Q2 2025 Oshkosh Corp Earnings Call

Operator: Greetings, and welcome to the Oshkosh Corporation's second quarter 2025 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. 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. 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.

Greetings, and welcome to the Oshkosh Corporation second quarter, 2025 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.

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.

It is now my pleasure to introduce your host. Pat Davidson senior vice president of ambassador relations for Oshkosh Corporation. Thank you, sir. You may begin.

Pat Davidson: Good morning, and thanks for joining us. Earlier today, we published our second quarter 2025 results. 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 and non-GAAP financial measures that we will use during this call and is also available on our website. 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 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.

Good morning and thanks for joining us earlier. Today, we published our second quarter 2025 results, 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. This information is also available on our website.

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,

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 8-K filed with the SEC this morning and other filings we make with the SEC, as well as matters noted at our Investor Day in June 2025. 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. Our presenters today include John Pfeifer, President and Chief Executive Officer, and Matthew Field, Executive Vice President and Chief Financial Officer. Please turn to slide three, and I will turn it over to you, John.

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 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 as well as matters. Noted at our investor Day. In June 2025, 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

John Pfeifer: Thank you, Pat, and good morning, everyone. Before we get into the quarter, I want to highlight the positive response we have received to our June 5th Investor Day. This slide from the event highlights the key elements that we believe make Oshkosh Corporation an attractive investment, bringing the full strength of our portfolio, united by our shared strategy, accelerated innovation in autonomy, electrification, and intelligent connected products, all supported by favorable long-term trends. I want to reiterate two key messages from the event about our 2028 targets. First, we expect to deliver sizable revenue growth. Second, we expect to transform margins. We believe many of the key drivers that support these returns are largely under our control at Oshkosh Corporation. Turning to slide four, we delivered an adjusted operating margin of 11.5% on revenue of $2.7 billion in our Q2.

Our presenters today, include John Pfeiffer, president and chief executive officer and Matt Field. Executive Vice President and Chief Financial Officer. Please turn the slide 3 and I'll turn it over to you, John.

Thank you, Pat and good morning everyone. Before we get into the quarter, I want to highlight the positive response. We've received to our June 5th investor day.

This slide from the event highlights. The key elements that we believe make Oshkosh an attractive investment.

Bringing the full strength of our portfolio. United by our shared strategy accelerated innovation in autonomy, electrification and intelligent connected products, all supported by favorable, long-term trends. I want to reiterate 2 key messages from the event about our 2028 targets. First we expect to deliver sizable Revenue growth and second we expect to transform margins.

We Believe many of the key drivers that support these returns are largely under our control at Oshkosh.

John Pfeifer: This led to adjusted earnings per share of $3.41, an increase of 2.1% over the prior year. These results reflect strong performance across each of our segments, which Matt Field will dig into later in the call. We grew adjusted EPS and maintained adjusted operating income margin year over year despite lower revenue, reflecting continued strong performance in our vocational segment, improved returns in our transport segment, and a resilient mid-teens margin in our access segment. Maintaining adjusted operating income margins on lower revenue highlights our commitment to transform margins as we move forward. Our results reflect the disciplined execution of our innovate, serve, advance strategy, which we show on slide five. Through this strategy, we have expanded our portfolio to include strong operations like AeroTech and AUSA that expand our business into attractive adjacent markets while improving our earnings profile.

Turning to slide 4, we delivered an adjusted operating margin of 11.5% on revenue of $2.7 billion. In our second quarter, this led to adjusted earnings per share of $3.41, an increase of 2.1% over the prior year. These results reflect strong performance.

Across each of our segments, which Matt will dig into later in the call, we grew adjusted EPS and maintained adjusted operating income margin year-over-year, despite lower revenue, reflecting continued strong performance in our vocational segment. Improved returns in our transport segment and a resilient mid-teens margin in our access segment, maintaining adjusted operating income margins on lower revenue, highlight our commitment to transform margins as we move forward.

Our results, reflect the disciplined execution of our innovate, serve Advanced strategy, which we show on slide. 5 through this strategy, we have expanded our portfolio to include strong operations, like Aerotek, and a USA that expand our business into attractive adjacent markets while improving our earnings profile.

John Pfeifer: Turning to slide six for Q2 highlights, as I mentioned earlier, we discussed our plans to grow the company at our Investor Day. We were excited to share our 2028 targets with you all, including a compound annual revenue growth rate of 7% to 10% and transformative margin expansion of 200 to 400 basis points. While these are targets for 2028, we believe the building blocks that support our plan are in place today. As we expected and highlighted at our Investor Day, we signed the three-year sole source contract for FMTV, the Family of Medium Tactical Vehicles program, with the Department of Defense just a week later. This contract includes updated pricing and an economic price adjustment mechanism, which we believe will yield favorable returns as we build units under the contract.

Starting on slide 6 for Q2 highlights. As I mentioned earlier, we discussed our plans to grow the company. At our Investor Day, we were excited to share our 2028 targets with you all, including a compound annual revenue growth rate of 7% to 10% and transformative margin expansion of 200 to 400 basis points. While these are targets for 2028, we believe the building blocks that support our plan are in place today.

John Pfeifer: A significant part of the FMTV program is the launch of our LVAD, or Low Velocity Air Drop variants, which have been favorably received by the DOD. This new FMTV contract follows our five-year FHTV, the Family of Heavy Tactical Vehicles, contract with the DOD that we signed last year and has similar terms. Our performance this quarter in the transport segment in part reflects production of FHTV units under these new contract terms. For the delivery side of the transport segment, we are making steady progress with the production ramp-up of the next-generation delivery vehicle for the United States Postal Service at our Spartanburg, South Carolina facility. In June, we surpassed 1 million cumulative miles driven by postal workers across the fielded NGDV fleet, an exciting milestone that reflects the momentum of this program.

As we expected and highlighted at our investor day, we signed the 3-year, sole source contract for fmtv. The family of medium tactical Vehicles, program with the Department of Defense just a week later, this contract includes updated pricing and an economic price adjustment mechanism, which we believe will yield favorable returns as we build units under the contract.

A significant part of the fmtv program is the launch of our lvad or low velocity airdrop variants, which have been favorably received by the dod.

This new fmtv contract follows our 5-year fhv, the family of heavy tactical Vehicles contract with the dod that we signed last year and has similar terms

Performance this quarter and the transport segment in part, reflects production of FH, TV units under these new contract terms.

For the delivery side of the transport segment, we're making steady progress with the production. Ramped up of the Next Generation delivery vehicle for the United States. Postal Service at our Spartanburg, South Carolina, facility.

John Pfeifer: In July, the USPS topped 1.5 million cumulative miles. We are also pleased to welcome Steve Nordlund, who joined in mid-July to lead the transport segment. Steve brings a proven track record of innovation, leadership, and success in securing major defense contracts. Most recently, he led Boeing's Air Dominance Division, which includes the recent award of the sixth generation F-47 fighter aircraft. He is a valuable addition to our team and is well positioned to help drive continued growth and performance in this segment. Turning to slide seven, another highlight of the quarter was the launch of our micro-sized scissor lift, which we announced in May and we began delivering in June. This product, specifically designed for data center customers, has been so well received that we are already evaluating options to expand capacity for this model and broaden the product line.

In June, we surpassed 1 million cumulative cumulative, miles driven by postal workers across the fielded, ngdv, Fleet and, and exciting Milestone that reflects the momentum of this program. And in July, the USPS topped, 1.5 million cumulative miles.

We're also pleased to welcome Steve nordland who joined in mid July to lead the transport segment. Steve brings a proven track record of innovation leadership and success in securing major defense contracts. Most recently, he led Boeing's air dominance division which includes the recent Award of the sixth generation f-47, fighter aircraft. He's a valuable addition to our team and is well positioned to help Drive continued growth and performance in this segment.

John Pfeifer: Sales in the access segment were in line with expectations. The segment delivered nearly 15% adjusted operating income for the quarter, despite 11% lower revenue. Last but certainly not least, I want to highlight the strong performance in our vocational segment. At Investor Day, we discussed the opportunity to expand capacity progressively in this segment to meet growing demand and fulfill backlog orders. Deliveries of our fire apparatus increased 7% in the quarter compared to last year, which included 15 trucks for Kansas City, Missouri, a great example of the many deliveries we are making to fire departments across North America. These efforts contributed to a 15% revenue increase for the segment and 20% growth for fire apparatus. We are proud to serve firefighters throughout the country and are honored to once again co-sponsor the 9/11 Memorial Stairclimb on September 20th at Lambeau Field in Green Bay.

Turning the slide 7. Another highlight of the quarter was the launch of our micro size scissor lift, which we announced in May and we began delivering in June this product specifically designed for data center. Customers has been so well, received that we are already evaluating options to expand capacity for this model and broaden the product line.

Sales in the access segments were in line with expectations. The segment delivered nearly 15% adjusted operating income for the quarter despite 11% lower Revenue,

Last but certainly not least. So on a highlight the strong performance in our vocational segment at investor day. We discussed the opportunity to expand capacity progressively in this segment to meet growing demand and fulfill backlog orders. Deliveries of our fire apparatus increased 7% in the quarter compared to last year, which included 15 trucks for Kansas City Missouri. A great example of the many deliveries we're making to fire departments across North America.

John Pfeifer: This is the 13th year of our support for this outstanding event, benefiting the National Fallen Firefighters Foundation. We are committed to partnerships like these and building our business to be sustainable for the long term. Many of our initiatives are highlighted in our 12th annual sustainability report, which we published in June. In summary, this was another strong quarter for Oshkosh Corporation with contributions from all our segments. As we shared at our Investor Day, we believe we are well positioned to grow revenue and transform our margins between now and 2028, and the building blocks to deliver on this growth are evident in this quarter's results. With that, I will hand it over to Matt Field to walk through our detailed financial results.

These efforts contributed to a 15% Revenue increase for the segment and 20% growth for fire apparatus. We are proud to serve firefighters throughout the country and are honored to once again. Co-sponsor the 9/11 Memorial stair. Climb on September 20th at Lambeau Field in Green Bay. This is a 13th year of our support for this outstanding event benefiting the national

Fallen. Firefighters Foundation.

We are committed to our to Partnerships like these and building our business to be sustainable. For the long term, many of our initiatives are highlighted in our 12th annual sustainability report, which we published in June in summary. This was another strong quarter for Oshkosh with contributions from all our segments as we shared at our investor day. We believe we are well, positioned to grow revenue and transform. Our margins between now and 2028 and the building blocks to deliver on this growth are evident in this quarter's results.

With that, I'll hand it over to Matt to walk through our detailed Financial results.

Matthew Field: Thanks, John. Please turn to slide eight. Consolidated sales for the second quarter were $2.7 billion, a decrease of $115 million, or 4% from the same quarter last year, primarily due to lower sales volume in the access and transport segments, which was partially offset by higher vocational sales volume and improved pricing. Adjusted operating income was $313 million, down slightly from the prior year as a result of lower sales volume. Adjusted operating income margin of 11.5% was consistent with the prior year, despite lower sales. Adjusted earnings per share was $3.41 in the second quarter, $0.07 higher than last year. During the quarter, we stepped up our share repurchases, repurchasing nearly 415,000 shares of our stock for about $40 million, bringing our year-to-date share repurchases to nearly $70 million. Share repurchases during the previous 12 months benefited adjusted EPS by $0.06 compared to the second quarter of 2024.

Thanks John. Please turn to slide 8.

there were 2.7 billion, a decrease of 115 million or 4% from the same quarter last year primarily due to lower sales, volume in the access, and transport segments, which was partially offset by higher vocational, sales volume and improved pricing

Adjusted operating income was $313 million, down slightly from the prior year as a result of lower sales volume.

Adjusted operating income margin of 11.5% was consistent with the prior year, despite lower sales.

Adjusted earnings per share was $3.41 in the second quarter 7 cents higher than last year.

During the quarter, we stepped up our share repurchases, repurchasing. Nearly 415,000 shares of our stock for about 40 million dollars. Bringing our year-to-date share repurchases to nearly 70 million dollars.

Share repurchases. During the previous 12 months benefited, adjusted EPS by 6 cents compared to the second quarter of 2024.

Matthew Field: Positive free cash flow for the quarter of $49 million was significantly higher than the second quarter of 2024, which had a net use of cash of $251 million. Improved free cash flow primarily reflected the timing of tax payments and better management of receivables. Turning to our segment highlights on slide nine, the access segment delivered resilient adjusted operating income margins of 14.8% on sales of $1.26 billion. Market conditions for access equipment in North America were in line with our expectations. Sales were $151 million lower than last year, reflecting the expiration of our agreement to produce CAT-branded telehandlers, which ended last year, and higher discounts. We also experienced lower sales volume in Europe, which was partially offset by sales at IUSA.

Positive free cash flow for the quarter was $49 million, significantly higher than the second quarter of 2024, which had a net use of cash of $251 million. The improved free cash flow primarily reflected the timing of tax payments and better management of receivables.

Turning to our segment highlights on slide 9, the access segment, delivered resilient adjusted operating income margins of 14.8% on sales of 1.26 billion.

Market conditions, for Access Equipment in North America were in line with our expectations.

Sales were $151 million lower than last year, reflecting the expiration of our agreement to produce CAT-branded telehandlers, which ended last year, and higher discounts.

We also experienced lower sales volume in Europe, which was partially offset by sales at iusa.

Matthew Field: Our vocational segment continued to deliver higher sales volume and improved pricing as we worked down our backlog, achieving an adjusted operating income margin of 16.3% on $970 million of sales. Vocational's 16.3% adjusted operating income margin was a 220 basis point increase from last year, reflecting improved price-cost dynamics. The transport segment delivered an improved operating income margin of 3.7% compared to 2.1% last year, despite lower sales volume. Transport sales decreased $93 million to $479 million. Revenue from delivery vehicles represented an increasing share of transport sales, growing from 6% a year ago when we began shipping NGDVs to 11% during the first quarter of 2025 and 22% during the second quarter. As expected, defense vehicle volume was lower due to the wind-down of the domestic JLTV program, partially offset by higher international sales of tactical wheeled vehicles.

Our vocational segment continued to deliver higher sales, volume and improved pricing as we work down, our backlog, achieving an adjusted operating income margin of 16.3% on 970 million dollars of sales.

vocational 16.3%, adjusted operating income margin was a 220 basis point increase from last year reflecting improved price cost, Dynamics

The transport. Segment delivered, an improved operating income margin of 3.7% compared to 2.1% last year despite lower sales volume.

Transport sales decreased by $93 million to $479 million.

Revenue from delivery vehicles represented, an increasing share of Transport sales growing from 6%, a year ago and we began shipping ngtv to 11% during the first quarter of 2025 and 22% during the second quarter.

As expected, defense vehicle volume was lower due to the wind down of the domestic jltv program.

Matthew Field: Improved FHTV pricing, as highlighted by John, was the largest contributor of the higher operating income margin. Please turn to slide 10. Turning to our outlook for the balance of this year, the tariff environment continues to remain dynamic. As we incorporate the impact of pauses and revisions to tariff rates, as well as our strong performance this quarter, we expect a more limited impact from tariffs on our business compared with the last quarter after incorporating the cost actions we have enacted. For the year, we project the impact of tariffs to be fully offset and expect our adjusted EPS for the year to be in the range of $11 per share on revenues of approximately $10.6 billion, equal to our pre-tariff guidance.

Our partially offset by higher International sales of tactical wheeled vehicles.

Improved fhv pricing as highlighted by John with the largest contributor of the higher operating income margin.

Please turn to slide 10.

Turning to our outlook for the balance of this year, the tariff environment continues to remain dynamic.

As we incorporate the impact of pauses and revisions to tariff rates, as well as our strong performance this quarter. We expect a more limited impact from tariffs on our business compared with the last quarter after incorporating the cost actions, we have enacted

Matthew Field: We anticipate tariffs and market dynamics will impact each segment differently, leading to a slightly weaker access adjusted operating income margin with stronger vocational and transport results, as shown on the slide. This remains a fluid environment, and I'm confident we have the levers across the organization to deliver these results, assuming the external macro environment remains resilient, as we've seen today. We are also increasing our outlook for free cash flow from a range of $300 million to $400 million to a range of $400 million to $500 million, reflecting primarily the recently enacted tax bill and operating performance. In the second quarter, we stepped up share repurchases, and we fully expect to continue to materially increase the pace of our share buybacks across the year.

for the year, we project. The impact of tariffs to be fully offset and expect our adjusted EPS for the year to be in the range of 11 dollars per share on revenues of approximately 10.6 billion equal to our pre-tertiary.

We anticipate that tariffs and market dynamics will impact each segment differently, leading to a slightly weaker access-adjusted operating income margin, with stronger vocational and transport results, as shown on the slide.

This remains a fluid environment, and I'm confident we have the leaders across the organization to deliver these results, assuming the external macro environment remains resilient, as we've seen today.

We are also increasing our outlook for free cash flow from a range of 300 to 400 million to a range of 400 to 500 million reflecting primarily the recently enacted tax bill and operating performance.

Be fully expect to continue to materially increase the pace of our share BuyBacks across the year.

Matthew Field: I want to reiterate what we said last quarter, and you saw at our Investor Day and in our 2028 targets that we remain committed to execute on our strategies despite uncertainty introduced by tariffs. We believe the trends that support our industry-leading businesses will provide long-term growth opportunities, and we are well positioned to capitalize on these opportunities. With that, I'll turn it back over to John for some closing comments.

I want to reiterate what we said last quarter.

And you saw at our investor day and in our 2028 targets that we remain committed to execute on our strategies, despite uncertainty introduced by terrorists.

John Pfeifer: Thanks, Matt. Despite the dynamic tariff environment, we're well positioned to take the necessary actions to deliver strong performance. We shared our vision for the company, our balanced and resilient business, and our path to roughly double adjusted EPS to a targeted range of $18 to $22 per share in 2028. Our performance in the second quarter is just the first step on this journey, and we are excited to share our progress with you along the way. I'll turn it back to you, Pat, for the Q&A.

We believe the trends that support our industry-leading businesses will provide long-term growth opportunities and we are well positioned to capitalize on these opportunities with that. I'll turn it back over to John for some closing comments.

Thanks Matt.

Despite the dynamic tear up environment. We're well positioned to take the necessary actions to deliver strong performance, we shared our vision for the company, our balanced, and resilient business, in our path to roughly double adjusted. EPS to a targeted range of 18 to 22 dollars per share in 2028. Our performance, in the second quarter is just the first step on this journey, and we are excited to share our progress with you along the way.

Pat Davidson: Thanks, John. I would like to remind everybody, please limit your questions to one plus a follow-up. Please stay disciplined on your follow-up question. After the follow-up, we ask that you rejoin the queue if you have additional questions. Operator, please begin the Q&A session.

I'll turn it back to you, Pat for the Q&A. Thanks, John. I'd like to remind everybody. Please limit your questions to 1 plus a follow-up. Please, stay disciplined on your follow-up question.

And after the follow-up, we ask that you rejoin the queue. If you have additional questions,

Operator. Please begin the Q&A session.

Operator: 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. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two 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. Our first question comes from the line of David Raso with Evercore. Please proceed with your question.

Thank you.

We will now be conducting a question and answer session again. We ask that all callers limit themselves to 1 question and 1 follow-up.

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.

You may press *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 key. One moment, please, while we pull for questions.

David Raso: Hi. Thank you for the time. Quick question. On the access segment, first half margins 13.3%, implied second half 10.7%, and the decrementals year over year are similar to the first half, 38%, 39%, 40%. The confidence in that pricing that you mentioned, can you give us a little more detail with the incremental tariff, I would assume, cost pressure? When were those costs, those prices instituted? How much is that already in the backlog, or is it related to expected orders the rest of the year? Your backlog coverage is 54% of the implied second half guide. I am just trying to make sure, is it pricing that is already in the backlog so you feel confident you will get it, or is it orders to come that you are hoping to get the price? Thank you.

Thank you. Our first question comes from the line of David Rosso with Evercore. Please proceed with your questions.

Hi, thank you for the time. Um, quick question on the access segment, right? First half, margins 1333 implied. Second half 1077.

And the decremental year-over-year similar to the first half. You know, 30 3839, 40%,

The confidence in that pricing that you mentioned. Can you give us a little more detail? With the incremental tariff, I would assume cost pressure. When were those costs or those prices instituted? How much is that already in the backlog, or is it related to expected orders for the rest of the year? Like, your backlog coverage is 54% of the implied second-half guide. So, I'm just trying to make sure.

Matthew Field: Morning, David. Thanks for the question. The second half results really is two things. One, obviously, there is some seasonality in there. But fundamentally, what we expect to see is, really, it is more of the fourth quarter, some of the impact on tariffs on the cost side. There is a number of mitigation actions we have taken against tariffs that we talked about on prior calls. Our overall top line, we expect continued discounts relative to last year and a weaker external environment, kind of similar to what we saw in the first half, roughly.

Is it pricing? That's already in the backlog so you feel confident you'll get it or is it orders to come that you're hoping to get the price? Thank you.

David Raso: Okay. Q3 is a little bit old pricing, but still more of the older costs. Q4 is really where the price has to show up.

Good morning, David, thanks for the question. Um, so the second half results really is 2. Things 1. Obviously, there's some seasonality in there. Um, but fundamentally, what we expect to see is in really, it's more of the fourth quarter, some of the impact on tariffs on, on the cost side. You know, there's a number of mitigation actions we've taken against tariffs that we talked about on prior calls, um, and our overall Topline. Um, you know, we expect to continue, uh, discounts relative to last year and a weaker external environment. Kind of similar to what we saw in the first half, roughly

Okay, so Q3 is a little bit old pricing, but still more of the older costs. Fourth quarter is really the...

Matthew Field: The last thing I'm—

David Raso: Sorry?

Matthew Field: Yeah, that's where we'd see more of the cost elements kick in is the fourth quarter, plus some of the resourcing actions and other actions we would have from our tariff mitigations.

David Raso: Last on vocational, the margins in the second half at 16.4% implied after 15.6% in the first half. Is that some of the pricing we have heard for a while about we have better pricing in the backlog? Even with, assuming some tariff input cost, is the backlog already priced where you feel very confident you have better margins in the second half than first half? I know the backlog coverage is large, so I am just really trying to figure out do we already have it sort of baked in?

Where the price has has to has to show up and then lastly on location. Sorry, yeah, that that's where we would see more of the cost. Elements kick in is the fourth quarter. Plus some of the resourcing actions. And other actions, we would have from our tariff mitigations

and then last 10 vocational, the margins in the second half at 164 implied after 156 in the

You know, in the first half, some of the pricing we've heard for a while indicates that we have better pricing in the backlog. Even with, you know, assuming some tariff input costs.

Matthew Field: Yeah. Yeah. On vocational, as we have talked about before, and we talked about it in Investor Day, we are progressively working through ramping up our capacity. That is a big driver of the second half relative to the first half as we ramp up capacity. Obviously, there is pricing in the backlog that would come to the fore. We would see that continue. Really, you are talking about volume growth over the second half driving improvements.

Is the backlog already priced, where you feel very confident, you have better margins in the second half than first half and I know the backlog coverage is large. So I'm just really trying to figure out who we already have it sort of baked in

David Raso: All right. Thank you so much.

Yeah, so so on vocational as we've talked about before and we talked about an investor day. We're progressively working through ramping up our capacity and that's a big driver of the second half relative to the first half as we ramp up capacity. Obviously, there is pricing in the backlog, that would come to the 4. Uh, we would see that that continued. But really you're talking about volume growth over the second half driving uh improvements.

John Pfeifer: Yeah, David, with those backlogs in vocational, we will continue to get some modest benefits from pricing for the next two, three years.

For the next 2, 3 years.

David Raso: Great. Thank you.

Matthew Field: Thanks, Tim.

Be great. Thank you.

Thanks.

Operator: Our next question comes from a line of Mig Dobre with Baird. Please proceed with your question.

Our next question comes from the line of Mig Dobre with Barrett. Please proceed with your question.

Mig Dobre: Hey, guys. Good morning. Just a quick clarification on your tariff commentary. What I heard is that you said that you expect to fully offset the headwind. I am curious to hear exactly how you are going to do that. Then, per the prior question, it seems that the fourth quarter is where you are starting to experience maybe some higher tariff-related headwinds. Is that getting fully offset, or is that becoming more of an issue into 2026 as we are thinking about access?

Hey guys. Good morning. Uh, just a quick clarification on the pair of commentary. I mean, what I heard is that you said that you expected to fully offset the headwind. So I'm kind of curious to hear if...

You exactly how you're going to do that and then, you know, put that sorry question. It seems that you know, the fourth quarter is where you're starting to experience, maybe some higher tariff related, headwinds does that

John Pfeifer: Hey, Megan. It's John. Thanks for the question. Let me be clear. We, just like any manufacturer in America, still have tariff headwinds coming at us, right? There are a few things going on. Number one, the tariffs that we are experiencing now, it's a very dynamic situation, changes regularly. What we are seeing right now is a little bit better tariff environment than we saw one quarter ago. That's part of it. The other part of it is we are continuing to execute our mitigation strategy. I have always said most of what we sell in America is made in America. That gives us an advantage to start. We have a local-for-local strategy. We are really trying to drive local production for local regions, Europe for Europe example, the U.S. for U.S. We do a lot of work negotiating with our suppliers.

is that getting fully offset or is that becoming more of an issue in the 2026 if we're thinking, about access to equipment, maybe specifically,

Hey Megan, it's John. Thanks for the question. Um, so let me, let me be clear. We, like any manufacturer in America, still have tariff headwinds coming at us, right? And there are a few things going on. Number one, the tariffs that we're experiencing now, you know, it's a very dynamic situation that changes regularly. So, what we're seeing right now is a little bit better tariff environment than we saw one quarter ago. So, that's part of it.

John Pfeifer: We are engaged in resourcing work where we need to or onshoring work where we need to. We still do have a tariff headwind. We just believe that we have got the right strategies in place to be able to deal with tariffs and offset what we need to offset. There is also business outperformance that's helping us get over tariffs as well. That's why we are back to an $11 guide.

Um, the other part of it is we're continuing to execute our mitigation strategy. I've always said most of what we sell in America is made in America. That gives us an advantage to start. We have a local for local strategy, we're really trying to drive local production for for local regions, Europe for Europe. Example us for us, we do a lot of work, negotiating with our suppliers we do. We're engaged in resourcing work where we need to or onshoring work where we need to, um, but we still do have a tariff headwind. We just believe that that, uh, we've got the right strategies in place to be able to, to deal with tariffs and and offset what we need to offset. There's also business outperformance, um, that that's helping us get over tariffs as well. Uh, and, and that that's why we're back to an 11 guide.

Mig Dobre: Okay. I see. Then my follow-up, maybe in the transportation segment, parsing out Q3 versus Q4 margin that is embedded into your guide, and then should we sort of think about that exit run rate as something that is sustainable into 2026 that maybe hopefully you can build upon? Thank you.

Okay, I see uh, then my follow-up. Um, maybe in the transportation segment. Parting out 2 3 versus 24, uh, margin of embedded into your guide and then

should be sort of think about that exit. Run rate is something that's sustainable into 2026 that maybe. Hopefully we can build a box. Thank you.

Matthew Field: Sure. As you saw, transport improved in the second quarter. We would expect steady improvement as we roll on to new contracts. As we mentioned on the call, we started building under the new FHTV contract, and we announced the new FMTV contract. We will start building on that in 2026, kind of mid-year or so. I would expect to see second half performance as implied in our guide will improve, and then we have additional building blocks into 2026.

Sure. So, um as you saw transport improved in the second quarter, we would expect steady Improvement, as we roll on to new contracts. We, as we mentioned on the call, we started building under the new FH TV contract, uh, and we announced the new FM TV contract. We'll start building on that um, in 2026 kind of mid year or so. Um, so I would expect to see, you know, second half performance as it implied in our guide will improve and then we have additional building blocks into 2026

Operator: Our next question.

John Pfeifer: There's a lot of—no, go ahead, Pat.

Our next question. There's a lot of

Operator: Our next question comes from a line of Angel Castillo with Morgan Stanley. Please proceed with your question.

David Raso: Hi. Good morning, and thanks for taking my question. I just wanted to go back to the access equipment. A couple of things, I guess you noted a little bit of sales discounts or higher sales discounts in the quarter. Just hoping you could comment a little bit more on that and just the general competitive environment. What gives you confidence that we will not see potential push-outs or further pressure from that discounting activity, as you combine that with what you are hearing or seeing from customers in terms of demand and order backlog for the second half?

our next question comes from the line of Angel Castillo with Morgan Stanley. Please receive with your question.

Matthew Field: Yeah. As I mentioned, Angel, we are seeing an external environment that is about what we expected at the beginning of the year. Discounts in the range of 2% to 3% is consistent with our expectation for the year as well. Book-to-bill has kind of returned to normative levels, so we are seeing a return to normal seasonality. I will let John comment on customers and some of the conversations we are having there. But overall, the market has been fairly resilient and really overall as we expected.

Hi, good morning, and thanks for taking my question. Um, I just wanted to go back to the Access Equipment, a couple of things. I guess you noted a little bit of kind of, uh, sales discounts or higher sales discounts in the quarter. Just just hoping you could comment a little bit more on that and, and just the general kind of competitive environment. And you know what, how as you combine that with what you're hearing or seeing from customers in terms of demand and and Order backlog for the second half like what gives you confidence that we won't see, you know potential push out or or further pressure from um kind of that discounting activity.

John Pfeifer: Yeah. Angel, going on with regard to our customers, the first thing that I will highlight is that utilization rates of equipment in the access industry are fine. They are actually pretty good. What our customers are really seeing is there is a really nice pocket of demand, which is meaningful, coming from big projects. That is infrastructure spending, which is going to go on for years. It is data centers that will go on for years. These data centers are gigantic, and they draw a lot of equipment, power generation. On the other side of it, you have got private non-residential, think about building construction, where we are seeing a lot of kind of holding and pausing. We are not seeing any project cancellations in the market to speak of anyways, but there is a lot of pausing and kind of waiting for conditions to stabilize.

Yes. So um as I mentioned angel that you know, we're saying, external environment. That's about what we expected at the beginning of the year. Uh, discounts in the range of 2 to 3% is consistent with our expectation for the year as well. Um, book to bill has kind of return to normative levels. So we're seeing a return to normal seasonality. Um, you know, I'll let John comment on customers and some some of the conversations we're having there but overall, you know, the Market's been, you know, fairly resilient and really, you know, overall as we expected,

John Pfeifer: That might mean interest rates. What is the Fed going to do? It might mean how are tariffs going to impact end markets before we proceed with this project? That is on the other side of it. I think that, but overall, customers are comfortable with where utilization rates are.

That's infrastructure spending which is going to go on for years, its data centers that that will go on for years. You know these data centers are gigantic and they draw a lot of equipment power generation on the other side of it. You've got private non-residential uh think about building construction. Where there, you know, we're we're seeing a lot of kind of holding and pausing. We're not seeing any projects cancellations in the market to to speak of anyways. But there's a lot of pausing and kind of waiting for conditions to stabilize. That might mean interest rates. What's the FED going to do? It might mean what's house tariffs, going to impact and markets? Before we proceed with this project. So that's on the other side of it and and I, I think that, uh, but, but overall customers are are comfortable with where utilization rates are

David Raso: is very helpful. Thank you. Then maybe just as it relates to those customer conversations, I guess one, have you seen any step change in their desire to buy equipment, I guess, given the tax bill? Could you quantify a little bit more specifically what is kind of embedded in your guidance for free cash flow in terms of those tax benefits?

John Pfeifer: We think that the tax benefits in the OBBB are certainly supportive of our long-term outlook and long-term trends. It is an ongoing change to the tax law, so I do not know that we are going to see a specific spike in the near term. There is not an expiration date to what they did with regard to taxes. But we think overall it supports the long-term health of the industry when our customers buy capital equipment.

That's very helpful. Thank you. And then maybe just as it relates to, um, those customer conversations. I guess. 1 have you have you seen any step change in in their desire to to buy equipment? I guess as given the tax bill? And then could you quantify a little bit more specifically, what kind of embedded in your guidance, uh, for free cash flow in terms of uh, those tax benefits?

Matthew Field: Just building on that in terms of the free cash flow specifically, we did increase our guide from $300 million to $400 million to $400 million and $500 million. That largely reflects some of the tax bill changes on R&D credits and how those get handled.

Well, we think that the the tax benefits in the in the obb are certainly supportive of our of our long-term Outlook, and long-term trends. Um uh it's an ongoing change to the tax laws so so I don't know that we're going to see a specific spike in the near term. There is not an expiration date to the uh to what they did with regard to taxes. But we think it overall it supports the long-term health of of the industry, when our customers buy Capital Equipment,

Just building on that. In terms of the free cash flow specifically, we did increase our guide from 300 to 400 to 400 and 500 that largely reflects uh some of the tax bill changes on R&D credits. And how those get handled

David Raso: Understood. Thank you.

Matthew Field: Thanks, Angel.

Understood, thank you. Thanks angel.

Operator: Our next question comes from a line of Steven Fisher with UBS. Please proceed with your question.

Our next question comes from the line of Steven Fischer with UBS. Please proceed with your question.

David Raso: Thanks. Congratulations on the quarter. Just to follow up again on the second half on the access side of things and that last question. As was pointed out before, only about half of the second half revenue implied is in backlog. Are you anticipating that sort of activity will actually increase in the second half of the year, and there will be a lot of book and burn? Is that what you are expecting in your confidence there?

Thanks and congratulations on the quarter, just to to follow up again on sort of the second half on the access side of things. And then that last question um I you know I guess you know the the as was pointed out before you know only about half uh of the second half Revenue implied is is in backlog. So uh are you anticipating that? Sort of activity will actually increase in the second half of the year and and there'll be a lot of sort of book and burn is is that uh sort of what you're, You're Expecting and and your confidence there.

John Pfeifer: Yes. Thanks for the question, Steve. The backlog that we have right now is about $1.2 billion in backlog. It is a totally normal backlog, especially as we are here in kind of the early first third of the third quarter. It is normal for us to come in with orders already booked, but also needing to continue to take orders. That is a totally normal environment for us. Nothing is abnormal about that. So yes, we do need to book some orders in the third and the fourth quarter, and that is almost always the case. So it is not abnormal at all. The $1.2 billion backlog sitting right now is in the line of historical norms.

Yeah, thanks for the question Steve. You know, the backlog that we have right now? We're at about 1.2 billion dollars in backlog. It's a totally normal backlog especially as we're here in kind of the early first third of the of the uh, third quarter. And it, you know, this is it's normal for us to come in with orders already booked but also needing to continue to take orders. That's a totally normal environment for us. Nothing is abnormal about that. So, yes, we do need to book some orders, um, uh, in the third and the fourth quarter, and that's almost always the case. So it's not abnormal at all. 1.2 billion dollar, backlog sitting right now is is, uh, in the line of of historical norms,

David Raso: Okay. Fair enough. I know, as you said in the release and on the call, it is a dynamic tariff environment. I think the release said, you are reflecting tariffs as of July 30th. I am curious, I do not know if you have even had any time to think about it, but the August 1st update, what that might mean relative to kind of what you have already assumed based on July 30th?

Okay, fair enough. And then, uh, I know, as you said in the, in the release, and on the call is a dynamic, tariff environment. I think the release said, you know, you're reflecting tariffs as of July 30th. Uh, I I'm curious just, you know, I don't know if you even had any time to think about it. But, uh, the August 1st update, um,

what that might mean relative to kind of what you've already assumed based on July 30th.

John Pfeifer: It is a dynamic environment, and we are always updating our outlooks and what we need to do based upon the changing environment. The good news is some of our biggest trading partners seem to have come to some resolution with the administration of what the tariff rate will be. Think about Europe for one as one example. So that gives us some comfort. But sure, there could be some disturbances today on August 1st or over the next quarter, and we will adjust to it as necessary. But we do feel okay because some of our big trading partners have seemed to come to a framework for resolution.

well, um,

it's a d. Well, surely Steve, it's a dynamic environment. And we, we are always updating our outlooks. And what we need to do based upon, uh, the changing environment. It, you know, the good news is some of our biggest trading partners, uh, seem to have come to some, um, resolution with the administration of what the Tariff rate will be, think about Europe. For 1 is 1 example. So so that gives us some comfort, but sure, there could be some disturbances today on on August 1st or over the next, you know, quarter and we'll adjust to it as as necessary. But, uh, we do feel okay, because some of our big trading partners, have have seemed to come to a, a framework for resolution.

David Raso: Okay. Thank you.

Matthew Field: Thanks, Steve.

Okay, thank you.

Thanks Steve.

Operator: Our next question comes from a line of Tim Thein with Raymond James. Please proceed with your question.

Sign with Raven James, please receive with your question.

Mig Dobre: Thank you. Good morning. The first question is just on the vocational business, the strength in the fire segment of 20%. Just curious, as you think about delivering on that backlog in the back half of the year, should we expect a similar construct in terms of the from a product mix standpoint or any changes that you would call out in terms of, going back to that earlier question, I would assume that that had some positive impact from a margin standpoint in the quarter. So I am just curious if that is expected to continue in the second half.

Thank you, good. Good morning. The first question is just on the vocational business, the the strength and the fire segment of of 20%, um, just curious how, as, as you think about delivering on that backlog in the back half of the year. Uh, should we expect it to kind of a similar construct in terms of the, from a product mix standpoint, or any, any changes that you would you'd call out in terms of, you know, going back to that earlier question, I would assume that that had some positive impact from a margin standpoint in the quarter. So I'm just curious. If, if that's expected to continue,

John Pfeifer: Yes, it is expected to continue. Pierce, our fire brand, is a very strong business for us. We are continuing to invest in Pierce. It is our, it is the market-leading brand. We are really focused on continuing to increase capacity. We have got great people and a great team that is executing this. We are confident that every quarter that goes by, we will continue to be able to increase supply to our customers and the velocity with which we can supply. This is a great business, and we think it is going to be for a long time. A stable market, not a cyclical market. Yes, is the answer to your question.

Mig Dobre: Okay. Just a quick follow-up on the access business. Yet again, on the sales mix, it was noted as a positive. Was that more of a product mix, i.e., telehandlers being down more than access or geography with Europe being down or both? Then, how are you thinking about that dynamic in the back half? Thank you.

Uh, in the second half. Yeah, yeah, it is expected to continue. Pierce, our Firebrand, is a very strong business for us. We are continuing to invest in Pierce. It's the market-leading brand. We're really focused on continuing to increase capacity. We've got great people and a great team that is executing this. And um, we're confident that every quarter that goes by, we will continue to be able to increase supply to our customers and the velocity with which we can supply. But this is a great business, and we think it's going to be for a long time, a stable market. This is not a cyclical market. Um, so yes, this is the answer to your question.

Okay, just a quick follow-up on the access business yet again, on the sales mix uh, was noted as a, as a positive. Was that a

More of a product mix, i.e., you know, tell handlers being down more than access or geography.

Matthew Field: Sure. Hi, Tim. Good morning. So, it's a number of factors in there. Partly, it would be geography mix. We saw a stronger mix in North America, which helps. We also actually had a stronger mix of independents than this time last year, even though clearly we swing into nationals for this quarter relative to the last quarter. But on a year-over-year basis, we did see a stronger mix of independents holding up as they support some of the larger projects. Within that, there was obviously some mix among units.

Uh with with Europe being down or both and then just, you know what what's, how you're thinking about that dynamic in the back half. Thank you.

Sure, hi, Tim. Good morning. Um, so it's a, it's a number of factors in there. Um, partly it, it would be geography, mix. Uh, we saw, you know, stronger mix in North America, which helps. Uh, we also actually had a, a stronger mix of Independence. Um, then then this time last year, even though clearly we swing into Nationals for this quarter relative to the last quarter, but on a year-over-year basis. Uh we did see a stronger mix of Independence holding up as they support some of the larger projects. Uh and then within that there was obviously some some Maximum units.

Mig Dobre: Got it. Thank you for the time.

Matthew Field: Thanks, Tim.

Got it. Thank you for the time. Yep. Thanks Tim.

Operator: Our next question comes from a line of Tami Zakaria with J.P. Morgan. Please proceed with your question.

Tami Zakaria: Hey, good morning. Thank you so much. Very nice quarter. I have just one question. I think I heard you say you want to steadily increase the buyback through the course of the year. Just wanted to frame what the opportunity could be. Is there a way to think about the repo as a percentage of the free cash flow you guided, $400 million to $500 million? Is there a target that XYZ amount of that could be deployed for repo this year?

Our next question comes from the line of Tammy Zakaria with JP Morgan. Please proceed with your questions.

Hey, good morning, thank you so much, very nice quarter. I have just 1 question. I I think I heard you say you want to steadily increase the buyback. Um,

Through the course of the year. So just wanted to frame what the opportunity could be. Is there a way to is there a way to think about the repo as a percentage of the free cash flow? You guided 400 to 500 million? Is there a Target that XYZ amount of that could be deployed for repo this year?

Matthew Field: Thanks, Tammy. Thanks for the question. Year to date, we have seen about $70 million share repurchase, with about $40 million of that in the second quarter. As you correctly noted, we did mention that we would step that up. Last year, we bought about $120 million. I would expect that to roughly double, maybe a little bit more than that. I do not look at it necessarily as a percentage of free cash flow, more as just how we are executing this year and our comfort level with our execution level.

Tami Zakaria: Understood. Thank you.

Thanks, Tammy. Thanks for the question. Um, so you know, year to date, we've seen about 70 million dollars, uh, share repurchase for about 40 of that in the second quarter. Uh, as you correctly noted, we did mention that we would step that up. Last year, we brought about 120. I would expect that to, you know, roughly double, maybe maybe a little bit more than that. So I don't look at it necessarily as a percentage of free cash flow, uh, more as just how we're executing this year and our our comfort level with our execution level.

Matthew Field: Thank you. Thanks, Tami.

Understood, thank you.

Thank you. Thanks Tammy.

Operator: As a reminder, if you would like to ask a question, press star one on your telephone keypad. Our next question comes from the line of Chad Dillard with Bernstein. Please proceed with your question.

as a reminder, if you would like to ask a question press star 1 on your telephone keypad,

Our next question comes from the line of Chad Dillard with Bernstein. Please proceed with your question.

David Raso: Hey, good morning, guys. Can we talk a little bit more about your expectations for orders in the second half? More specifically, how are you thinking about the contribution from national accounts versus independent? Then maybe you can talk about what is in the backlog mix on those terms.

Hey, good morning guys. Um can we talk a little bit more about your expectations for orders in the second half more specifically, you know, how are you thinking about the contribution from national accounts versus independent and then maybe you can talk about just what is in the backlog. Mix?

Uh, on those terms.

John Pfeifer: Yeah. Thanks, Chad. I am not going to get into what is in the backlog right now. Our backlog is healthy. It is normal. As I talked about a little bit earlier, when you look at the marketplace, you see really strong, healthy demand in big, big projects, big infrastructure, data centers, that kind of thing. The nationals tend to get a lot of that business because they have got the huge fleets that can support it. It takes a huge fleet of equipment to support that kind of activity. So I think you can assume it is a little bit heavier weighted towards nationals for the short term. We will see how some of the private non-residential construction shapes up. Again, there is nothing being canceled. It is just kind of a lot of stuff on hold. So that is a little bit of clarification for you on that.

Yeah. Um,

Thanks Chad. You know, I'm not going to get in into what's in the backlog right now, our backlog is healthy, it's normal. Um as I've talked about a little bit earlier you know when you look at the marketplace you see really strong healthy demand in big, big projects, a big infrastructure.

Tend to get a lot of that business because they've got the huge fleets that can support it, and it takes a huge Fleet of equipment to support that kind of that kind of activity. Um, so I think you can assume it's a little bit heavier, weighted towards Nationals, uh, for the short term. Um, and uh, we'll we'll see how uh, how uh, some of the private non-residential construction shapes up. Again, there's nothing being canceled. It's just kind of a lot of stuff on hold.

Um, so that's a little bit of clarification for you on that.

David Raso: That's helpful. Can you also talk through your Q3 and Q4 expectations for access revenues and margins? Just based on what's in backlog, is typical seasonality the right way to think about it, or should we be thinking about something else?

Matthew Field: Hi, Chad. So, you should really think about access as returning to normal seasonality. We saw that in the first quarter. We are certainly seeing that in the second. I would expect third quarter to be a good, strong quarter on a relative basis, and then fourth quarter to dip down again. That is really what we have seen historically, pre-COVID. That is certainly our outlook for the year as well.

That's helpful. And can you also talk through your 3 q and 4 key expectations for Access revenues and margins. Uh so just based on what's in backlogs. Is typical seasonality is the right way to think about it. Or, you know, should be thinking about something else.

Hi, Chad. Um, so yeah, you should really think about access is returning to normal seasonality. We saw that in the first quarter, we certainly seeing that in the second, I would expect third quarter to be, you know, a good strong quarter on a relative basis and then fourth quarter to dip down again. So that's really what we've seen historically, you know, kind of preco and that's certainly our outlook for the year as well.

David Raso: Great. Thank you.

Matthew Field: Thanks, Chad.

David Raso: Thanks, Chad.

Great. Thank you. Thanks Chad.

Operator: Our next question comes from a line of Kyle Menges with Citi. Please proceed with your question.

Our next question comes from the line of Kyle mangas with City. Please receive with your question.

Matthew Field: Morning, guys. Thanks for taking the question. I think the vocational margin guide for this year already gets you to the low end of your 2028 target. We have seen it already coming in a bit ahead of the expectation laid out at the Investor Day a couple of months ago. Maybe if we could just take a step back and if you could talk a little bit about what you have seen in vocational, what has come through the backlog and execution that has got you to this point to margins now guided to 16% for the year. Just based on what you see in the backlog and in the plan from an execution standpoint, what could incremental margins look like over the next one to three years for vocational?

Morning guys, thanks for taking the question. Um, I think the, The Vocational margin guide for this year. Now, it already gets you to the low end of your 2028 Target already. So would would seem already coming in a bit ahead of the expectation laid out at the investor day, a couple months ago. So maybe if we could just take a step back and and if you could talk a little bit about um,

John Pfeifer: We really love our businesses, but vocational is a business that really is shaping up to continue to be healthy for a long time. These are not cyclical markets. They are fairly stable markets. The other thing that is great about them is that their technology is in demand in these markets, whether it is a fire truck or an environmental vehicle in refuse and recycling or an airport ground service equipment. Our customers want advanced technology in the form of autonomous functionality, sometimes full autonomous. You saw it at the Consumer Electronics Show. We showcased a lot of this autonomous capability, using AI to deliver insights and features on products that nobody ever dreamed possible before. These are the types of things that our customers want us to do, and we are able to do it.

What what you've seen in vocational um what's come through the backlog and and execution that has got you to this point to uh margins now guided to 16% for the year and and just based on what you see in the backlog and and in the plan from an execution standpoint, what could incremental margins look like over the next you know, 1 1 to 3 years for vocational.

I mean, we we

Really love our. We love all of our business.

Occasional is a business that, uh, that really is shaping up to continue to be healthy for a long time. Um, these are not cyclical markets, uh they're fairly stable markets. And the the other thing that's great about them is that there's their their technology is is is in demand in these markets whether it's a fire truck or an EnV

John Pfeifer: We believe that this is helping drive demand for vehicles like our new fully integrated refuse and recycling vehicle that has just got all sorts of productivity benefits all over it. That helps our customers be better. That is why we think these are good markets where we are continuing to execute and grow. We think that the health is going to continue for a long time.

Environmental vehicle and refuse and recycling, or an airport ground service equipment. Um, our, our customers want advanced technology in the form of autonomous functionality. Sometimes, full auten autonomous, you saw it at at, uh, the Consumer Electronics Show. We showcase a lot of this autonomous capability and our and using AI to deliver insights and features on products that nobody ever dreamed possible. Before these are the types of things that our customers want us to do and we are able to do it. And we believe that this is helping Drive demand for vehicles like our new fully integrated uh, refuse and recycling vehicle. That's just got all sorts of productivity benefits all over it that helps our customers be better and that's that's why we think these are good markets where we're continuing to execute and grow and uh we think that that the health is going to continue for a long time.

Matthew Field: Helpful caller. Thanks. A question for Matt, just I guess how he's thinking about capital allocation. I thought it was noteworthy increasing the expectation for share buybacks. I guess that is driven by an increase in the free cash flow expectation. The stock is also trading at 52-week highs. I would love to hear just how, Matt, you are thinking about capital allocation and share buybacks going forward. Sure, Kyle. I think we outlined a good framework at our Investor Day. Our priorities are unchanged from that, which is first and foremost, maintaining a strong investment-grade balance sheet. We are in great shape there. Two, it is some of the activities we talked about, which is organic growth. All of the capacity additions we are talking about in vocational, the opportunities there, that is our second priority.

Helpful caller, thanks. And then uh, a question for Matt. Um, just I guess how he's thinking about Capital allocation. Um, I thought it was noteworthy. Increasing the, the expectation for shared by backs. I guess that's driven by increasing the free cash flow expectation. But, uh, I mean, the stock is also trading at 52-week highs. So I would love to hear just, um, how Matt you're thinking about Capital, allocation,

And share buybacks going forward.

Matthew Field: After that would come, even though we are at a 52-week high, we are still, we believe, a discounted multiple. Share repurchases would be a priority following that. Lastly would be M&A opportunities as they arise. We had a good discussion in our Investor Day deck about how we think about M&A. Those priorities really do not change. Even if we are at a 52-week high, we still do believe our multiples would be higher if we were rated as we would expect.

Opportunities as they arise and we had a good discussion in our investor day deck about how we think about m&a. But so those those priorities really don't change. Even if we're out of 52 week high, we, we still do believe our multiples would would, uh, would be higher if we were, uh,

Rated, as we would expect.

David Raso: Makes sense. Thanks for the time, guys.

Matthew Field: Thanks, Kyle.

Makes sense. Thanks for the time, guys.

Thanks Kyle.

Operator: Our next question comes from a line of Steve Barger with KeyBanc. Please proceed with your question. Steve Barger, your line is live.

Our next question comes from the line of Steve Barger with KeyBank. Please receive with your questions.

Live.

Matthew Field: Steve, are you there?

Are you there?

David Raso: Sorry. I was muted.

Sorry, I was muted.

Matthew Field: Morning.

David Raso: Morning. John, with all the focus on near-term access trends, I am just going to ask one about the longer-term targets. To get to the 2028 midpoint requires about an 8% CAGR. Sitting here today, does that feel like a heavy lift? Can you break out how much you think comes from overall market growth, how much from share gains, or new product introduction? Do you expect M&A to be part of that growth? Just holistically, how are you thinking about getting from here to there?

Um, morning yeah. John with all the focus on near-term, assess Trends. I'm just going to ask 1 about the longer term targets to get to the 2028. Midpoint requires about an 8% kegger and sitting here today, does that feel like a heavy lift? And you can you break out how much you think comes from overall market growth? How much from share gains or new product introduction?

John Pfeifer: When we do those, you know, the 8% CAGR you are talking about, you are exactly right. We never include any M&A that might be on the horizon. That is all organically driven. We think it is a reasonable, achievable growth rate based upon what is going on in our business and our markets and how we are investing, not only in new products in the core of our market, where you will see us continue to come out with innovations in kind of that core AWP market, but also in some of the places that we have invested with some of the acquisitions we have already made.

Do you expect m&a to be part of that growth? Just holistically. How are you thinking about? Getting from here to there?

Yeah, well, when we do those, you know, the 8% kegger, you're talking about, you're exactly right. We never include any m&a, that might be on the horizon. That's all organically driven.

John Pfeifer: Then you look at some of the more futuristic investment that we are making in our ability to create the job site of the future, which we showcased at CES, and our ability to drive connectivity, drive insights through that connectivity and analytics, and even getting into some machine learning and AI for our customers. That really drives a healthy kind of lifecycle business for us that we think is going to continue to be the future of where our end markets want us to support them. When you combine all that together, we think that an 8% growth rate is very, very reasonable and very achievable.

Um, and we think it's a, a reasonable um uh achievable growth rate, based upon what's going on in our business, and our markets and how we're investing, not only in new products in the core of our Market, where you'll see us continue to come out with Innovations in kind of that core awp Market. But also in some of the places that we've invested, um, with some of the Acquisitions we've already made. And then you look at some of the more futuristic investment that we're making in, uh, our ability to create the job site of the future, which we showcased at CES and our ability to drive connectivity Drive insights through, uh, through that connectivity and, and, and analytics, and even getting into some, uh, machine learning and AI for our customers, you know, that that really drives a healthy kind of life cycle business for us, uh, that that we think is going to continue to be

The future of where our end markets want us to support them. And when you combine all that together, you know, we think that an 8% growth rate is very, very reasonable and very achievable

Matthew Field: Look at some of the tailwinds in the market too, Steve. You see, which I have already talked about on this call, you see all these big trends around data centers and infrastructure that is going to go on for a long time. Those are also strong long-term underpinnings to help demand move along over time.

So, so get some of the Tailwinds in the market too. Steve. You see, you know that which I've already talked about on this call. You see all these big trends around data centers and infrastructure. That's going to go on for a long time. Those are those are also strong long-term underpinnings to, uh, to to help demand Move Along over time.

David Raso: So, is this really more about the pie growing and you maintaining or growing share, or do you expect a lot of proliferation of applications to go along with that?

So is this really more about the the high growing and you maintaining or growing share? Or do you expect a lot of proliferation of applications to go along with that?

John Pfeifer: We expect both to happen.

Um we we expect both to happen.

David Raso: Got it. If I can just squeeze one more in, sorry if I missed this, but for the transport revenue cadence in the back half, is Q3 more like the front half in terms of revenue, or with a really sizable step up in Q4, or will the quarters be more level-loaded in terms of both revenue and margin?

Got it and and if I can just squeeze, 1 more in. Sorry if I missed this but for the transport Revenue Cadence in the back, half is 3Q more like the front half in terms of of Revenue or with a really sizable step up in 4 q or will the quarters be more level loaded in terms of both revenue and margin?

Matthew Field: We would expect it to be progressively growing over the quarters. As a reminder, think about us building up our production of NGDVs. We are steadily ramping throughout the year. That should give an increase sequentially by quarter in terms of revenues in the transport segment. As we shift on to new contracts, think of it as FHTV production this year under the new contract, that would also be a driver for higher revenue sequentially.

Uh, so again we would expect it to be uh progressively growing. Um over the quarters again, as a reminder, you know, think about us building up our production of ngvs. And so we're steadily ramping throughout the year. So so that should give uh, increase sequentially by quarter in terms of revenues in the transport segment and then as we shift on to new contracts, so think of it as fhv production. This year under the new contract that would also be a be a driver for higher Revenue sequentially.

David Raso: Got it. Thanks.

Matthew Field: Sure. Have a great day.

Got it, thanks.

Sure. Have a great day.

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

Pat Davidson: All right, Christine, thank you. Thanks, everybody, for joining us today. We report a very strong beat and raise. Please consider that when you're looking at Oshkosh Corporation. If you have any follow-up questions, please reach out to me or get back with us. We look forward to seeing you in the next quarter at conferences, and have a great rest of the day and a great weekend.

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

All right, Christine. Thank you, thanks, everybody for joining us today, we report a very strong beat and raise. Uh, please consider that when you're looking at Oshkosh, if you have any follow-up questions, please reach out to me uh or get back with us. We look forward to seeing you in the next quarter at conferences and have a great rest of the day and a great weekend.

Operator: 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.

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.