Q2 2025 Terex Corp Earnings Call

Derek Everitt: Greetings and welcome to the TEREX 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. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Derek Everett, Vice President, Investor Relations.

Derek Everitt: Good morning and welcome to the TEREX second quarter 2025 earnings conference call. A copy of the press release and presentation slides are posted on our Investor Relations website at investors.terex.com. In addition, the replay and slide presentation will be available on our website. We are joined today by Simon Meester, President and Chief Executive Officer, and Jennifer Kong, Senior Vice President and Chief Financial Officer. Their prepared remarks will be followed by a Q&A. Please turn to slide two of the presentation, which reflects our safe harbor statement. Today's conference call contains forward-looking statements, which are subject to risks that could cause actual results to be materially different from those expressed or implied. These risks are described in detail in the earnings material and in our reports filed with the FCC.

Greetings and welcome to the tracks second quarter in 2075 results conference call at this time, all participants are in a listen on the mode. A brief question and answer session will follow the formal presentation. As a reminder, this conference is being recorded, it is now my pleasure to introduce your host Derek Everett vice president, investor relations.

Good morning and welcome to the TK's. Second quarter 2025 earnings conference. Call a copy of the press release. The presentation slides are posted on our investor relations website at investors. Tex.com in addition. The replay and slide presentation will be available on our website.

We are joined today by Simon Lester president and chief executive officer and Jennifer Kong senior vice president and Chief Financial Officer.

They're prepared remarks will be followed by a Q&A.

Please turn the slide to the presentation which reflects our Safe Harbor statement.

Today's conference call contains forward-looking statements that are subject to risks that could cause actual results to be materially different from those expressed or implied.

Derek Everitt: On this call, we will be discussing non-GAAP financial information, including adjusted figures that we believe are useful in evaluating the company's operating performance. Reconciliations for these non-GAAP measures can be found in the conference call materials. Please turn to slide three, and I'll turn it over to Simon Meester.

These risks are described in detail in the earnings material and in our reports filed with the FCC.

On this call, we will be discussing non-gaap financial information including adjusted figures that we believe are useful in evaluating the company's operating performance.

Reconciliations for these non-gaap measures can be found in the conference call materials.

Simon Meester: Thanks, Derek, and good morning. I would like to welcome everyone to our earnings call and appreciate your interest in TEREX. I want to start by thanking our global team for their continued focus on our customers and our operational performance while navigating through a very dynamic environment. Some of our businesses have more tailwinds or headwinds than others, but our overall performance in the second quarter was in line with expectations. We delivered earnings per share of $1.49 on sales of $1.5 billion with an operating margin of 11%. In addition, we achieved $78 million in free cash flow, a significant increase compared to this time last year, representing a cash conversion of 108%. The power of our evolving portfolio was evident in the quarter, as strong performance in environmental solutions offset industry-wide headwinds in aerials. Materials processing executed well, delivering strong sequential growth and margin improvement.

Please turn the slide 3 and I'll turn it over to Simon Mester.

Thanks Derek and good morning. I would like to welcome everyone to our earnings call and appreciate your interest in ter. I want to start by thanking our Global team for their continued. Focus on our customers and our operational performance while navigating through a very Dynamic environment.

Some of our businesses have more Tailwinds or headwinds than others, but our overall performance. In the second quarter was in line with expectations.

We deliver earnings per share of 1.49 on sales of 1.5 billion dollars with an operating margin of 11%.

In addition, we achieved 78 million in free cash flow. A significant increase compared to this time last year. Representing a cash conversion of 108%.

The power of our evolving portfolio was evident in the quarter, as strong performance in Environmental Solutions offset industry-wide headwinds in Aerials.

Simon Meester: Looking ahead, we are maintaining our full-year EPS outlook of $4.70 to $5.10. We expect stronger ES performance in the second half compared to our previous outlook, as both ESG and TEREX utilities are well positioned with healthy backlog, operational momentum, and synergies ramping up ahead of schedule. We are assuming independent rental customers will remain cautious with their CAPEX deployment, impacting the sales mix and margin outlook for aerials, while we continue to expect NFE to improve margins in the second half compared with the first half of 2025. With respect to tariffs, we fully understand that things change quickly, and it is difficult to predict where final rates will eventually end up. Our outlook assumes that tariffs broadly remain at current rates and reasonable deals are made with key countries. To that point, let's move to slide four to discuss that in a bit more detail.

Materials processing executed, well, delivering strong sequential growth and margin Improvement.

We expect stronger es performance in the second half compared to our previous Outlook as both ESG, and tariff utilities are well, positioned with healthy backlog.

Operational momentum and synergies are ramping up ahead of schedule.

We are assuming independent. Rental customers will remain cautious with their capex deployment impacting, the sales, mix and margin outlook for Aerials while we continue to expand. MP to improve margins in the second half compared with the first half of 2025.

With respect to tariffs, we fully understand that things change quickly and it is difficult to predict where final rates will eventually end up.

Our Outlook assumes. That tariffs, broadly remain at current rates and reasonable deals are made with key countries.

Simon Meester: As we communicated last quarter, we are well positioned from a manufacturing footprint standpoint, as about 75% of our 2025 US machine sales are expected to be generated by products that we produce in at least one of our 11 US manufacturing facilities. Environmental Solutions' full line of refuse collection vehicles, utility vehicles, compactors, and digital solutions are all designed and made in America. Genie manufactures the vast majority of the boons and scissors sold in the US in Washington State, representing about 70% of its US sales. Pella Handlers, manufactured in Monterrey, Mexico, totaling approximately 20% of its US sales, qualify under the US MCA exemption. Approximately 40% of MP's 2025 US sales, including cement mixers and certain environmental and aggregate products, are also made in the United States. Our primary aggregate product lines are produced in Northern Ireland, which is part of the United Kingdom.

To that point. Let's move to slide 4 to discuss that in a bit more detail.

As we communicated last quarter, we are well, positioned from a manufacturing footprint standpoint as about 75% of our 2025 us machine, sales are expected to be generated by products that we produce in, at least 1 of our 11 us manufacturing facilities.

Environmental Solutions, full line of refugees collection Vehicles, utility vehicles, compactors and digital Solutions are all designed and made in America.

Genie manufacturers. The vast majority of the booms and scissors salt in the US in Washington state representing about 70% of its Us sales

Manufactured in Monterey Mexico totalling, approximately 20% of its Us sales qualify on the US MCA exemption.

Approximately 40% of MPS 2025 U.S. sales, including cement mixers and certain environmental and aggregate products, are also made in the United States.

Simon Meester: As we anticipated, the UK reached agreement on the 10% tariff rate, consistent with our previous outlook. Approximately 85% of MP's 2025 US sales are generated by products made in the US or the UK. Cranes and material handlers are manufactured in the European Union and represent less than 10% of MP's US sales. Like other industrial companies, we have a global supply base and are exposed to tariffs, mostly on imported material. We are working closely with our suppliers and executing our mitigation strategy, but we are seeing direct and indirect tariff-related inflation on materials. Based on our current outlook, we estimate the overall net impact of tariffs to be roughly $0.50 for the full year, which includes the recently announced 15% reciprocal tariff on the European Union. We will continue to follow the ongoing trade negotiations for all of our key markets.

Our primary Aggregates product lines are produced in Northern Ireland, which is part of the United Kingdom. As we anticipated, the UK reached agreement on the 10% tariff rate consistent with our previous Outlook.

Approximately 85% of MPS 2025 Us sales are generated by products made in the US or the UK.

Screens and material handlers are manufactured in the European Union and represent less than 10% of Mech, Us sales like other industrial companies. We have a Global Supply base and are exposed to tears mostly on import of material.

We are working closely with our suppliers and executing our mitigation strategy, but we are seeing direct and indirect pair of related inflation on materials.

Based on our current Outlook, we estimate the overall, net impact of tariffs to be roughly, 50 cents for the full year, which includes the recently announced 15% reciprocal tariff on the European Union.

Simon Meester: Moving to page five, macro cross-currents are impacting end-market demand and channel dynamics. We view the Big Beautiful Bill as largely positive, as key provisions, particularly the reinstatement of 100% bonus depreciation, to be supportive of equipment demand and increased US industrial activity. Moreover, the bill includes new bonus depreciation for qualified production property, which marks the first time that newly constructed non-residential real estate can benefit from 100% bonus depreciation, which we believe will support increased US manufacturing CAPEX. The bill also includes significant allocations to construction spending, particularly for border infrastructure and defense. Coming counter to these policy tailwinds are persistently high interest rates and tariff-related uncertainty that continue to impact capital decisions in certain areas. A building strength of the TEREX portfolio is the diversification of our end markets.

We will continue to follow the ongoing trade negotiations, for all of our key markets.

Moving to page 5.

Macro cross currents are impacting in market demand and channel Dynamics. We view the big, beautiful bill, as largely positive. As key Provisions, particularly the reinstatement of 100% bonus depreciation to be supportive of equipment, demand and increase us industrial activity.

Moreover, the bill includes new bonus depreciation for qualified production property, which marks the first time that newly constructed non-residential real estate can benefit from 100% bonus depreciation, which we believe will support increased us Manufacturing capex.

The bill also includes significant allocations to construction spending, particularly for Border, infrastructure, and defense.

Running counter to these policy Tailwinds are persistently High interest rates and tariff related uncertainty that continue to impact Capital decisions in certain areas.

Simon Meester: Waste and recycling now represents approximately 30% of our global revenue and is characterized by low cyclicality and steady growth. Utilities is about 10% and growing due to the need to expand and strengthen the power grid. About 15% of our business is related to infrastructure, where significant investments are being made in the United States and around the world. These three markets, representing more than half of our revenue, are highly resilient and less exposed to macroeconomic or geopolitical dynamics. General construction, which in the past had represented the majority of our end markets, is now less than a third. On balance, we continue to see a two-speed profile in US construction, with strength in large projects and infrastructure and softness in local private projects persisting through the second half of 2025.

A building strength of the Terex portfolio is the diversification of our end markets. Waste and recycling now represents approximately 30% of our global revenue and is characterized by low cyclicality and steady growth.

Utilities is about 10% and growing due to the need to expend and strengthen the power grid.

These 3 markets representing more than half of our Revenue are highly resilient and less exposed to macroeconomic or geopolitical Dynamics.

General construction. Which in the past had represented the majority of our end markets is now less than a third.

Simon Meester: Earnings a year, we are seeing a generally weak economic and construction environment in the near term, with a more encouraging outlook for infrastructure and industrial-related spending growth in the medium to longer term. We're also encouraged by increasing adoption of our products in emerging markets such as India, Southeast Asia, the Middle East, and Latin America. Turning to slide six, around this time last year, when we announced the ESG acquisition, we started to communicate the opportunity to unlock increasing synergies across TEREX. I'm pleased to report that we are running well ahead of our initial targets and are finding more opportunities for leverage across our portfolio of businesses. A great example of creating synergy value is extending the capabilities of ESG's third-eye digital platform to advanced mixer and TEREX utilities.

On balance, we continue to see a 2-speed profile in U.S. construction, with strength in large projects and infrastructure and softness in local private projects persisting through the second half of 2025.

Referring to Europe, we are seeing a generally weak economic and construction environment in the near term, with a more encouraging outlook for infrastructure and industrial-related spending growth in the medium to longer term.

We're also encouraged by increasing adoption of our products in Emerging Markets, such as India, southeast Asia, the Middle East and Latin America.

Turning to slide 6 around this time. Last year when we announced the EOC acquisition, we started to communicate the opportunity to unlock increasing synergies across Terra

I'm pleased to report that we are running well ahead of our initial targets and are finding more opportunities to leverage across our portfolio of businesses.

Simon Meester: In the second quarter, we launched modules that provide vehicle operators enhanced situational awareness for better maneuverability and safety. The system also provides fleet operators real-time visibility into driver performance, chassis and body activity, and equipment status, which reduces operating and liability costs. Third Eye generates an important and growing subscription or software as a service-based revenue stream for ESG, and we're excited about the prospects for new digital revenue streams across the TEREX portfolio. The middle picture is a TEREX utilities high-ranger bucket truck, which was part of a significant order we received through a historical ESG customer. Relationships matter, and this recent order is a great example of how strong customer relationships in one area can open doors for other parts of the business.

A great example of creating Synergy value is extending the capabilities of esg's. Third eye digital platform to advance mixer and pair of utilities.

In the second quarter, we launched modules that provide vehicle operators. Enhanced situational awareness for betterment of ability and safety.

The system also provides Fleet operators real-time visibility into driver performance chassis and body activity and Equipment status which reduces operating and liability costs.

Third eye, generates an important and growing subscription for software as a service based Revenue stream for ESG and we're excited about the prospects for new digital revenue streams across the tariffs portfolio.

The middle picture is a terrific utility high-range or bucket truck, which was part of a significant order we received through a historical ESG customer.

Simon Meester: As a result, TEREX utilities is building 80 plus bucket trucks and bigger TEREX for a customer that was not in their previous sales plan. We will continue to explore incremental opportunities as we leverage relationships and channels across the group. Finally, the sourcing savings are starting to build up as well, helping offset tariff and inflationary pressure. So far, the teams have leveraged our increased scale to secure better rates and terms in categories such as steel fabrications, hardware, consumables, and transportation. There's more opportunity ahead as we systematically work through all areas of our bill of materials. Overall, I'm very pleased with the work of our integration teams and look forward to unlocking considerably more synergies going forward. And with that, I'll turn it over to Jen.

Relationships matter. And this recent order is a great example of how strong customer relationships in 1 area, can open doors for other parts of the business.

As a result, their utilities division is building over 80 bucket trucks and digger derricks for a customer that was not in their previous sales plan.

We will continue to explore incremental opportunities as we leverage relationships and channels across the group.

Finally, the sourcing savings are starting to build up as well. Helping offset tariff and inflationary pressure so far, the teams have leveraged our increased scale to secure better rates and terms in categories such as steel fabrications, hardware, consumables, and transportation.

There's more opportunity to add as we systematically work through all areas of our bill of materials.

Overall, I'm very pleased with the work of our integration teams and look forward to unlocking conservatively more synergies going forward.

Jennifer Kong: Thank you, Simon, and good morning, everyone. Let's look at our Q2 financial results on slide seven. Our overall performance in the quarter was in line with our expectations, despite tight monetary policies, changing trade policies, and geopolitical tensions. This is a testament to the strength of the TEREX portfolio that has been phased by aerials, while offset by ongoing strong performance in environmental solutions, supported by NFE delivering on the planned sequential improvement. Total net sales of 1.5 billion grew 8% year over year, or 7% of constant exchange rate. Excluding ESG, our legacy sales declined by 12%, or 13% excluding the impact of FX, consistent with our expectations. Our operating margin was 11%, down 310 basis points year over year, consistent with our planned sequential improvement of 190 basis points. Stronger ES margins offset lower than expected margins in aerial.

And with that, I'll turn it over to Jen.

Thank you, Simon. Thank you. Good morning, everyone. Let's look it. Up to you to financial results on slide 7.

Our overall performance in the quarter was in line with our expectations, despite tight, monetary policies changing trade policies and geopolitical tensions.

This is a testament to the strength of the tariffs portfolio that hate wins based by Ariel will offset by ongoing strong performance, and Environmental Solutions, supported by AI, delivering on the plan. Sequential improvements.

Total net sales of 1.5 billion grew 8% year-over-year or 7% at constant exchange rate.

Including EOC our Legacy sales declined by 12%, or 30%, excluding the impact of effects.

Consistent with our expectations.

Our operating margin was 11% down. 310 basis points, year-over-year. Consistent with our plan. Sequential improvements of 190 basis points.

Jennifer Kong: Excluding ESG, legacy operating margin declined by 560 basis points, driven by volume, tariffs, and NAICS, partially offset by FG&A reduction. Interest on other expenses were $44 million, $29 million higher than last year due to interest on ESG acquisition financing. The second quarter effective tax rate was 18.3%, about 170 basis points better than planned due to net favorable discrete items rebounding from utilization of certain non-US tax attributes. EPS for the quarter was $1.49, which includes a 3% benefit from the favorable tax rate. EBITDA was $182 million, or 12.2% of sales. We generated $78 million of free cash flow in Q2, which was $35 million better than last year, despite lower earnings due to better working capital performance. ESG generated cash well above the interest expense associated with the acquisition financing.

Stronger EF margins offset, lower than expected, margins and areas.

Excluding ERG Legacy operating margin declined by 560 basis points driven by volume, carrots and mix.

This is an other expenses with 44 million.

29 million higher than last year due to interest on ESG acquisition financing.

The second quarter effective tax rate was 18.3%.

About 170 basis points, better than planned due to net. Favorable discrete items resulting from utilization of certain non-us tax Aces

EPS for the quarter was 1.49 cents which includes a 3% benefit from the favorable tax rate.

Evita was 182 million or 12.2% of sales.

We generated 78 million of free cash flow and Q2, which was 35 million better than last year, despite lower earnings, due to better working Capital Performance.

Jennifer Kong: We continue to execute our capital allocation strategy, returning value to shareholders while investing for longer-term organic growth. Please turn to slide eight to review our settlement results, starting with aerials. Sales of $6.07 million were consistent with our expectations in total, but the cuts were made with more heavily weighted to our national customers than we anticipated. Independent rental customers are more exposed to smaller interest rate-sensitive projects compared to the national, who are benefiting from that greater exposure to the larger projects. Aerial operating margin improved 500 basis points sequentially on better manufacturing adoption, but was about 200 basis points lower than we expected, largely because of cuts or NAICS. Turning to slide nine, NFE sales of $454 million were 9% lower than last year, but in line with our expected step up from Q1.

PSG generated a cash. Well above the entrance expense associated with the acquisition financing.

We continue to execute our Capital allocation strategy returning value to shareholders, while investing for longer terms organically.

Please turn to slide 8 to review our Fatman Reserve starting with Ariel.

Sales of 607 million work consistent with our expectations in total but the customer makes with more heavily weighted to our national Craftsman than we anticipated.

Independent rental partners are more exposed to smaller interest rate, sensitive products compared to the National for benefiting from that greater exposure to the larger projects.

Alice operating margin improved 500 basis. Points sequentially from better manufacturing absorption, but what about 200 basis points? Lower than we expected largely because of customer needs.

Turning to slight, not.

Jennifer Kong: We continue to see high fleet utilization rates in the United States and deal with broad levels normalized. However, maximum certainty and higher interest rates remain a headwind for rent-to-own conversion, and the European market remains weak, although showing early signs of recovery. NFE generated 12.7% of operating margin in Q2, in line with expectations, as cost controls and pricing actions largely offset tariff impacts. This was a 270 basis points sequential quarter-over-quarter margin improvement from the 10% lower in Q1. Most of the improvement was in the aggregate vertical, while the cranes and handling businesses remain challenging. Please turn to slide ten to review environmental solutions. Our ES segment had another great quarter, generating $430 million sales, with 12.9% year-over-year growth on a pro forma basis and 8% sequential growth versus Q1. The strong growth was driven by increased throughput and delivery of refuse collection vehicles and utilities.

MP sales of 434 million when 9% lower than last year. Bottom line with that expected step up since you want.

We continue to see high speed.

Utilization rates in the United States.

And deal with that level is anomaly.

However, Maxwell uncertainty and high interest rate remain a hate when for rent to own conversions.

A European market remains weak. Although showing early signs of recovery.

MP generated 12.7% of operating margin in future in line with expectations as cost controls and pricing actions. Largely upset, carrots and cuts.

This was a 270 basis, point sequential quarter of a quarter margin improvement from the 10% lower in q1. Most of the Improvement was in the aggregate vertical while the previous and handling businesses remain challenging,

Please turn to select 10 to review Environmental Solutions.

Our EF segment had another great quarter generating 430 million of those with 12.9% year-over-year growth on a profile basis and 8% sequential growth versus q1.

Jennifer Kong: ES delivered a 19.1% operating margin, representing a 230 basis point improvement on a pro forma basis compared to last year. Utilities benefited from positive customer and product mix and improved operational execution. I look forward to consistent strong performance from this segment. Please turn to slide 11. We have strong liquidity and a flexible capital structure with the right mix of secured and unsecured debt and variable versus fixed rate. As stated previously, we can prepay or reprice a significant portion of the debt, and we do not have any maturities until 2029. We ended the second quarter with 1.2 billion of liquidity consistent with our outlook. We plan to deliver in the second half of the year as we generate increased cash flow from the operation. We will also continue to invest in our businesses to fuel organic growth and profitability improvement.

The strong growth was driven by improved through foods and delivery of refused selection to become and utilities.

He has delivered a 19.41% operating margin, representing a 230 basis point improvement on a pro forma basis compared to last year.

Utility benefit from positive customer and product, link and improve operational execution.

I look forward to consistent strong performance from this section.

Please turn to slide 11.

We have strong liquidity and a flexible capital structure with the right mix of secured and unsecured debt and variable versus fixed rate. A state of previously, we can prepay or reprise a significant portion of the debt and we do not have any maturities until 2029.

We ended the second quarter with 1.2 billion of liquidity, consistent with our outputs.

We plan to deliberate in second half of the year as we generate increased cash flow from the operations.

We will also continue to invest in our businesses.

Jennifer Kong: Returning capital to shareholders remains a priority. In the second quarter, we repurchased 21 million of TEREX stocks, increasing our first half total to 53 million. We are also announcing the authorization of a new $150 million share buyback program, with $33 million remaining at the end of Q2 from the previous authorization. The new authorization will provide us flexibility to take advantage of market conditions when appropriate. In addition to the buyback, we paid $11 million in dividends in the quarter. TEREX is in a strong financial position to invest in our business and execute our strategic initiatives while returning capital to shareholders. Turning to bookings and backlog on slide 12. Our bookings trends have returned to normal seasonal patterns, supported by a 19% year-over-year pro forma growth in the quarter. Aerial bookings grew 70% year over year, with a sequential decline consistent with historical seasonality.

Since you were organic growth and profitability improvements.

Returning Capital to shareholders remains a priority.

And the second quarter. We repurchased 21 million of tariff stocks.

Increasing our first half total to 53 million.

From the previous authorization.

The new authorization will provide us flexibility to take advantage of market conditions when appropriate.

In addition to the BuyBacks, we paid 11 million in dividends in the quarter.

Parex is in a strong financial position to invest in our business and execute our strategic initiatives while returning Capital to shareholders.

Turning to bulking and backup on site 12.

Our bookings Trends have returned to normal seasonal patterns supported by a 19% year-over-year, performance growth in the quarter.

Jennifer Kong: Despite the macro uncertainty, NFE bookings grew 24% year over year, driven by aggregate, which saw a positive demand uptake in the United States and India. In environmental solutions, bookings reflect a return to normal seasonal ordering patterns, and the healthy backlog provides strong forward visibility. Our overall TEREX backlog sits at $2.2 billion and supports our second half outlook. Now, turn to slide 13 for our 2025 outlook. We are operating in a complex environment with many macroeconomic variables and geopolitical uncertainty, and results could change negatively or positively. We're maintaining our full-year EPS outlook of $4.70 to $5.10, which now includes $0.50 of net tariffs impact. We continue to expect full-year 2025 sales to drop between $5.3 billion and $5.5 billion, representing between $200 to $400 million higher sales than prior years, due to the acquisition growth of ESG, more than offsetting lower legacy sales.

Our spoken groups increased 7% year-over-year, with a sequential decline consistent with historical seasonality.

Despite the macro uncertainty MP booking group 24%, year-over-year driven by aggregate which saw a positive demand uptake in the United States and India.

In Environmental Solutions. Broken is like a return to normal seasonal, ordering patterns and the healthy background for that strong forward disability.

Our overall parents backlog. Sits at 2.2 billion and supports our second half Atlas.

Now, I'm trying to select 13 for our 2025 Outlook.

We're operating in a complex environment with many macro economic variables and geopolitical uncertainties.

And reach out to change negatively or positively.

We're maintaining our full year EPS Outlook of 4.70 to 5 dollars which now includes 50% of net. Harris impact. We continue to expect 4 years 2025 sales of between 5.33 billion and 5.5 billion.

Jennifer Kong: We continue to expect settlement operating margin of approximately 12%, resulting from stronger ESG margins and planned sequential improvements from NFE, which will help offset second half headwind scenarios, including the impact of tariffs. We now express interest in other expenses of about $170 million and an improved effective tax rate of approximately 17.5% for the full year. From a quarterly perspective, as opposed to our historical cadence, this year, we expect our Q4 EPS to be higher than Q3 due to the ramp-up of tariff mitigation actions and higher Q4 margins at NFE, which more than offset the sequentially lower sales volume in aerial.

Representing between 200 to 400 million highest sales and prior year, due to the acquisition growth of CSG more than offsetting lower Legacy sales.

We continue to expect segment, operating margins of approximately 12, to 10 regarding from stronger years to margins and plant sequential improvements from other people, which will help offset, second half kit, wins and arrows, including the impact of parents

We now expect interest and other expenses all about 170 million and it improves effective tax rate of approximately 17.5% for the full year.

From a quarterly perspective s opposed to our historical Cadence this year, we expect our Q4 EPS to be higher than Q3 due to the ramp up of Paris, mitigation action and higher Q4, margins and MP.

Jennifer Kong: We continue to expect a significant increase in free cash flow compared to 2024 and sustaining between $300 million and $350 million in 2025, driven by working capital reduction and a full year of ESG cash generation, while investing in our businesses with expected CAPEX of approximately $120 million. Looking at our segment, we're maintaining our aerials and NFE sales expectations and increasing our sales outlook for ES. In aerial, we expect full-year sales to be in line with our previous outlook of down below double digits. We also expect the unfavorable customer mix dynamics that we saw in Q2 to persist in the second half. This, coupled with the timing of tariff impacts, will put pressure on aerial margins in the second half.

Which more than offset the sequentially, lower sales volume than ours.

We continue to expect the citizens increase in free cash flow compared to 2024, anticipating between 300 million and 350 million in 2025.

Driven by working capital reductions and a full year of ESG cash generation.

While investing in our businesses with expected capacity of approximately 720 million.

looking at assessments, we're maintaining our hours and MP sales, expectations and increasing our sales outlook for ES

Scenario we expect 2 year sales to be in line with our previous outlooks up down low double digits.

We also expect that unstable customer makes dynamics that we saw in Q2 purchase and the second half.

Jennifer Kong: In NFE, our backlog coverage, as well as the underlying machine utilization rates, parts consumption, and code activity, gives us confidence in our down high single-digit outlook for the year. We expect NFE to achieve full-year debt to net margin well within our 25% target. ES had a great first half, and we expect a strong momentum to continue into the second half. We're increasing our full-year sales outlook again this quarter and are now expecting full-year sales to be at low double digits. We expect margins to moderate slightly in the second half due to customer and product mix. And with that, I'll turn it back to Simon.

Just coupled with the timing of terrorists. Impacts will put pressure on errors. Margins. In the second half.

In mp our backup coverage as well as the underlying machine utilization rates.

Part consumption include activity. Guilt has confidence in our down, high single-digit, outlook for the year.

We expect MP to achieve full year documental margins. Well, within up, 25% Target DX had a great first half and we expect a strong momentum to continue into the second half.

We're increasing our 4 year sales Outlook again this quarter and are now expecting full year sales to be up low double digits.

We expect margins to moderate slightly in the second half due to customer and product names.

Simon Meester: Thanks, Jen. I will now turn to slide 13. TEREX is well positioned to navigate the current dynamic environment and deliver long-term value to our shareholders. We have a strong, more synergistic portfolio of industry-leading businesses across a diverse landscape of industrial segments with attractive end markets. We will continue to improve our through-cycle financial performance as we integrate ESG and realize synergies across the company. As always, I want to close by thanking our team members around the world. We will continue our exciting path forward, building and growing a new TEREX. And with that, I would like to open it up for questions. Operator.

And with that, I'll turn it back to finance.

Thanks Jen. I will now turn to slide. 13 kex is well, positioned to navigate the current Dynamic environment and deliver long-term value to our shareholders.

Of industry-leading businesses across a diverse landscape of industrial segments with attractive markets.

We will continue to improve our through cycle financial performance as we integrate ESG and realize synergies across the company.

As always, I want to close by thanking our team members around the world. We will continue our exciting path forward, building and growing new tariffs.

And with that, I would like to open it up for questions, operator.

Derek Everitt: Thank you. Ladies and gentlemen, we will now begin the question and answer session. If you have dialed in and would like to ask a question, please press star followed by the number one on your telephone keypad. If you would like to withdraw your question, simply press star one again. We kindly ask everyone to limit themselves to one question and one follow-up only to accommodate as many questions as possible. Thank you. Your first question comes from the line of Stephen Balkman with Jefferies. Please go ahead.

Steve Volkmann: Great. Good morning, everybody. Thank you for taking the question. It feels like ES margins especially are the gift that sort of keeps giving, so I wanted to delve into that a little bit. You know, it seems like they've been coming in ahead of your expectations as well as ours, so I'm curious, you know, what's driving that? I think you mentioned some mix in there as well, so is there much difference between utility and refuse? And just kind of a little more color on what's driving that.

Thank you, ladies and gentlemen, we will now begin the question and answer session. If you have dialed in and would like to ask a question, please press star, followed by the number 1 on your telephone keypad. If you would like to withdraw your question, simply press star 1, again we kindly ask everyone to limit themselves to 1 question and 1 follow up only to accommodate as many questions as possible. Thank you. Your first question comes from the line of Stephen bolman with Jeffrey's. Please go ahead.

Great. Uh, good morning everybody. Thank you for taking the question. Um, it feels like es margins, especially are the gifts that sort of keeps giving. So I wanted to delve into that a little bit. Um, you know, it seems like they've been coming in ahead of your expectations as well as our so I'm curious you know what's driving that I think you, uh, mentioned some mix in there as well. So is there much difference between utility and and refugees and just kind of um a little more color on.

Jennifer Kong: Hey, good morning, Steve. Yes, so we're very happy with the ES Q2 OP performance and another strong quarter. It's driven by three factors and that 19%. First, we continue to see strong throughput in ESG, driving the operational efficiencies and favorable factory adoption, similar to what we saw in Q1. We expect that to continue into the second half of the year. Second, for the very first time, we see that there is better execution in utilities driving operational efficiencies, which we are also expecting to see that in the second half of the year. Now, the discrete item that happened in Q2 is related to the favorable customer and the product mix in utilities, which we do not expect to recur in the second half of the year.

Was driving that.

Hey, good morning Steve. Um yes so we're very happy with the esm Q2 op performance and another strong quarter was driven by 3 factors and um and that 19% first um we continue to see strong throughput in ESG driving the operational efficiencies and favorable Factory absorption.

Similar to what we saw in q1.

We expect that to continue into second half of the Year second for the very first time we see that there is better execution and utilities driving. Oh so um, operational efficiencies which we are also expecting to see that in the second half of the year. Now, the discrete item that happened in Q2 is related to the favorable customer and the product links in utilities, which we do not um, expect to recur in second half of the year.

Steve Volkmann: Okay. Any color? I think you said maybe moderates in the second half, but kind of what does that mean in your mind?

Jennifer Kong: So moderate means probably like a percent lower just the second half of the year.

Okay. Um, any color I think you said maybe moderates in the second half but kind of. What does that mean? Uh, in your mind?

Steve Volkmann: Yeah, the favorable mix in Q2 is not expected to come back in Q3 and Q4. Okay. Understood. Thank you. I'll pass it on.

So moderate, it means, um, probably like a, a percent, um, lower just the second half of the year. Yeah. The the favorable mix in Q2 is not expected to come back in Q3 and Q4 correct.

Understood, thank you. I'll pass it on.

Derek Everitt: Your next question comes from the line of Nick Dobry with Baird. Please go ahead.

Simon Meester: Thank you for the question. Good morning. And I guess where I would like to start is with your updated EBITDA guide, maybe a little bit of color in terms of what drove the $20 million adjustment. And I heard you talk about tariffs and mitigation maybe into the fourth quarter. Maybe you can help us understand exactly what your plans around mitigation would be, presumably that's not all pricing related. There might be something else that you should be aware of in there as well.

Your next question comes from the line of League W with Bayer. Please go ahead.

Jennifer Kong: Hey, thank you, Brian. I'll take the first question on the EBITDA, and I'll hand it over to Simon to talk a little bit about the tariff mitigation. So our $20 million lower EBITDA is driven by, you know, a couple of percent takes. The very first one, of course, with a stronger outlook in ES, driving more margins. But it's largely offset by the unfavorable mix that we see in aerials in Q2 and also we expect for the rest of the year, and then coupled with the higher tariffs.

Thank you for the question. Good morning. And um, I guess my, where I would like to start is with your updated, the dog guidance, maybe a little bit of color. In terms of wardrobe, the 20 million adjustment. And um, I I heard you talk about tariffs and, and mitigation maybe instead of fourth quarter, maybe you can help us understand exactly what your your plans around mitigation would be. Um, presumably that's not all pricing related there. There might be something else that we should be aware of in there as well.

Hey Mike, good morning. Um I take the first question on the ebita and I'll I'll hand it over to um Simon to talk a little bit about the power of mitigation.

So uh 20 million lower, um ebita is driven by, you know, a couple of fruits and takes the very first 1, of course, with a stronger Outlook in es driving more margins.

Simon Meester: Yeah, and when it comes to mitigation and tariffs, so our story is we are really dependent on trade deals with basically four markets: so the UK, the EU, China, and Mexico. So two of those, or three of those four are pretty much locked in, and we've all read the headlines on China, so we'll see what comes out of that. But we're getting more and more firm on what our tariff outlook is going to be going forward. And then in terms of mitigation, so yeah, we're still in that 40, 50 cent ballpark, if you will, and holding our outlook. But yeah, we started the year by pulling in some supply, just pulling it forward because we knew that, you know, there was risk of tariffs coming. And so we pulled material forward. We pulled some FDI forward.

But it's largely offset by the unfavorable make-up that we see in areas in Q2 and also expect for the rest of the year, coupled with the higher tariffs.

Simon Meester: And then ever since, you know, like you would expect, we've been working very hard with our suppliers to absorb as much as they could. And obviously also looking at alternative supply solutions, options, including re-engineering or insourcing, making it ourselves, and other cost out actions. And then obviously, we also have price in our toolbox that, you know, is one of the tools that we're using. But the preferred option is to just work it out with our supply chain.

The, you know, there was risk of tariffs coming and so we pulled material forward, we pulled some FTI forward.

And then ever since, you know, we like, like, you would expect, we've been working very hard with our suppliers to absorb as much as much as they could. And, um, uh, obviously also looking at alternative Supply Solutions, uh, options, uh, including re-engineering, or insourcing, making it ourselves, um, and other costs out actions. Uh, and then obviously, we also have, uh, price in our tool box, um, that, um, you know, is, is 1 of the tools that that we're using, but the, the preferred option is to just work it out with our supply chain.

Simon Meester: Okay, then my follow-up is on AWP. I guess I'm curious as to how you think about margins within the context of what you just said here for the second half of the year. It sounds to me that we should be thinking margin down relative to what you've been able to put up in Q2. And I'm also curious as to how comfortable are you with this implied top line guidance for the back half? Because if I do the math right, it seems to imply something like down this single digit. And yet, you know, backlog continues to erode that, at least in theory, you should have quite a bit of pressure on production in the back half of the year. So I know it's kind of a lot in this question, but appreciate it.

Okay then, my follow-up on is is on awp. Um I guess I'm I'm curious as to how you think about margins within the context of what you just said here for the second half of the year. Uh it sounds to me that we should be thinking margins down relative to what you've been able to put up in in Q2.

Simon Meester: Oh, so thanks for the question. I'll take the backlog part, and then I'll let Jen start with the margin outlook.

And, and I'm also curious as to how comfortable, are you with this implied? Topline guidance for the back half because if I do the math, right? It keeps implies something like down this single digits. Uh, and yet, you know, backlog continues to erode that. So we can in theory, you should have quite a bit of pressure on production in the back, half of the year. So um, I know it's kind of a lot of this question, but appreciate it. Oh, so that thanks for the question. I'll I'll take the backlog part and

Jennifer Kong: Right. And so on the margin outlook, look, we clearly, for aerials, are going through some challenging times. I do want to reemphasize that despite all the, I would call it, the very substantial adjustments that we made, and now the current tariff in Q2 is still a step up versus a Q1 of a 500 basis point of sequential margin improvement. For the rest of the year, what we're expecting is that the Q3 OP will be a mid-single digit, a step down versus Q2, largely driven by the Trump tariffs. Second, the lower sequential volume in Q3 versus Q2. And then the third is the unfavorable customer mix that we see in Q2 to proceed for the rest of the year.

And I'll let you in start with the margin Outlook.

Right. And um, so on the margin outlook. Look look. Um the we clearly um, for areas is going through some challenging times. I do want to re-emphasize that despite all the, I would call it the the very, um, the tenor adjustments that we made and now, the Trump tariff,

In Q2, we see a step up versus Q1 of 5 permanent basis points, indicating a point of sequential margin improvement.

For the rest of the year. What we're expecting is that the Q3 op will be a mid single digits a step down versus Q2 will likely driven by the Trump terrorists.

Second. The lowest sequential volume in Q3 versus versus due to. And then the third is the unfavorable customer makes that we see in Q2 to proceed for the rest of the year.

Simon Meester: Yeah, and then on the backlog coverage, so we ended the second quarter with a little over four months of backlog coverage in aerials. We're now approaching August, you know, so we have pretty good forward visibility of what the rest of the year looks like. We are firmly back to normal seasonality with higher booked bill in our traditional higher booked bill in Q4 and Q1, and you know, fueled by higher sales in Q2 and Q3. The nationals, strong, obviously, as you know, maybe because of their exposure to large projects. Booked bill on independence did not quite come in as strong as we expected in Q2. Fleets still healthy, healthy project pipeline. Main driver is replacement demand. We do see some recovery happening in Europe, which gives us confidence. And other pockets of, you know, like Africa and the Middle East are strong.

Yeah, and then on the, on the backlog coverage. So we ended the second quarter with um little over 4 months of months of backlog coverage, um, in aerial. So we're now approaching, uh, August, you know. Um, so we have pretty good forward visibility of what the the rest of the year looks like.

We are, we are firmly back to normal seasonality with higher booked bill in dark, traditional higher, booked billing Q4 and q1. And uh, you know, fueled by higher sales and Q2 and Q3 the Nationals, uh, strong. Obviously, as you as, you know, mate because their exposure to large projects booked Bill. Uh, on Independence did not quite come in as strong as we expected in Q2. Um,

Simon Meester: So with what we're currently seeing in the backlog, we feel pretty confident about that aerial's outlook for the remainder of the year.

Simon Meester: All right, thank you.

Fleet still healthy uh uh healthy project pipeline. Main driver is is replacement man. We do see some some recovery happening in Europe which gives us uh which gives us confidence and other pockets of uh you know like African Middle East or strong. Um so with what we're currently seeing in the backlog, uh we we feel pretty confident about that Aerials outlook for your man of the year.

All right. Thank you.

Derek Everitt: Your next question comes from the line of David Raffo with Evercore Partners. Please go ahead.

Thanks Mike.

Steve Volkmann: Yeah, hi, thank you. The ES backlog coverage is big, and we appreciate that. But back to NP and aerial, I just want to make sure now that we're sort of back into the normal coverage, I mean, aerial's a little higher than historical norms. But as you said, right, these conversations for '26, can you give us a sense of the customers, their sense of timing, when they're willing to engage in conversations? I'm just curious, you know, obviously, people have spoken about uncertainty ad nauseam for months now. But given some of the trade agreements, the passage of the legislation on bonus depreciation, and thinking about next year broadly, can you give us a sense of those conversations right now? Is it a level of uncertainty, or are they pushing the timing of engaging in orders back, or maybe not?

Your next question comes from the line of David Rosso with Evercore Partners. Please go ahead.

Yeah. Hi, thank you. Um, the es backlog coverage is is big and we we appreciate that, um, but back to MP and Ariel. I, I just want to make sure now that we're sort of back into the normal coverage. I mean, aerial is a little higher than historical Norms. But as you said, right these conversations for 26,

Steve Volkmann: I'm just curious the tone on '26, given we're back to normal coverage. And that can include NP as well as aerial.

Can you give us a sense of the customer's their sense of timing when they're willing to engage in conversations? I'm just curious. You know, obviously people have spoken about uncertainty, add know for for months now but given some of the trade agreements, the the, the passage of the legislation on bonus depreciation and thinking, about next year, broadly can you give us a sense of those conversations right now? Is it a level of uncertainty or are they pushing the timing of of engaging in orders?

Simon Meester: Yeah, I would say larger customers stick to their cadence. And so we typically start those negotiations in this quarter, in Q3, and we'll typically end in Q4, sometimes spills over in Q1. Normal cadence there, normal discussions. As I mentioned, fleet utilization quite where we would expect it to be. Smaller customers are a little bit more hesitant, and especially when you get into NP, which tends to be a booked bill business anyway. Those are kind of just ongoing discussions, if you will. And there's definitely still some caution. And so far, I've been talking about North America. In Europe, we do see the narrative changing and gets a little bit more upbeat. Started actually at BAMA earlier in the year. And we see more and more kind of momentum building.

Back or, or maybe not. I'm just curious the tone on 26 given. We're back to normal coverage and that can include MP as well.

Uh, and so we, we typically start those negotiations in this quarter, uh, in Q3, and they will typically end in Q4 sometimes spills over in q1, normal, Cadence their normal normal discussions. Um, as I mentioned, um, fleece utilization quite quite where we would expect it to be um smaller customers a little bit more, hes hesitant and especially when you get into MP which which tends to be a booked build business. Anyway those are kind of just ongoing discussions if you will and there's there's definitely still some caution and so far I've been talking about North America in Europe. We do see the The Narrative changing and gets a little bit more upbeat.

Simon Meester: I wouldn't call it quite a V-shaped type of recovery that we're anticipating, but definitely we do see Europe slowly kind of coming around in both aerials and in NP.

Started um started actually at bomber um, earlier in the year. Um and uh we see more and more kind of momentum building, I wouldn't call it quite uh, v-shaped type of recovery that we're anticipating. But definitely, we do see uh, Europe slowly kind of coming around both in both Aerials and in mp

Steve Volkmann: The conversations, though, anything about replacement demand levels versus this year? Any sense of timing or maybe pushing back even a little bit more on even with tariffs, pushing back on price? Just some early vibe of how they're discussing it versus historical norms. And then, Kim, real quick, the comment about EPF in the second half, is it sort of a $1.25, then a $1.35? Like the comment of fourth quarter a little higher? Is that roughly the right way to think about that comment? $1.25, $1.35 fourth?

The the conversations are anything about replacement demand levels versus this year, any sense of timing or maybe pushing back, even a little bit more on even with tariffs pushing back on price. Just some early Vibe of how they're discussing it versus historical norms and then Kim real real quick. The comment about EPS in the second half.

Is it sort of a a125 then a135 like the comment of fourth quarter, a little higher, that roughly the right way to think about?

Simon Meester: Yeah, thanks, David. I'll talk about replacement demands. Yeah, normal discussions on replacement demand in aerials. In NP, we actually see some signs of fleets aging a little bit in certain subsegments within NP. And so what we're working on actually is trying to avoid we get back into that same pattern where all of a sudden everything starts needs to be replaced and then we get into a supply issue again. So we're having those discussions right now to make sure that the fleet doesn't age too much on the NP side. And that's mostly, that's especially in handling, but also in aggregate. But in aerials, very normal kind of replacement discussions going on.

That comment, 25 354.

Yeah, thanks, David. I'll talk about replacement demand. Let's have a normal discussion on replacement demand.

Jennifer Kong: And David, good morning. So yes, for Q4, we're expecting that Q4 EPS to be slightly higher than Q3. I'll call it, you know, in that 10, 20% higher than Q3 just because of the timing of our mitigation actions and our cost recovery actions as well.

In Aerials in mp. Um, we actually see some signs of fleets agent a little bit in certain sub segments within MP and so what we are working on, actually is trying to avoid. We get back into that same pattern where all of a sudden, everything starts, uh, needs to be replaced and then we get into into a into a supply issue again. So we're we're having those discussions right now to make sure that the fleet doesn't age too much. Uh on the MP side and that's mostly it's uh especially in handling but also an aggregate but an aerial is very normal. Kind of replacement discussions going on.

And David good morning. Um,

Steve Volkmann: I appreciate it. Thank you.

For we're expecting that at 2 24 Epps be um slightly higher than Q3. Um, I would call it, you know, and and that 10 20% higher than Q3 just because of the timing of our mitigation actions um and our cost recovery actions as well.

Simon Meester: Thanks, David.

I appreciate it. Thank you.

Derek Everitt: Your next question comes from the line of Tammy Zakharia with JPMorgan. Please go ahead.

Thanks David.

Simon Meester: Hey, this is Alec Alford, Tammy. Thanks for taking our questions. So, you know, I want to get some incremental updates on NP. I believe margins are expected to sequentially rise over the remaining balance of the year, you know, getting absorption under control. You've got some customer mix, positive business mix, and questioning screening. I just want to confirm this is still on track and any other incremental updates in NP and sort of what you're hearing on the ground in Europe or any green shoots would be great. Thanks. Yeah, so we definitely see some gradual sequential improvement in NP, and it's expected to continue into the second half. Obviously, there is still caution in the pipeline, if you will, you know, trying to gauge what tariffs are going to do to demand, what rates are going to do to demand.

Your next question comes from the line of Tammy zakari with JP Morgan. Please go ahead.

Hey, this is for Tommy, thanks for taking my questions. So, you know, want to get some incremental updates on on NP. I believe margin is expected to sequentially. Rise over the remaining, uh, balance of the year, you know, getting absorption in the control. You've got some customer mix positive business, mix and crushing and screening. Uh, I just want to confirm this is still on track, uh, and any other incremental updates on that be. Um, and so what you're hearing on the ground in Europe or any any green shoots? Um,

That would be great. Thanks.

Simon Meester: But definitely, what we are assuming is a continuous gradual sequential improvement. As I mentioned earlier, we do see healthy fleet utilization in NP across the board in both North America and the EU. So the fleet is working, and this is the kind of machinery that you can't sweat too long because it's being heavily used. We do see rental conversions extending. That's why I mentioned that, you know, fleet is aging a little bit beyond historical norms because there's still a little caution in converting. But yeah, we are back to basically normal coverage. And with what we're seeing in terms of booking cadence, we're confident in that kind of sequential gradual improvement in our outlook. So I'll let you want to weigh in on margins.

Yeah, so we, we definitely some gradual sequential Improvement, uh, in mp, and it's expected to continue into the second half. Uh, obviously there is still caution in the pipeline, if you will, you know, trying to gauge, what what terrorist is going to do to demand, what rates are going to do to demand. Um, but definitely, uh, what we are assuming is a, a continuous, gradual sequential, uh, Improvement. As I mentioned earlier, we do see healthy fleets utilization in, in NP across the board in both North America and, and the EU

Jennifer Kong: Right, good morning. So the margins, exactly what Simon mentioned, skewed towards the Q4 due to the higher factory adoptions and also some favorable geographical mix.

So the fleet is working and this is the kind of Machinery that you, You Can't Sweat too long because it, you know, it's being heavily used. Um, uh we do see rental conversions. Extending, that's why I mentioned that, you know, Fleet is aging a little bit beyond historical Norms because there's still a little Caution in converting. Uh, but um, uh, yeah, we are back to uh, basically a normal coverage. And um, with what we're seeing in terms of booking Cadence, is is, uh, we're confident in that kind of sequential gradual improvement in our Outlook. So I'll let you you want to weigh in on margins, right? Um,

Exactly what I'm Simon mentioned. Um skewed towards the um Q4 due to the higher Factory absorption and also some favorable geographical mix.

Simon Meester: Understood. Thanks. I'll pass it on.

Jennifer Kong: You're welcome.

Simon Meester: Thank you.

Understood. Thanks. Alberto.

You're welcome. Thank you.

Derek Everitt: Your next question comes from the line of Carl Mingus with Citi Group. Please go ahead.

Your next question comes from the line of call. Me the group, please go ahead.

Steve Volkmann: Thank you. I was hoping if you could elaborate just on changes to the assumed tariff impact. It looks like last quarter you had assumed $0.40 impact for the year, now assuming $0.50. So it would be helpful maybe if you could unpack what you were assuming last quarter, what you're assuming now, or I guess tariff rates and mitigation efforts.

Thank you. I was hoping if you could elaborate just on changes to the assumed tariff impact. It looks like last quarter, you would assumed 40 cents impact for the year. Now, assuming 50 cents. So,

Jennifer Kong: Perfect. Hey, good morning, Paul. So if I could just walk from last outlook of the $0.40 to current outlook of the $0.50, it's largely driven by three factors. First, in our $0.50, we have included the EU reciprocal tariff increasing from 10% to 15%. And as what Simon mentioned earlier, that deal has been signed. Second, it also includes secondary tariffs impact higher than what we have originally expected in April. And third, it also includes the 232 still tariffs doubling from 25% to 50%. When we add all of those three factors together, that offsets the lower China reciprocal tariffs that we have assumed back in April.

Would be helpful, maybe, if you could unpack, what you were assuming last quarter what you're assuming now? Um, or I guess tariff rates and mitigation efforts.

Perfect. Hey, good morning. Um so if I could just walk from last Outlook of the 40 cents to to current Outlook of the 50 cents, it's likely driven by 3 factors. First in our 50 cents we have included the EU reciprocal tariffs, increasing from 10% to 15%. And as what Simon mentioned earlier, that bill has been signed.

Back in it also includes secondary um, Paris impact higher than what we have originally expected in April and third, it also includes the 232 still terrorists doubling from 25% to 50%. When we add all of those 3 factors together, that offset the lower China reciprocal terrorists that we have assumed back in April,

Steve Volkmann: Great. That's helpful. And it would be helpful to hear just that you expand on trends you're seeing in really North America, material processing. Yeah, I guess what you're seeing in aggregate and material handling. And I mean, any early discussions with customers that have pointed to maybe more of a willingness for customers to come to the table to look at a new machine with bonus depreciation going back up to 100%?

Great that's helpful and um would be helpful to to hear just that you expand on Trends. You're seeing and really in North America material processing. Um,

Simon Meester: Yeah, we see in North America still a little bit of caution, especially in smaller projects, but there's a lot of tailwind from the mega projects, and we expect that to continue for several years. We definitely expect that to continue to be a good guide for us. But then another thing that we see ramping up very clearly is transmission and distribution jobs, which is growing, and we believe we're still at the beginning of the growth cycle there. So we see a lot of upside in utilities, which will obviously, you know, help our outlook for ES. But overall, it's a little bit of a, yeah, strong in manufacturing, construction, strong in data centers, strong in infrastructure. We see transmission and distribution coming online, and we see a lot of upside there. And then obviously, a lot of strength in waste and recycling.

Yeah, I guess what you're seeing in Aggregate and material handling is, I mean, any early discussions with customers have pointed to maybe more of a willingness for customers to come to the table to look at a new machine with bonus depreciation going back up to 100%.

Yeah, we we see in North America, um,

still a little bit of a, a caution, especially in a smaller, uh, projects. But there's a lot of Tailwinds from the mega projects and we expect that to continue, um, uh, for for several years, um, we definitely expect that to, to continue to be a good guy for us, but then another thing that we see ramping up uh, very clearly is uh, transmission and distribution jobs.

Simon Meester: Aggregates is still a little bit on the fence. We do see the fleet being used and replacements being pushed out. And that's a little bit of a function of interest rates and just overall confidence and sentiment in the market. And then the last one I would call out is probably concrete. We see our concrete mixers continue to get good bookings. They get a lot of pull from infrastructure jobs and construction jobs. We had a high booking year in concrete mixers last year, and they're holding up that booking profile for this year. So that's kind of the mix as we see it in North America.

Which is go. And we believe, we're still at the beginning of the growth cycle there. So we see a lot, a lot of upside, uh, in utilities, um, which will obviously, uh, you know, help our our outlook for for ES. But overall, it's a little bit of a yeah, stronger manufacturing, uh, construction, strong in data centers, strong in infrastructure. We see Transmission in this distribution, uh, coming online and we see a lot of upside there and then, obviously a lot of strength, in, in waste and recycling. Um, Aggregates is still a little bit on the, on the, on the fence. Um, we do see the fleet being used, um, and um, uh, and and, and replace Replacements being pushed out. And that's a little bit of a function of interest rates and this overall confidence and sentiment in the market. Um, and then, the last 1 I would call out is probably concrete. We see our concrete mixers continue to

Get good, bookings. They they get a lot of uh, pull from uh, infrastructure jobs and construction jobs. We had a, a high booking year in concrete mixers last year and they're they're holding up that that booking profile for this year. So that's kind of the the next, as we see it in North America,

Steve Volkmann: Got it. And then I guess just any early indication that bonus depreciation is driving customers to come back to the table to order a new machine.

Simon Meester: Yeah, I mean, the way we look at it is obviously it puts cash in the pockets of our customers, and that's always a good thing. And so for us, it's not a question of, you know, if it will eventually lead to incremental investment. It's more when. So we think that most companies are just trying to figure out what the cash benefits are going to be, what the tariff headwinds are going to be. But at some point, we assume that that will lead to incremental investments. The key question is when. I don't personally expect a lot of upside from it in the second half, but it could definitely be in play for 2026.

Got it. And then I guess, just any early indication that bonus depreciation is driving customers to come back to the table to order a new machine.

Yeah. I mean the way we look at it is obviously it puts cash in the pockets of our customers. And that, that's always a good thing. And so, um, if for us, it's not a question of, you know, if it will eventually lead to incremental Investments, it's more when, um, so we, um, we think that, um, most companies are just trying to figure out what what the cash benefits are going to be what the the Tariff headwinds are going to be. Um, but at some point, uh, we assume that that will lead to incremental Investments. The the key question is, when I I don't personally, expect a lot of upside from it in the second half, but it could definitely be in play for 2026.

Steve Volkmann: Got it. Helpful. Thank you.

Simon Meester: Thank you.

Derek Everitt: Your next question comes from the line of Angel Castillo with Morgan Stanley. Please go ahead.

Thank you.

Steve Volkmann: All right, thanks for taking my question and good morning. You mentioned on the independence that you expect them to remain cautious. So just kind of tying in with a lot of this discussion that we've been having, I guess, how would you characterize, you know, the risk into the second half if OBVPA, I guess, doesn't necessarily kick in until maybe '26 in terms of demand? What's kind of the risk here that things actually maybe worsen a little bit or, you know, that customers on the independent side choose to kind of postpone purchases to more next year, given we're kind of this far into the construction season already?

Your next question comes from the line of Angel Castillo with Morgan Stanley. Please go ahead.

Simon Meester: Well, we are back in our normal seasonality, so that's obviously one factor. The other one is, yeah, so we do see a continuation of strong demand coming from larger jobs, especially infrastructure, manufacturing, data centers. Data centers continue to be very strong, and we see upside in manufacturing construction as well. And then on top of that, as I mentioned earlier, we clearly see some early signs of transmission and distribution jobs starting to come online pretty soon. On the flip side is the smaller local private projects. And yeah, we did see an uptick in inquiries and starts, and we'll have to see if that translates in spend. That's the big question, and it might be tied to what's going to happen with interest rates, but it's mostly a confidence factor, and we need to see if that confidence factor is going to kick in or not.

Hi. Thanks for taking my question and good morning, uh, you mentioned on the Independence that you expect them to remain cautious. So just kind of tying in with a lot of discussion that we've been having, I guess, how would you characterize, you know, the risk into the second half? If, if obb PA, I guess doesn't necessarily kick in until maybe 26, in terms of demand. Um, what's kind of the risk here that I think is actually maybe worse than a little bit or you know that customers on the independent side just to kind of postpone purchases to to more next year. Given where kind of this far into the construction season already.

Well, we, we are back in our normal seasonality, so, uh, that's obviously 1 1 Factor. Uh, the other 1 is, um, yeah. So we do see, uh, a continuation of strong demand coming from larger jobs, uh, especially infrastructure, manufacturing data centers, data centers continues to be very strong. And we see, um, men we see upside and Manufacturing construction as well. And then on top of that, as I mentioned earlier we we clearly see some early signs of transmission and distribution jobs uh starting to come online uh pretty soon. Um, on the flip side is is the smaller uh local uh private private projects. And um yeah we did we did see

Steve Volkmann: Understood. Thank you. And two quick ones on NP, if I could. Just on the one big beautiful bill or some of these changes, any desire or kind of changes in incentives to actually move some of this production in NP perhaps to North America, given some of the changes? And then given your comments around kind of the customers' ongoing cautiousness in terms of renting, conversion to buying, just curious, I guess, is there anything, is the choice to kind of continue to rent and not convert as quickly, is that simply just interest rate or macro kind of demand uncertainty near term, or is this a bigger question of kind of customers' preference here of owning the equipment?

And uptick in inquiries and starts, and we'll have to see if that if that translates in in spends that that's the big question and it might be tied to what's going to happen with interest rates. But it's it's mostly a confidence factor and that we need to see if that conference factors is going to kick in or not.

Simon Meester: No, I would say on your second question, it's mostly interest rate driven and overall sentiment. Just a little uncertainty on kind of what's going to happen in the second half, and that's causing a little bit of that delay in conversion. It's definitely not a change in profile as we see it. And if you think about, you know, mobile crusher, our mobile crushing business, the reason we like that business is because that's where the market is going. It's a much more flexible product. It's a product that you can, you know, you can have it travel with the job, and it just gives customers a lot of flexibility. And typically, they will want to own those assets instead of rent. So we don't see the profile changing per se. It's mostly just a confidence factor.

Understood, thank you and and 2 quick ones on mpf if I could. Um, just on the 1, big beautiful bill or some of these changes any uh, desire or kind of changes in incentives to actually move some of this production in mp, perhaps to, to North America, given some of the, some of the changes and then given your your comments around kind of the customers ongoing cautiousness in terms of renting conversion to buying just curious, I guess, is there anything, uh, is a choice to kind of continue to rent and and not convert as as quickly is that simply just interest rate or macro kind of demand uncertainty near-term or or is this a bigger question of kind of customers preference here of owning the equipment?

No, I I would say on your second question is, is mostly interest rate driven and overall sentiment just, uh, just a little uncertainty on kind of what's going to happen in in the second half. And, um, and that's causing a little bit of that delay in conversion. Definitely not a change in profile as we see it. Um, and if you think about, you know, mobile Crusher is our mobile crushing business.

Simon Meester: And then on your first point, yeah, there's also cash benefit for us, which we have included in our 300 to 350 outlook. We are constantly assessing our footprints. We have been making some changes, but we want to see the current dynamics stabilize a little bit over the next six months before we get a little bit more firm on what we're going to do with footprint and where and when.

Steve Volkmann: Very helpful. Thank you.

We we we, the reason we like that business is because that's where the market is going. It's a much more flexible product. It's a product that you can, you know, you can have it travel with the, with the job, uh, and it just gives customers a lot, a lot of flexibility and, and typically, they will want to own those assets in instead of rent. So we don't see the profile changing per se. It's mostly just the confidence confidence factor and then on your first point, um, yeah. There's also a cash benefit for us, which we have included, uh, in our 300 to 350 Outlook. Um, we are constantly assessing our Footprints, we, we have been making some changes but we want to see the current Dynamics stabilize, uh, a little bit over the next 6 months before we we get a little bit more firm on what we're going to do with footprint. And where and when

Simon Meester: Thank you.

Very helpful. Thank you.

Derek Everitt: Your next question comes from the line of Michael Feger with Nexus America. Please go ahead.

Thank you.

Tim Thein: Yep, thanks, Jasmine, for putting me in. When we're talking about tariffs, you mentioned Section 232 with steel. Is that impacting the cost profile in the second half, or does that start to filter more into 2026? I'm just trying to understand because I think you guys do some hedging on the steel side for that. And just my follow-up question is on the ESG side, you know, good performance. Just are you seeing any changes in the ordering and purchasing plans from your customers with maybe trying to get in front of tariffs or if tariffs are impacting any of their kind of quarterly or yearly cadence in terms of how they're kind of doing the fleet buying? Thank you.

Your next question comes from the line of Michael Federer with Bank of America. Please go ahead.

Yeah, thanks, guys, thank you for calling me. And when we're talking about tariffs, you mentioned section, 232 with steel, is that impacting the cost profile on the second half. Or does that start to filter more to 2026? I'm just trying to understand because I think you guys do some hedging on the steel side for that and just my my follow-up question, just on the ESG side, um, you know, good performance. Just are you seeing any changes in the order ordering and purchasing

Simon Meester: Yeah, thanks for the questions. I'll ask Jen to weigh in on 232, and I'll take the bookings question.

Jennifer Kong: Right. Hey, good morning, Michael. So I just want to mention on the steel, on your question of the steel, we do not have material impact from a steel inflation perspective because we do not import raw steel. And 70% of what we use is HRC. And approximately half of our second half of the year consumption is really hashed, like you said, is a very favorable rate. And our second half of the year future price as it stands right now that we can see is only at one to two percent inflation versus current rate support rate. So it's immaterial. And the imported steel as part of our, you know, part import is really part of our 50 cents guide.

Uh, plans from your customers with maybe trying to get in front of tariffs, or if tariffs are impacting any of their kind of quarterly or yearly Cadence, in terms of how they're how they're kind of doing their flea buying. Thank you. Yeah, thanks for the question. So, I'll ask Jen to weigh in on, on 232, and I'll take the bookings question, right? Hey, good morning, Michael.

Just want to mention on the feel. Um, on your question, is that still? Um, we do not have mature impact from a still inflation perspective because we do not import raw skills.

and 70% of what we use is HRC and approximately half of our second half of the Year consumption is really hard like you said is that very favorable rate

Simon Meester: Yeah, and on the ES bookings, yeah, we see strong demand for both ESG and utility products on top of the eight-month backlog coverage that we have. But bookings, you know, came in in line with this time last year, especially when you take the shorter lead times into account. Historically, Q2 is the softer booking quarter for this segment. In a normal year, most negotiations will complete in Q4 and some in Q1. And so we were expecting and are expecting for the backlog to continue to come down and return to more normal levels as lead times continue to improve. But overall demand profile is very strong for both ESG and utilities. With the current coverage and what our customers are saying, we have a good line of sight to the second half of 2025 and their first take on '26.

And our second half of the Year future price at it stands, right now that we can see, it's only at most 1 to 2% inflation versus current, um, rate sport rates. So it's in material and um, the important skill. Um as part of our, you know, Parts import is really part of our 50 cents guys.

Yeah, I know on on the, on the es uh bookings. Um yeah we we see strong demand for both ESG and utility uh products on top of the 8 months. Uh back for coverage that we have.

But bookings, you know, came in in in, in line with uh this time last year, especially when you take the shorter lead times into accounts. Historically, Q2 is the softer booking quarter for this segment, uh, in a normal year of most, negotiations will will complete in Q4, and some in, in q1. Uh, and so we, we were expecting in our expecting to, for the backlog, to continue to come down.

And return to more normal levels as, um, as lead times, uh, continue to, uh, continue to improve. But overall, demand, uh, profile, very strong for both ESG and utilities.

Simon Meester: Customers are very deliberate on their cadence around fleet replacement, fleet management, but also fleet upgrades. And what we like is that we just continue to see ESG performing really, really well because of their competitive lead times, but also because their overall competitive value prop. You know, the technology that they bring to this space is really making a difference. And what we like about this business is that that's where the market is moving as well. So we're moving towards where the puck is moving, and that really sets us up for the long term for a really nice run here. And then the last point I want to make within this segment, we also see utilities growing, taking share. The IOUs and public power companies are upgrading their fleet to maximize uptime, and we see significant upside coming from the transmission and distribution jobs going forward.

With the current coverage and what our our customers are saying, we have good line of sight to this second half of 2025 in their first, take on 26. Um, customers are very deliberate and on, on their Cadence around, sleep replacement sleep management but also Fleet upgrades. Um, and uh, what we like is that we we just continue to see ESG performing really, really well, because of their competitive lead times, uh, but also because their overall competitive value prop, you know, the technology that they bring to this space, um, is really making a difference. And what we like about this business is that, that's where the market is moving as well. So, we're moving towards where the puck is moving. Um, and that really sets us up for the long term, for a really, a nice run here. And then, the last point, I want to make within this segment, we also see utilities growing taking share, uh, the iOS and Public Power Company.

Simon Meester: So overall, very bullish on the segments.

Tim Thein: Thank you.

Companies are upgrading their fleet to maximize uptime, and we see significant upside coming from the transmission and distribution jobs going forward. So overall, we are very bullish on that segment.

Thank you.

Derek Everitt: Your next question comes from the line of Stephen Berger with KBank Capital Markets. Please go ahead.

Simon Meester: Hey, thanks. Good morning. If I heard correctly, ESG margin will be about 100 basis points lower in the back half, which gets full year high 18% range. Understanding that mix can move around quarter to quarter, is that how we should think about normalized run rate for the time being, or do you think that that picks up as we go into next year just from synergies and operational efficiencies?

Your next question comes from the line of Stephen ferger with k bank Capital markets. Please go ahead.

Hey, thanks. Good morning. If I heard correctly, ESG margin will be about 100 basis points, lower in the back half which get full year high 18% range.

Jennifer Kong: Hey, Steve. Good morning. Yes, you're right. About the second half of the year, about I'll call it 1%, a higher basis point lower than the first half of the year. But we continue to expect that the operational efficiency, higher throughput with a fixed cost structure in those ESG and utilities that happened in Q1 favorable to us to continue for the rest of the year. And of course, the customer mix and product mix, sometimes it does change over the last second half of the year, but currently, that's not in our outlook. You talk a little bit about the synergies. Yes, so currently, just now, Simon talked about this. We're running ahead in terms of our synergies, annualized more than $25 million. That hasn't really dropped to entirely in this year, and that will be realized next year, and you would see that in the OP.

Understanding that the mix can move around quarter to quarter, is that how we should think about normalized, run rate for the time being or uh or do you think that that picks up as we go into next year? Just from synergies and and operational efficiencies

Hey, Steve. Good morning. Um, yes. You're right about second. Half year about. I will call it 1% or higher basis points lower than first half of the year. Um, but please continue to expect that the operational efficiency, um, highest reboot with a 6 cost structure in those ESG and utilities that happened in q1, favorable to us to continue for the rest of the year. Um, and of course, the customer makes a product makes, sometimes it, it does change over, um, the last, uh, second half of the year, but currently that's not in our Outlook.

You talk a little bit about the synergies. Um, yes. So currently, um, just now, Simon talk about the we're running ahead in terms of a Synergy, analyze more than 25. Um,

Simon Meester: Got it. Okay. And then, Simon, just a quick one. You talked about third eye and digital revenue streams. I think you said there's other digital revenue streams you envision in the future. Can you talk a little bit more about that? Yeah, as I mentioned in our opening remarks, so we are now bolting third eye technology onto our concrete mixers and our utility trucks. And there's a lot more coming. But you know, whatever helps operator safety, whatever helps, you know, vehicle productivity, vehicle efficiency, health monitoring, there's just a lot of use cases that we're exploring with third eye, and it's a real gem in the portfolio. And you know, it really does what it really does intrinsic value to our customers. So we're very, very pleased with the momentum that we have in third eye, and we see more use cases coming.

That hasn't really dropped entirely this year, and that will be realized next year. You would see that in the op.

Got it, okay.

And then Simon just a quick 1. You talked about third eye and digital revenue streams. Uh, I think you said there's other digital rep revenue streams you envision in the future. Can you talk a little bit more about that?

Are uh, now bolting uh, third eye uh technology onto our concrete mixers in our utility trucks.

Simon Meester: So yeah, you said there's a lot more coming. Does that mean you're expanding the third eye product specifically, or there's a lot more digital revenue streams outside of third eye that you think are on the drawing board? I would say both. So we see our third eye offering expanding, and we see the use cases expanding for third eye. Got it. Okay. Thanks. Thank you.

And there there's a, there's a lot more coming. Uh, but, you know, whatever, helps operator, safety, whatever helps. Uh, uh, you know, uh, vehicle, uh, productivity vehicle, efficiency, uh, Health monitoring. There's just a lot of use cases that we're exploring with third eye and, and, and it's a, it's a real gem in the portfolio. And, you know, it really does what, uh, it really does, uh, intrinsic value as intrinsic value to our customers. So, we're very, very pleased with the momentum that we have in third eye and we see more use cases coming.

So, yeah, you said there's a lot more coming. Does that mean you're expanding the Third Eye product specifically? Or are there a lot more digital revenue streams outside of Third Eye that you think are on the drawing board?

I I would say both so we see, we see our third eye offering expanding and we see the use cases expanding for a third eye.

Oh, got it. Okay, thanks.

Derek Everitt: The next question comes from the line of Tim Tain with Raymond James. Please go ahead.

Thank you.

Tim Thein: Thank you. Good morning. I just said a question. If I heard correctly, what the higher expected EPS in the fourth quarter into the third, I believe, Jen, you cited NP margins. I'm just curious if you could maybe, if I heard that correct, maybe expand on that. Is that, you know, product mix you have in the backlog that you see shipping? Is it, well, anyway, I think it's somewhat counter to seasonal trends and the fact that that's called out as a driver. I just wanted to clarify that in terms of what's supporting that.

The next question comes from the line of Team time with Raymond James. Please go ahead.

Thank you. Good morning. I just sent a a question if I heard correctly. What the, um, the higher expected EPS in the fourth quarter and the third, uh, I believe Jen. You cited, MP margins. I'm just curious. If you could, maybe if I heard that correct, it may be expand on that. Is that

Is that, you know, the product mix you have in the backlog that you see shipping? Is it, um,

Jennifer Kong: Hey, Tim. Good morning. So yes, our Q4 EPS is going to be higher than our Q3. I would call it, you know, 10 to 20 percent higher. And that's driven by three things. First is, like I mentioned earlier, the tariff mitigation actions are going to flow through more in Q4 versus than Q3. Second is the timing of our tariff cost impact is largely in Q3 and less in Q4. And then finally, I did, yes, I did mention about the NP, the sequential improvement in the margin profile driven by better factory absorption and also favorable geography mix.

Well anyway, I think it's somewhat counter to to seasonal Trends and the fact that that's called out as a driver. I just, I just wanted to, to clarify that potential. What's supporting that?

Tim Thein: Got it. Okay. And then just a small one, but the reduction in the tax rate from 20 to 17 and a half, I don't know, as we think about it, if the ES being a US accounting, well, ES driving more US profitability, is that a run rate to think about for '26 or or not? I'm just curious.

Hey, Tim good morning. So yes, our 24 APS is going to be higher than our Q3. I will call it, you know, it's 10 to 20% higher. Um, and that's driven by 3 things first is, um, like I mentioned earlier the, um, tariff, mitigation actions is going to flow through more, in Q4 versus than Q3 second is the timing of our tariffs cost impact is largely in Q3 and last in Q4 and then finally I did. Yes I did mention about the MP the sequential improvements in the margin profile driven by better Factory absorption and also favorable geography mates.

Jennifer Kong: Yeah.

Tim Thein: Sorry, go ahead.

Jennifer Kong: Yeah, so of course, we're not guiding '26 at this point in time, but our 17.5% of full-year revised outlook here are driven by discrete items. And looking forward, you know, we expect our ETR to normalize, of course, in that ballpark of 19% range as we fully utilize our global tax attributes. I think while, you know, ES margin is coming higher, we also are doing very active tax planning, so.

Got it, okay? And then, um, just a small 1 but the the reduction in the tax rate from 20 to 17 and a half I um, I I don't know if we think about it, if the width with es being the US accounting, uh, yes. Driving more us. Profitability, is that a, a a run rate to think about for 26 or or not? Um, just curious. Yeah yeah.

Tim Thein: Understood. All right. Thanks a lot.

Sorry, go ahead. Yeah, so Chris um we're not guiding 26 at this point in time but our 17.5% uh full year revised outlook here um are driven by discrete items and it's looking forward. You know we expect our ETR to normalize of course and that all type of 19% range as we fully utilize a Global Tax attributes. I think wow, you know, es um, margin is coming higher. We are so are doing very active tax planning. So,

Understood. All right. Thanks a lot.

Derek Everitt: There are no further questions. I would now like to turn the call back over to Simon Meester for closing remarks.

You're welcome. Thank you.

Simon Meester: Thank you, operator. So if you have any additional questions, please follow up with either Jen or Derek. And with that, thank you for your interest in tariffs. Operator, please disconnect the call.

There are no further questions, I would now like to turn the call back over to Simon Mister for closing remarks.

Thank you, operator. If you have any additional questions, please follow up with either Jen or Derek. With that, thank you for your interest in Terex Corp. Please disconnect the call.

Derek Everitt: Ladies and gentlemen, that concludes today's conference. You may now disconnect your lines.

Ladies and gentlemen, that concludes today's conference, you may now disconnect your line.