Q3 2025 Oshkosh Corp Earnings Call
Speaker #1: Greetings and welcome to the Oshkosh Corporation , third quarter 2020 results conference call . At this time , all participants are in a listen only mode .
Speaker #1: A brief question and answer session will follow the formal presentation . If anyone should require operator during the conference , please press Star Zero on your telephone keypad .
Speaker #1: As a reminder , this conference is being recorded . It is now my pleasure to introduce your host , Pat Davidson , Senior Vice President , Investor Relations for Oshkosh .
Speaker #1: Please proceed .
Speaker #2: Good morning , and thanks for joining us . Earlier today , we published our third quarter 2020 results , a copy of that release is available on our website at Oshkosh .
Speaker #2: 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 is also available on our website.
Speaker #2: 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 .
Speaker #2: Our remarks should 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 .
Speaker #2: 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 .
Speaker #2: 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 .
Speaker #2: 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 eight and I'll turn it over to you .
Speaker #2: John .
Speaker #3: Thanks , Pat , and good morning , everyone . We continue to successfully navigate a dynamic external environment with resilience and a strong sense of purpose to serve our everyday heroes with high quality products that are safe , intuitive and productive .
Speaker #3: We do this with a strong mission of service for our everyday heroes like firefighters in our communities . We proudly sponsored the 13th annual nine over 11 Memorial Stair Climb in Green Bay , where more than 2000 people raised over $120,000 for the National Fallen Firefighters Foundation and honored the brave firefighters that lost their lives on nine over 11 .
Speaker #3: We also demonstrated our commitment to our communities as over 1,200 volunteers came together for Oshkosh's eighth annual Feed the Body, Feed the Soul event.
Speaker #3: These volunteers packed £224,000 of rice in just 12 hours to support individuals and families facing food insecurity across eastern Wisconsin . Turning to our financial results on slide four .
Speaker #3: We delivered an adjusted operating margin of 10.2% on revenue of $2.7 billion in our third quarter . This led to adjusted earnings per share of $3.20 , an increase of 9.2% over the prior year .
Speaker #3: These results reflect solid performance across each of our segments . Despite lower revenue . We maintained a double digit adjusted operating income margin year over year , reflecting continued strong performance in our vocational segment .
Speaker #3: Improved returns in our transport segment , and a resilient double digit margin in our access segment . Our adjusted EPs grew compared with last year , reflecting our operating performance and taxes .
Speaker #3: While I am pleased with the resilience demonstrated in our third-quarter results, we are updating our outlook for the full year to reflect the demand environment we have been seeing.
Speaker #3: Starting mostly in the third quarter, we are revising our 2025 adjusted EPS guidance to a range of $10.50 to $11, which reflects slightly lower revenue expectations for both access and transport segments.
Speaker #3: I want to emphasize that end market activity in access segment is healthy , but we are seeing customers be more cautious in the near term regarding new equipment purchases .
Speaker #3: As a result of tariffs and the current economic environment . Matt will provide additional details on segment performance and our outlook later in the call .
Speaker #3: Please turn to slide six for Q3 highlights . In September , we continued to demonstrate how Oshkosh is shaping the future of airports by showcasing our advanced technologies at the international airport ground service Equipment Expo and in Washington , DC .
Speaker #3: At the AUSA Defense Conference . Just two weeks ago , we introduced our family of multi-mission autonomous vehicles FM , AV autonomy was a key focus at both events at the GSE Expo , we displayed our full range of ground support equipment and showcased a flexible , autonomous robot that can serve multiple roles on the tarmac .
Speaker #3: We also launched the new Tempest Seducer, designed to easily navigate congested ramps while providing improved visibility and more intuitive controls for operators. At AUSA, Oshkosh featured three production-ready variants from the autonomous vehicle portfolio.
Speaker #3: That's highlighting our ability to deliver autonomous payload agnostic platforms . Please turn to slide seven . As I mentioned earlier , access equipment and market activity remains healthy as we see in equipment utilization percentages .
Speaker #3: That said , customers are being cautious with capital spending . I'm proud of our team's execution , delivering double digit adjusted operating margins .
Speaker #3: Despite this environment , while overall demand in the current environment is lower than in 2020 for construction activity , for data centers and infrastructure has continued to drive demand , we believe that additional long term tailwinds related to lower interest rates , project deferrals , aged equipment and manufacturing reshoring will support a broader pickup in construction activity in the near term , the team remains resilient and is working to mitigate the impacts of tariffs across our business .
Speaker #3: As we have discussed previously, we are aggressively pursuing cost levers to offset the impact of tariffs. We are also having initial discussions with customers regarding the impact of tariffs on pricing, with the expectation that we will raise prices in 2026 to keep pace with input costs.
Speaker #3: Our success is driven by designing and building world class products to meet the needs of our customers . This quarter , we introduced our new AG 61 nine midsized AG Telehandler , aimed at the heart of the market , which we revealed at the World Dairy Expo last month .
Speaker #3: And in Europe, we launched the innovative lift pod, providing low-level access for commercial customers needing a safe, portable, and stowable solution to support a wide range of projects at height.
Speaker #3: Turning to slide eight , in the vocational segment , we continue to advance initiatives that support increased production of fire trucks . This is a multiyear process as we seek to improve production efficiency by addressing bottlenecks associated with building highly customized complex trucks .
Speaker #3: At the same time, we continue to support firefighters with our stock pumpers and build my peers' product offerings, which improve lead times by simplifying configurations.
Speaker #3: In recent quarters, we've seen an increase in the mix of orders for Build My Peers pumpers, which should further support our efforts to streamline production and reduce lead times.
Speaker #3: We finished the quarter with strong orders for vocational, as the segment recorded $1.1 billion in the quarter, led by orders for Pierce fire trucks and our Aerotec products.
Speaker #3: Of course, we remain focused on increasing throughput, and we expect to bring the backlog down over the next few years, as we discussed at our Investor Day in June.
Speaker #3: Finally , for the segment , I want to recognize the team that supports our Mcneilus Volterra Z . Refuse collection vehicle , which won the coolest thing made in Tennessee 2025 .
Speaker #3: This product is a game changer for the refuse collection industry , as the first fully integrated electric vehicle designed with the operator in mind to deliver world class ergonomics , purpose built performance and a zero emission quiet driving experience in neighborhoods .
Speaker #3: Please turn to slide nine . As I previously mentioned , we showcase autonomy at the AUSA Defense Conference . Earlier this month , we announced an order from the United States Army valued at $89 million for the modernized P A2 autonomy ready heavy tactical truck designed for load handling .
Speaker #3: Another example of innovation that is already available in our products today—not years in the future. We continue to advance core programs to support our U.S. and international customers, including building under our previously announced contract extension.
Speaker #3: We have also monetized JLTV related technology through a one time license of select operational software IP to the Department of Defense . That occurred during the quarter .
Speaker #3: This further demonstrates our commitment to our government customers by providing cutting edge technologies to support mission critical requirements and fleet sustainment . Lastly , we continued to ramp production of the NDI .
Speaker #3: This quarter and are targeting line rates that support our annual production goals . As with any new product launch in a new assembly plant , challenges are to be expected , and we've seen this across the vehicle industry worldwide and the team continues to work with urgency to ramp production while maintaining quality .
Speaker #3: We now have over 4 million miles driven by postal workers , and we remain excited about the rollout of this much needed productivity enhancing vehicle .
Speaker #3: With that, I'll hand it over to Matt to walk through our detailed financial results. Thanks, John.
Speaker #2: Please turn to .
Speaker #4: Slide ten . Consolidated sales for the third quarter were nearly $2.7 billion , a decrease of $53 million , 2% from the same quarter last year , primarily due to lower sales volume in the access segment .
Speaker #4: Partially offset by higher vocational and transport sales volume , and improved pricing . Adjusted operating income was $274 million , down slightly from the prior year , primarily reflecting lower volume adjusted operating income margin of 10.2% was roughly in line with last year on slightly lower sales .
Speaker #4: Adjusted earnings per share was $3.20 in the third quarter , $0.27 higher than last year . Adjusted EPs was favorably impacted by about $0.30 due to lower tax expense , resulting from the resolution of a multi-year US federal income tax audit .
Speaker #4: During the quarter , we again stepped up share repurchases , repurchasing approximately 666,000 shares of our stock for $91 million , bringing year to date share repurchases to 159 million .
Speaker #4: Share repurchases during the previous 12 months benefited adjusted EPs by $0.05 compared to the third quarter of 2020 . For free cash flow for the quarter was strong at 464 million , compared to 272 million in the third quarter of 2020 .
Speaker #4: For primarily reflecting working capital changes, including customer advances and inventory, turning to our segment results on slide 11. The Access segment delivered resilient adjusted operating income margins of 11% on sales of $1.1 billion.
Speaker #4: Sales were $254 million, or nearly 19% lower than last year, which reflected weaker market conditions in North America and higher discounts.
Speaker #4: Our vocational segment continued to deliver strong sales growth through higher volumes and improved pricing as we deliver our backlog, achieving an adjusted operating income margin of 15.6% on $968 million.
Speaker #4: In sales . Sales grew 154 million , or nearly 19% from last year , led by improved throughput for municipal fire apparatus and robust growth in airport products .
Speaker #4: Revenue in airport products was up 17% compared with last year , demonstrating our strong Jetbridge and RF businesses . The nearly 200 basis point increase in adjusted operating income margin for the segment , primarily reflected improved price cost , thanks transport segment sales , increased 48 million to 588 million .
Speaker #4: Delivery vehicle revenue grew by $114 million to $146 million and now represents approximately one quarter of transport segment revenue. Delivery revenue grew 37% sequentially compared to the second quarter of 2025.
Speaker #4: As expected, Defense vehicle revenue was lower compared with last year due to the wind down of the domestic JLTV program. This was partially offset by higher international sales of tactical wheeled vehicles and one-time revenue from the license of JLTV-related intellectual property to the U.S.
Speaker #4: Government for $25 million. The transport segment delivered an improved operating income margin of 6.2%, compared to 2.1% last year, reflecting the software IP license.
Speaker #4: Improved pricing on new contracts and a favorable mix were offset by higher warranty costs. The one-time licensing agreement, which was contemplated in our guidance last quarter, represented a roughly 400 basis point improvement in operating income margin.
Speaker #4: Please turn to slide 12 . Turning to our outlook for the remainder of 2025 . The macro backdrop and end market activity have remained broadly resilient across customer orders .
Speaker #4: However , reflect a more judicious approach to spending . As you heard from John , our team continues to execute well amidst a dynamic government policy and international trade environment .
Speaker #4: As John Pfeifer mentioned, we are updating our 2025 full-year adjusted EPS guidance to be in the range of $10.50 to $11 on revenues of approximately $10.3 to $10.4 billion.
Speaker #4: As you can see on the slide , we have further moderated our expected adjusted operating income margin in the access segment to reflect our sales outlook .
Speaker #4: And in the transport segment for our present expectations for Gdv production . Our cash flow outlook of 450 to 150 million , up 50 million from our previous outlook , reflects lower capital expenditures as we maintain rigorous spending controls .
Speaker #4: We also plan to continue with share repurchases through the balance of the year at a modestly higher pace than we did in the third quarter .
Speaker #4: With that , I'll turn it back to John for some closing comments .
Speaker #3: Thanks , Matt . It's clear that 2025 has proven to be a dynamic year , including the tariff landscape and sustained higher interest rates .
Speaker #3: Our updated outlook reflects the impact of these conditions on our customers and in turn , on the demand for our products , notably in the access segment .
Speaker #3: Even so, our team has shown strong focus and agility by managing through these conditions while delivering solid results. This performance reinforces our confidence in managing the near term while supporting our long-term growth objectives.
Speaker #3: Earlier this year at our at our Investor Day , we shared our vision to roughly double adjusted EPs to a range of 18 to $22 per share by 2028 .
Speaker #3: Each quarter represents a step toward that goal, and we're encouraged by the steps our teams are making today to lay the groundwork for nearly doubling EPs.
Speaker #3: By then, we appreciate your continued confidence in Oshkosh and look forward to updating you as we advance our strategy and create long-term value for shareholders, customers, and team members.
Speaker #3: I'll turn it back to you now , Pat , for the Q&A .
Speaker #2: Thanks , John . I'd like to remind everyone to please limit your questions to one plus a follow up . Please stay disciplined on your follow up question .
Speaker #2: And after that , we'll ask that you rejoin the queue . If you have additional questions . Operator , please begin the Q&A session .
Speaker #1: Thank you. Our first question comes from McDuffie with Baird. Please proceed.
Speaker #5: Hey . Good morning everyone . Thank you for taking the question .
Speaker #3: Good morning .
Speaker #6: MiG .
Speaker #5: Maybe we can start with with access a little bit . And you know , I'm . I'm sort of curious . Your perspective here as you're talking to your customers , obviously not only for business covering Q4 but into 2026 .
Speaker #5: You hinted at the fact that prices are going to are going to go up , which makes sense given tariffs and whatnot . What is your sense for where demand seems to be shaking out ?
Speaker #5: Because we have seen some that are increasing CapEx, at least optically, it looks like there are some signs of stabilization in that industry.
Speaker #5: I'm curious if that's sort of gels with with what you're hearing or your salespeople are hearing is is there contemplating 20 , 26 and maybe more broadly , what should investors be thinking ?
Speaker #5: Just as a general framework for the segment next year ? It would look to me like production is likely to be down first half of 26 , but perhaps you think about it differently .
Speaker #3: Well , in the I'll answer that Meg is John . So thanks for your question . You know , we're not guiding today , but I can give you some context on what we see ahead .
Speaker #3: For sure . We'll guide . You know , we're in we're in the in discussions with all of our customers about what 2020 looks like .
Speaker #3: So we'll have a lot better clarity for you when we get through the fourth quarter . But I'll give you context , first of all , we don't know if if at this point in time , if production is going to be down in the first half of 2026 , I honestly don't know that what I what I will tell you is that we feel , you know , we feel when we look at the market going forward and we .
Speaker #3: All customers are not the same. This is a vast customer base. We've got thousands of independent rental customers, and we've got a group of big national rental customers.
Speaker #3: And you’ve heard some positive things from the big national rental customers of ours. There is still a bit of hesitancy in the very near term.
Speaker #3: When I talk about the very near term , I'm talking about Q3 , Q4 , in terms of with the current environment , how much equipment do I want to take in the here and now ?
Speaker #3: But when we look forward to 2026 and we see what's going on in the market , we talk about long term demand drivers a lot .
Speaker #3: You hear about megaprojects constantly. Those are real, and they are ongoing, and they do drive a lot of equipment. But we're starting to also see some free stuff in terms of the commercial construction activity.
Speaker #3: So there's been a Non-res has had a lot of commercial construction , kind of on hold or paused . Some of the a lot of those projects are starting to get cleared through the into the planning phase .
Speaker #3: That's a very positive sign for the market going forward . So we'll get through this year , which has been one of the most dynamic years that anybody in business has ever experienced will manage it really well .
Speaker #3: We'll continue to deliver strong margins even through this dynamic period of 2025 . And as we get into 2026 , we'll give you some guidance in the in January and we think that it long term looks very healthy as we've been saying for a while .
Speaker #5: Understood . My my follow up maybe to put a finer point on on the tariffs . Give us a sense here for how the tariff picture has changed for you .
Speaker #5: Maybe quantify the cost and then , you know , as you think about next year . And again , I'm not asking for guidance .
Speaker #5: I'm just asking for your strategy . How do you think you'll you'll be able to mitigate these tariffs , if any at all .
Speaker #5: Thanks . .
Speaker #4: Good morning, MiG. So, tariffs for this year are kind of $30 to $40 million, which is what we see for the full year.
Speaker #4: Most of that being in the fourth quarter . So we would estimate to be about 20 to $30 million in the in the fourth quarter .
Speaker #4: Obviously , as you look into 2026 , you'd project a full year impact as that , as those are implemented and feathered in what you don't see in the fourth quarter is the pricing .
Speaker #4: John talked about , and you highlighted in your questions . So there'd be some pricing that would occur in 2026 against that . So that's how I'd think about for next year .
Speaker #4: And how are they kind of feathered in this year .
Speaker #7: Thanks , Meg .
Speaker #1: The next question comes from Steve Volkmann with Jefferies . Please proceed . Stephen , your line is loud .
Speaker #4: Are you .
Speaker #8: On mute ? Sorry about that . Yeah , I'm still I'm still kind of new at this , so I'm figuring it all out as I go .
Speaker #6: We we .
Speaker #8: So the the follow on just to Meg's question , actually . Is it reasonable to think that you can offset this tariff headwind during 2026 ?
Speaker #8: Is that sort of the plan, or will it take longer?
Speaker #6: Hi , Steve . So as we've .
Speaker #4: Talked about on prior calls , you know , our approach to tariffs is really multifaceted . First , it's negotiating the supply chain .
Speaker #4: Second , it's what we call tariff engineering . And that can come in many forms . And that could be sourcing . It could be , you know how we import .
Speaker #4: It could be the classification, as we've run into 232 and other classifications. We look strongly at each part. We bring in and make sure it's classified in the right way so that we get the right tariff treatment.
Speaker #4: And then only then do we start talking about pricing . So it would be preliminary for me to speculate on on how much would be would be offset next year , but certainly the goal is we mitigate as much as we can on the cost side , and then we look at what pricing we need to discuss with our customers .
Speaker #4: John, is there anything you want to add?
Speaker #3: I just want to make a point to say that we do a lot. We've got a lot of really great work happening with our teams and supply chain.
Speaker #3: First and foremost, there's engineering and manufacturing teams. We do a lot of work to offset the impact of tariffs, and we've had a lot of success doing that.
Speaker #3: Our M.O. , when we look at tariffs is we want to we want to absolutely minimize the impact of tariffs on our customers .
Speaker #3: That's our first goal . Minimize the impact to the customer . And we'll we've been pretty good at doing that . Now you can't you can't mitigate everything .
Speaker #3: So that's why I said in my prepared remarks that there'll be some price increase in 2026. We believe that the landscape will be calmed down enough to be able to assess what any price increase needs to be. But our M.O.
Speaker #3: is to get through this without impacting customers very much.
Speaker #8: Got it . Thank you . And then if my math is right , I think you're sort of implied incremental margins for vocational in the fourth quarter .
Speaker #8: Like 40% , which is obviously impressive , especially with tariffs . How should we think about that going forward ? Is that a reasonable assumption for for a while , or is that something special ?
Speaker #4: So, yeah, for the fourth quarter, the math would imply exactly as you said, about a 40% incremental for the year.
Speaker #4: Our guidance is about 30 , 33% actually . So , you know , it's really impacted this year as higher production throughput , higher volume .
Speaker #4: We've had a good mix with with strong sales in airport products . Again , it'd be preliminary for me to speculate what the Incrementals are .
Speaker #4: Our 2020 guidance, which we provided in June, would be a little lighter than that on an annualized basis, but certainly strong results out of vocational.
Speaker #4: Thanks for highlighting . .
Speaker #8: All right . Thanks .
Speaker #1: The next question comes from Jamie Cook with Truist Securities . Please proceed .
Speaker #9: Hi . Good morning . I guess just two questions . One , John , as you think about the competitive landscape within access to equipment in some of the market share that you've seen between you and your peers , do you feel like with section 232 , when tariffs like , are you in a position to gain share just based on your manufacturing footprint , relative to some of your peers ?
Speaker #9: And then my second question , if you could just quantify or talk through more , some of the discounting that you noticed , you know , in the access market , quantify it and to what degree , given the tariffs situation , you know , you know , does this ease I guess thanks .
Speaker #3: Yeah , sure . So I'll thanks , Jamie , for the question on the on the in the access equipment world . You know , what we're doing is we're executing what we call a local for local strategy .
Speaker #3: Now we've all always been predominantly a footprint of us , manufacturing for us sales in the US and our access business . So that's good .
Speaker #3: We started with a strong position . We're continuing to execute that and do more and more of that , particularly in the US , but also in Europe .
Speaker #3: That that kind of overarching strategy allows us to manage the tariff landscape is best we can and minimize the costs that it that we incur .
Speaker #3: So , yes , we think that that helps us a lot versus the competitive environment , particularly against competitors that are outside the United States .
Speaker #3: For sure . But JLG is is the leading brand in the industry . We've got fantastic innovations that continue to come to market .
Speaker #3: You know , our intent is to continue to focus on our customers . How can we drive improvement for them , and that ultimately is what what drives long term share .
Speaker #3: And that's what we're we're intently focused on . So yeah , that's what I can tell you about that .
Speaker #4: So and Jamie , just to your second question on the follow on . So the team practices very disciplined pricing . You've seen that in prior cycles .
Speaker #4: You've seen it prior quarters . That's also supported by a strong service network . And that in the end results in a very strong residual on our JLG equipment .
Speaker #4: And that's important for rental customers . And so what you saw in the quarter is about a 3 to 4% all in discount level , which we think is very reasonable given given the external environment we have .
Speaker #4: Obviously , we've not gotten into pricing for for tariffs in the third quarter with the limited impact , and that'll really be a factor in 2026 versus 2025 .
Speaker #9: Thank you .
Speaker #7: Thanks , Jamie .
Speaker #1: The next question comes from Tammy Jakaria with J.P. Morgan. Please proceed.
Speaker #10: Hi . Good morning . Thank you so much . Question from me on the warranty costs , which seem to be an item headwind in the quarter .
Speaker #10: Are you able to elaborate on that driving it and how to think about it for the rest of the year ?
Speaker #4: Hi , Tammy . So that's really a one time item we had in the third quarter . As we're working through the the units that we've built , specifically in the defense sector for vehicles in the kind of supply chain shortages , 2122 we identified issues that we need to repair as we built with kind of interim parts and so forth .
Speaker #4: So , so we took that charge in the third quarter . We we think that's behind us .
Speaker #3: Yeah . Tammy , I want to just emphasize that's a core defense product . It's not the postal vehicle . It's core defense .
Speaker #3: We are a quality focused company . We're known in the Department of Defense for quality . When we see that we have an issue , we wrap it up and we address it as quickly as we can with the customer .
Speaker #3: Again , as Matt said , this is this is not a this is not an ongoing issue to expect going forward .
Speaker #10: Understood . That's very helpful . And one question on access , I remember I think earlier in the year you talked about taking some pricing , doing some price investments .
Speaker #10: Did that... is that still the case? Do you expect that to continue through the rest of the year, or has anything changed there?
Speaker #7: Okay .
Speaker #3: Clarify that . Tammy I'm not sure if I if I got exactly what you were referring to .
Speaker #10: So so my question is on access , pricing , Ariel's pricing for the year , the way it's playing out , do you .
Speaker #10: Expect positive pricing this year as some types have come in or are you going back to your customers and giving some discounts ? So any comments on pricing and how that's trending in the access segment ?
Speaker #3: Go ahead . Matt .
Speaker #4: Yeah , thanks for the clarification . So as I just mentioned this year , really given the weakness we see in external demand , we've seen a negative pricing environment and access .
Speaker #4: Obviously, with tariffs hitting in the latter part of this year and mainly next year, we will be looking at a different pricing environment into 2026.
Speaker #10: Understood . Thank you .
Speaker #11: Thank you .
Speaker #1: The next question comes from Mike D.A. Davidson . Please proceed .
Speaker #12: Hey guys . Good morning . In access , it seems like a lot of the clients taking just taking a little bit deeper into the numbers .
Speaker #12: A lot of the clients that third quarter came from Telehandlers . It was down like , I think a little over 40% . And on the on the sales line , and you're actually getting capacity there .
Speaker #12: Just take just the access discussion one step deeper and just tell us a little bit about how that's going , what's happening . There compared to the core areas .
Speaker #3: Yeah , the the difference is Cat , you know , we've talked about it for a few quarters that we've had a long term agreement with Cat that agreement is no longer in place .
Speaker #3: And that's the primary reason you see the change in Telehandlers . Our the JLG telehandlers , including the Skytrac models , they're they're doing they're doing great .
Speaker #3: They're not losing share . They're . And then you look at the aerials , you know , we're in a situation where , hey , the market is down because of non-residential construction being down .
Speaker #3: But this is a you know , it's a it's a , a temporary phenomena . And long term we see very strong health in the market .
Speaker #3: And we're really pleased with how we're able to perform with resilience during, you know, you see in Q3 for our revenue and access equipment is down nearly 19%.
Speaker #3: And we're at , you know , healthy double digit margins . That's exactly the way we expect to operate . And that's what we're doing .
Speaker #3: And we'll continue through this . And the market will grow as we go forward .
Speaker #12: Great stuff . Thanks for that , John . And then just talking about peers , real quick . Have you seen any impact over the last few weeks at peers from the federal government shutdown , especially any local effects on any firefighter assistance grants or other state , local government assistance that the that the federal government provides to fire departments ?
Speaker #4: Hey , Mike , it's Matt . So in terms of federal government shutdown in the near term , we've not really seen a material impact .
Speaker #4: If it extends much longer or significantly longer , I guess , you know , we may have some contracts affected as we do sell directly to the government in some cases .
Speaker #4: You know , think about our products . And so forth . So there would be some knock on effects if this extends for an extended extended time , you know , not huge numbers , but certainly , you know , something that that I would watch for .
Speaker #12: Thanks .
Speaker #7: Thanks , Mike .
Speaker #1: The next question comes from Kyle Minguez with Citigroup . Please proceed .
Speaker #13: Thank you . I think Gdv sales of 146 million in the quarter was a little bit below your expectation , and sounds like fourth quarter going to be a little lower than initially expected .
Speaker #13: So just curious what's driving that . What have been some of the challenges and increasing capacity and then don't want to put words in your mouth , but got the sense from the prepared remarks .
Speaker #13: You know , perhaps a walk back of the the earlier guidance to get to annualized full run rate production of , I think , 16 to 20,000 units by year end .
Speaker #13: Is that still feasible in your mind ? Yeah , we'd just love to hear an update on that . Thank you .
Speaker #3: Yeah , I'll start with the 16 to 20,000 units is an annualized number . And so let me from the top I'm going to start with talking about the product .
Speaker #3: The Gdv or the new postal vehicles . An amazing product . The feedback that we continue to receive with now over 4 million miles driven in delivery operations by postal carriers , is really positive .
Speaker #3: We, as I said on the call in my prepared remarks, this is a brand new plant with a brand new product and highly automated processes.
Speaker #3: It's a fantastic plant . We have made progress . You can see the revenue growing there , but not to date at the pace that we want it to be at .
Speaker #3: So we're working really hard . We've got great people in place that are working on continuing to drive production increases until we get to full rate production .
Speaker #3: We expect to grow revenue sequentially and believe we will exit 2025 in a good position to support our plans for the United States Postal Service and a really strong 2026 .
Speaker #3: So that's kind of the state of the program . But for you .
Speaker #13: Got it . And just just curious , I guess when when you would expect maybe now to hit that full annualized run rate production and then yeah , my follow up was just going to be on the lowered CapEx guide .
Speaker #13: Looks like you brought it down 50 million . So curious what drove that .
Speaker #3: Yeah . So I'll try I'll start by the the full rate production . We continue to target full rate production by the end of this year .
Speaker #3: I want to say that's not without challenges of course . As I just mentioned previously , we have constant communication with the United States Postal Service to the highest levels .
Speaker #3: We're doing everything we can , but our our plans are to get to full rate production by the end of the year . Matt , do you want to talk about the $0.50 ?
Speaker #4: Yeah . The the reduction in CapEx reflects twofold . One , stricter spending controls in this environment . But then two , just timing and spending .
Speaker #13: Got it .
Speaker #7: Thank you . Thanks , Kyle .
Speaker #1: Thank you . Our next question comes from Angel Castillo with Morgan Stanley . Please proceed .
Speaker #14: Hi . Good morning and thanks for taking my question . Just wanted to go back to some of the discussion around access . Could you just clarify , I guess is the greater cautiousness that you talked about , you know , from your customers reflecting itself purely in just kind of the the low ordering or the low book to bill this quarter ?
Speaker #14: Or are you seeing any kind of order cancellations or delivery push outs here ? And just if you could add a little bit more color as part of that , you know , kind of how the behavior maybe differs between the nationals and independents ?
Speaker #3: Yeah . So first , Angel , thanks for the question . You know , we had a 0.6 book to Bill . That's a normal a normal book to bill for a third quarter .
Speaker #3: If you look historically , you know that said , the market's been a little bit softer compared to last year . As I already mentioned , I want to emphasize that end market demand in this here is is healthy .
Speaker #3: You know , the equipment utilization is healthy in the market used market is healthy . That's all really good signs . You know what we're seeing in the dynamic market with continuously shifting tariffs prolonged higher interest rates .
Speaker #3: That's caused a lot of customers to say , hey , the market's healthy . But I just in the very near term , I'm just going to kind of hold back on my CapEx until I get a little bit more clarity as to how this is going to evolve .
Speaker #3: See , the fed continue to drop rates , things like that , that that's really what we feel is happening in the market .
Speaker #14: That's helpful . Thank you . And maybe just a related to that , you know I know it's still early for fiscal year 26 .
Speaker #14: And a lot of moving pieces here . But given you know just your your ongoing kind of discussions with customers , whether on kind of the near-term environment or next year , can you just talk about the magnitude of the price increases that are currently being discussed for for next year and whether that kicks in kind of January 1st ?
Speaker #14: And just kind of overall , you know , discussion of those negotiations , because I guess , if I'm not mistaken , on the discounting part , it seems like discounting may have stepped up from 2 to 3% to 3 to 4% .
Speaker #14: So if you could just kind of help us understand , perhaps the trajectory of that versus the kind of increases expected in Jan one ?
Speaker #4: Yeah , I'd be preliminary to talk about pricing for 2026 on the quarterly basis . It's really what you see . There is some seasonality in how we go to market .
Speaker #7: Thanks , Angel .
Speaker #15: Thank you .
Speaker #1: Thank you . The next question comes from Tim Stein with Raymond James . Please proceed with your question .
Speaker #16: Great . Thank you . Good morning . Just lots of dialogue here on access . But maybe I'll ask yet another one . Just with respect to your expectations , John , for order activity here in the fourth quarter and and and specifically maybe the composition would imagine more more of the your NRC's are the ones that take up the order slots in the fourth quarter that are booking orders rather .
Speaker #16: But maybe just any kind of guardrails as to how you're thinking and and maybe how the initial discussions have shaped up just with respect to , you know , how we should be thinking about order activity .
Speaker #16: I see that that'll be important as to how we think about 26 . So maybe I'll start with that one . And then part B of the question is just on the the vocational segment and just on fire and emergency .
Speaker #16: Obviously that's a big part of the the nice margin improvement that you have lined up into that 2028 target . And you talked earlier about more stock units and the build my peers .
Speaker #16: Does that have any implications we should think about from a product mix standpoint? So that's the two long questions. Thank you.
Speaker #7: Yeah .
Speaker #3: So one on access , one on one on the fire industry . And our fire truck business Pierce start on access I mean you kind of hit the nail on the head Tim .
Speaker #3: The reason that we went from an $11 guide to a 1050 to $11 guide is primarily orders in the fourth quarter for access .
Speaker #3: And when I say orders in the fourth quarter for access , I'm talking about orders in the fourth quarter for delivery in the fourth quarter .
Speaker #3: And right now it's you know , it's in terms of how much equipment our customers I'm talking from the thousands of independents to the big guys are going to take in the fourth quarter .
Speaker #3: That's why there's a bit of a range there from 1050 to 11 . You know , it's as we expect we'll be around 11 bucks if it's , you know , they're not going to take quite as much equipment in the fourth quarter .
Speaker #3: Then that then it could come down a little bit with regard . But hey , I want to continue to emphasize how well our people at Access Equipment and JLG are performing in this very dynamic market .
Speaker #3: You know , we're performing extremely well . We'll continue to do that in this environment . But again , we see nice growth on the horizon ahead of us .
Speaker #3: As we've talked about through the year on the on our Pierce business , the fire truck business , we're continuing to get improved output .
Speaker #3: We'll continue to get improved output as we go forward the next few years . That will continue to draw the back down . The build .
Speaker #3: My Pierce and more of the off the shelf fire trucks are great products . We don't see a specific margin differential between whether or not we're we're shipping build my Pierce units or we're building our fully customized units .
Speaker #16: Thank you .
Speaker #1: The next question comes from Steve Berger with KeyBanc . Please proceed with your question .
Speaker #17: Good morning . This is actually Christian on for Steve Barger . This is a follow up . Maybe to Tim's first question on access .
Speaker #17: I heard your comments about the near term uncertainty . Your customers are facing . Just historically for CU is a big sequential order quarter for access as your customers plan for the next year .
Speaker #17: So do you still see a normal step up for in for Q or is that more of a . Thank you ?
Speaker #3: Yeah, thanks for the question. Sure. I mean, what's really differentiating us in the market today is our technological capability as well as our quality.
Speaker #3: We've got a really strong quality and service reputation . So so they know what they get when we supply them with with wheeled vehicles .
Speaker #3: But going forward , as I talked to my prepared remarks , it's a lot about things like autonomous functionality or full autonomy . And that's why you see a lot of our products moving that way with the technology that we have .
Speaker #3: And that's kind of what we see as the future of this . And it's why we're a why we stand out in that industry .
Speaker #3: Is that reliability and the technological performance and capabilities of our vehicles that get better and better and better as we go forward .
Speaker #7: Thanks , Christian .
Speaker #1: Thank you . Our next question comes from David Russell with Evercore . Please proceed .
Speaker #18: Hi. Thank you. Of the defense revenue cut by $200 million, how much of that was the postal truck?
Speaker #4: It was all on the delivery side . David .
Speaker #3: All of it ? Yeah .
Speaker #18: And when it comes to that , is that the ramp up of the Bev truck that's giving you a little bit of , you know , struggle to ramp up , or is it the ice truck as .
Speaker #3: Well ? It's it , it , it's unrelated to ice . And Bev . David . It's the , the vehicles are produced on the same line .
Speaker #3: It's just continuing to dial in all of the autonomous functionality of this manufacturing plant . And it's normal ramp up . Challenges that we're addressing .
Speaker #3: And we will get to full rate production . But it's not related to Ice and Bev .
Speaker #18: Just so I know how much this you feel is under your control , because 35 to 40% of the Ebit cut actually came from defense .
Speaker #18: And that program is hugely significant next year for driving defense profits to take , say , take a little pressure off access . So it's not immaterial .
Speaker #18: I think most people feel vocational . That backlog should carry you , but that interplay between transport , defense and access is not immaterial .
Speaker #18: So be a little clearer on when do you feel you'll have the ability to ramp that ? You know , I was looking for revenues getting close to 300 million a quarter at some point , not too far in the future .
Speaker #18: So, I apologize to push a little bit, but just a little more clarity. It's very important for Q3 2025.
Speaker #4: That's fine David . So so just on the oh I remember the warranty charge we took in the third quarter , which was about $13 million .
Speaker #4: That's flowing into O-i for the full year . We did fully expect the the licensing , which was in our guidance . The warranty , however , would flow through to O-i .
Speaker #4: So you shouldn't look at the top line change in revenue as the full impact on O-i .
Speaker #18: Okay, the licensing was in the guide. Okay. Thank you.
Speaker #7: Yeah it was .
Speaker #4: We we were expecting that that was under negotiation . We set up our guidance for the year previously .
Speaker #3: And and David I will just say your expectation for quarterly revenue on the on the delivery side is is is in line with ours .
Speaker #18: Okay . That's important . All right . I appreciate it . Thank you .
Speaker #7: Thanks , David .
Speaker #1: Thank you . At this time I would like to turn the call back over to Mr. Patrick Davidson for closing comments .
Speaker #7: Thank you .
Speaker #2: And thanks for joining us today . We'll be meeting with investors at several conferences during the fourth quarter in Chicago , Florida and New York .
Speaker #2: We'd be happy to connect in an early January . We'll be showcasing our technology at annual CES show in Las Vegas . We encourage you to stop by our booth and learn about technology that supports airports .
Speaker #2: Job sites and neighborhoods of the future. Take care, everyone, and have a great rest of the day.
Speaker #1: Thank you . This does conclude today's teleconference . You may disconnect your lines at this time . Thank you for your participation and have a great day .