and of course the NGDV margin as we're in production ramp builds throughout the year as we continue every week to increase production output.
So I'm going to take that as a yes.
Okay.
Okay
Speaker Change: Our next question comes from the line of Kyle Mengez with Citi. Please proceed with your question.
Kyle Mengez: Thank you. I was hoping, so just within the Access Outlook and Access Implied down 15% for the year, could you just help me just with maybe some range of how you're thinking about AWPs versus tall handlers in 2025?
We don't really give that level of guidance.
Within the guide that we've got
Kyle Mengez: I think the most, look at the down 15, we're guiding at $4.4 billion in revenue for access equipment. That's in line with all of the customer conversations we're having and all the metrics that we look at and what we expect with non-residential construction, how it's going to impact the market.
Kyle Mengez: And it also includes the changing nature of the CAT agreement. But suffice it to say that telehandlers have been strong for us, and we expect telehandlers to continue to be strong going forward.
Speaker Change: Got it. And then I was curious how you're thinking about telehandler capacity now with some puts and takes with the CAT contract, but then coming out with this new line of telehandlers.
Speaker Change: just would be helpful to hear how you're thinking about that.
Speaker Change: Yeah, well the cat what's happening with cat is not new news to us. We've known about this for a long time And we've known about it before we put the plans in place to put more capacity in Jefferson City, Tennessee So when we make capacity decisions
Speaker Change: We make them because of five-year-plus outlooks. We don't make them because of a one-year change in the market. And we see the five-year outlook being continuously healthy for our business.
Speaker Change: because of all the reasons that we talk about, new markets that we're putting the product into, megaprojects, etc., etc. A lot of construction will continue to happen over the next...
five-plus years.
Speaker Change: both in North America and globally. So when we put those plans together, that's what's in our line of sight, not just the next 12 months. We're 100%
Speaker Change: continuing forward and continuing to get output and increasing output in that Jefferson City, Tennessee plant and we need the product.
Got it. Helpful. Thank you. Thanks, Kyle.
Speaker Change: Our next question comes from the line of Chad Dillard with Bernstein. Please proceed with your question.
Hey, good morning guys.
Good morning.
Speaker Change: So I have a question on access. So first of all, I think you guys talked about annual purchase orders in one queue.
Speaker Change: I'm just wondering if that's shifted from a seasonal standpoint, I guess in other words.
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Speaker Change: How should we think about the cadence in terms of ramping and to what extent is there any absorption baked into the guidance for this year?
Speaker Change: I'm going to wait a little bit to put this annual purchase order in. That's kind of a little bit of the dynamic that's happening. So a little bit of seasonality in there that's different from maybe the past.
Speaker Change: The Jefferson City Telehandler plant, that's all in our guidance in terms of the ramp for those products. We're in production today. We're shipping products today. But we don't get to full production until the back half of the year. And the costs for doing that are all in our guidance.
Speaker Change: Great, that's helpful. Second question on NGDV. Could you comment on the production rate that you're seeing, I guess, maybe exiting the fourth quarter? And then, you know, just walk me through the, I guess, like, the shape of the ramp as we go through 25.
Speaker Change: Well, it's kind of consistent as we go through 2025. You know, we work with the United States Postal Service. We did a deliberate...
Speaker Change: kind of a low-rate production to start, which not only helps us, but also helps the Postal Service onboard vehicles.
Speaker Change: and get the onboarding right, and we're continuing to progress and increase production every month and every quarter that goes by, and we will be at full rate production by the end of the year.
Thank you all.
Thank you.
Speaker Change: Our next question comes to the line of Mike Shliske with D.A. Davidson. Please proceed with your question.
Hey, guys. Good morning. Thanks for taking my question.
Speaker Change: I wanted to go back to one of your earlier first comments you made, John, about access, about the first half and second half.
Speaker Change: You know, you kind of said that it could be a bit stronger in the second half, and it positions itself well for 2026. So, I know it's only January, but, and of course, the economy is quite fluid still, but is your first instinct?
Speaker Change: That 2020 split could be an up year in access and perhaps a better way to ask the question is kind of what you're seeing currently in 2025 more of a blip than a multi-year downturn that you're kind of seeing the first phases of here.
Speaker Change: And really, I think ultimately that's what gets baked into our forecasts of equipment needs and when the equipment is needed, because we know when those projects are coming online because our customers tell us that.
Speaker Change: So that's really kind of what gives us the insight to say that we'll be doing a little bit more on the back half than the front half.
Speaker Change: Okay. And then maybe secondly, if we can just dig a little bit deeper into the backlog and vocational, could you comment on if the Pierce backlog got any better in the quarter? Was the book to bill above one there? Or at the very least, you know, if you were to order a firetruck today, what year would you be able to deliver it?
Speaker Change: Hi Mike, it's Matt. So the backlog continued to grow over the quarter, so we took more orders specifically in Pierce. So really pleased with the continued demand we have and the production ramp-up.
Speaker Change: The team is working on to support that demand. So, it is the book to bill, I believe, was over one. So, we're...
Speaker Change: continuing to continue to support those customers with everything we can build.
Thank you.
Thank you, Mike.
Speaker Change: Good morning, this is actually Christian Zylon for Steve Barger. Thanks for taking the question. Okay, great. Good morning.
Speaker Change: Just looking at the second half of 2024, your incremental margin was 3% in 3Q and 4% in 4Q on high single-digit and mid-single-digit revenues, respectively. Why was that? And does that get better in 2025?
So, in terms of that,
Speaker Change: So, you're really looking at a couple of things there. You're looking at business mix, driving that as well. So, the strong vocational performance obviously impacts the sequential incremental margins. So, really strong performance in vocational drives a lot of that in the quarter-of-quarter performance.
Speaker Change: Got it, thank you. Next question, just balance sheet and leverage look pretty healthy. Are there parts of your portfolio that you think you are missing capabilities or that you can add via M&A? Or can you just frame up which of your segments could benefit the most with any incremental M&A like we saw with OUSA and Aerotech? Thank you.
Speaker Change: Yeah, so, you know, we do have a healthy balance sheet and we...
Speaker Change: We think that's good. You saw us do more aggressive share buybacks in the fourth quarter.
Speaker Change: because for a lot of reasons, and you'll probably see us continue to be deliberate about share buybacks going forward. One of the benefits that we have of a healthy balance sheet. But when we look at M&A, we have an always on process. We are always looking at targets. Every day there's targets that we look at and debate.
And when we look at things, we're very focused.
Speaker Change: So we look at ourselves as technology for the everyday hero, you know, we say the purpose of the company is we deliver for the for the
Speaker Change: every day hero and to make their lives better and so where we have the opportunity to apply our technology and our capability to make a material difference i.e. that's the synergy that's adjacent a near adjacency to what we do.
Speaker Change: So Aerotech is a great example. We were already in airports, we saw all these categories that we weren't in. We said, hey, we can help with the technology on this product.
Speaker Change: that you saw at CES, AUSA is another example, INOA in Italy is another example, near adjacencies to JLG where we can drive a lot of goodness.
Thanks, Christian.
Speaker Change: Our next question is a final question from David Rasso with Evercore. Please proceed with your question.
David Rasso: Hi, I know we're running late. I'll be quick. Maybe I'm being a little greedy, but the vocational implied incremental margins of 25%
David Rasso: Can you lend some insight to why that Want to be stronger and maybe within that if you look at the revenue growth for the whole segment guided You know shade below 15% Which are the categories within do you think will be above and below that 15% to maybe help us with the mix question?
Thank you. Hi David.
It's Matt, thanks for the question.
David Rasso: In terms of the incremental and vocational, really what you're looking at there is some of our investments in terms of capacity and otherwise.
David Rasso: So you're getting good growth across the business, but also investing in the business at the same time So that's a little bit what you see in the guide and just want to point out again I don't think you guys have highlighted enough on the call the strong vocational operating income guidance. We've provided
David Rasso: and the strength that that provides to the overall business, I have to say.
David Rasso: In terms of the mixed products, obviously Pierce continues to deliver. I mentioned McNeilis, which is a good business with good, strong margins.
David Rasso: that continues to grow. You saw that in the sales numbers we posted as well.
David Rasso: and then Aerotech is a great bolt-on business that we acquired and embedded and have a fantastic new leader there as well. So I'm not going to provide specific guidance across those three but that's where we see the growth for the year.
Speaker Change: To nudge us a little, sorry Matt, is it fair to say Pierce is growing the fastest?
Speaker Change: We're not going to provide that level of specificity at this time. We can talk more about that in our quarterly results, but Pierce certainly has a good, healthy backlog with good opportunities to grow. But David, the good news is in that vocational business, they're all growing. Yeah.
Speaker Change: Yeah, I know I just pierced I think leads the show there with margins if I'm correct So just curious how much of that backlog we can unleash in 25 just to offset any access or you know
Speaker Change: wrinkles around the defense margins as the year plays out. So that was the spirit of the question. Okay, I appreciate it. Thank you. You know, David, we think that the vocational business
Speaker Change: really pairs well with our access business. You know, they're both great businesses. They're both driving really good margins. And I think that the two really complement one another well, and you're seeing that in 2025.
Speaker Change: as we continue to grow in vocational well access positions itself for the future.
I appreciate that. Thank you.
and the other two.
Speaker Change: Thank you. Mr. Davidson, I would like to turn the floor back over to you for closing comments.
Speaker Change: Yeah, thanks very much. As both Matt and John mentioned, we've got our investor day coming up a little bit later this year. Between now and then, we will be at a couple of different conferences in Florida and New York, and we hope to see you there. Thanks very much for dialing in today.
Speaker Change: 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.