Q2 2026 Terex Corp Earnings Call

July 30, 2026

Speaker #1: Only mode. A brief question-and-answer session will follow the formal presentation. If you would like to ask a question, please press *1 to raise your hand, to withdraw your question press *1 again.

Speaker #1: As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Drew Konop, Vice President of Investor Relations.

Speaker #1: Greetings, and welcome to the TEREX Q2 2026 results conference call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation.

Speaker #2: Good morning, and welcome to the TEREX Q2 2026 earnings conference call. A copy of the press release and presentation slides are posted on our Investor Relations website at investors.terex.com.

Speaker #1: If you would like to ask a question, please press *1 to raise your hand. To withdraw your question, press *1 again. As a reminder, this conference is being recorded.

Speaker #2: 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.

Speaker #1: It is now my pleasure to introduce your host, Drew Konop, Vice President of Investor Relations.

Speaker #2: They're prepared remarks will be followed by Q&A. Please turn to slide 2 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.

Speaker #2: 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.

Speaker #2: These risks are described in greater detail in our Earnings Materials and in 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.

Speaker #2: Reconciliations for these non-GAAP measures can be found in the conference call materials. Please turn to slide 3, and I'll hand it over to Simon.

Speaker #3: Thanks, Drew. Good morning, and thank you for joining us today. TEREX delivered a strong Q2 with revenue of $2.2 billion increasing 8.5% compared to last year on a pro-forma basis.

Speaker #3: The quarter's performance reflects revenue growth in all segments, improved earnings conversion, and progress against the strategic priorities we've laid out in the past 2 years.

Speaker #2: Reconciliations for these non-GAAP measures can be found in the conference call materials. Please turn to slide 3, and I'll hand it over to Simon.

Speaker #3: Today, I'll begin with our consolidated performance and the demand backdrop we are seeing across the portfolio. I'll then discuss how each segment is executing against those market conditions before providing an update to our full-year guidance.

Speaker #3: Thanks, Drew. Good morning, and thank you for joining us today. TEREX delivered a strong Q2 with revenue of $2.2 billion increasing 8.5% compared to last year on a pro-forma basis.

Speaker #3: And Jen will then take you through the detailed financials. At the consolidated level, Q2 performance was supported by revenue growth and improved earnings conversion both sequentially and year over year.

Speaker #3: The quarter's performance reflects revenue growth in all segments, improved earnings conversion, and progress against disputed priorities we've laid out in the past 2 years.

Speaker #3: Adjusted EBITDA of $269 million increased 26 million or 10.7% versus last year on a pro-forma basis, driven by meaningful improvements especially in the materials processing and specialty vehicles segments.

Speaker #3: And Jen will then take you through the detailed consolidated level, Q2 performance was supported by revenue growth and improved earnings conversion, both sequentially and year-over-year.

Speaker #3: Bookings increased 25% year over year on a pro-forma basis, our backlog of $6.9 billion provides solid coverage and supports our confidence in the second half and today's updated full-year outlook.

Speaker #3: Adjusted EBITDA of $269 million increased 26 million or 10.7% versus last year on a pro-forma basis, driven by meaningful improvements, especially in the materials processing and specialty vehicle segments.

Speaker #3: From a macro perspective, the demand environment for our business is positive, and improving in many of our verticals. U.S. non-residential construction is benefiting from the ongoing transition of planned projects to new starts, supporting demand across multiple segments.

Speaker #3: Bookings increased 25% year-over-year on a pro-forma basis, our backlog of $6.9 billion, provides solid coverage and supports our confidence in the second half and today's updated full-year outlook.

Speaker #3: Year to date, U.S. non-residential construction start rose 18% to $368 billion, driven by momentum in data centers, energy investments, and civil projects such as bridge, water, and sewage infrastructure.

Speaker #3: Mega-project starts totaled approximately $80 billion year to date through May, creating increased opportunities for many of our businesses. Across our end markets, we're seeing higher utilization rates for our products, increasing capital expenditures by our customers, and positive sentiment from channel partners.

Speaker #3: Year-to-date, U.S. non-residential construction start rose 18% to $368 billion, driven by momentum in data centers, energy investments, and civil projects such as bridge, water, and sewage infrastructure.

Speaker #3: These indicators in our bookings trend support our view that demand is growing in many of our verticals. Looking ahead, policy and infrastructure activity in Washington also provides a promising backdrop, including enactment of the 21st Century Road to Housing Act and introduction of the Build America 250 Act.

Speaker #3: Mega-project starts totaled approximately $80 billion year-to-date through May, creating increased opportunities for many of our businesses. Across our end markets, we're seeing higher utilization rates for our products, increasing capital expenditures by our customers, and positive sentiment from channel partners.

Speaker #3: The timing and implementation of these programs may vary, but the direction of public and private investment is supportive. LP municipal budgets and replacement needs support demand for fire apparatus, ambulances, refuge collection vehicles, and related equipment.

Speaker #3: These indicators in demand is growing in many of our verticals. Looking ahead, policy and infrastructure activity in Washington also provides a promising backdrop, including enactment of the 21st Century Road to Housing Act and introduction of the Build America 250 Act.

Speaker #3: Within specialty vehicles, during the quarter, the City of Chicago approved the purchase of 80 fire trucks and 40 ambulances as part of its fleet replacement plan.

Speaker #3: The timing and implementation of these programs may vary, but the direction of public and private investment is supportive. LP municipal budgets and replacement needs support demand for fire apparatus ambulances refuse collection vehicles and related equipment.

Speaker #3: The breadth of our specialty vehicle portfolio allows us to serve communities of all sizes, and because these are essential assets that municipalities replace on a regular cycle, they provide a recurring source of replacement demand.

Speaker #3: In environmental solutions, long-term demand is supported by a large installed base of refuge collection vehicles, digital and aftermarket activity. And robust transmission demand and utilities.

Speaker #3: Within specialty vehicles, during the quarter, the City of Chicago approved the purchase of 80 fire trucks and 40 ambulances as part of its fleet replacement plan.

Speaker #3: The breadth of our specialty vehicle portfolio allows us to serve communities of all sizes and, because these are essential assets that municipalities replace on a regular cycle, they provide a recurring source of replacement demand.

Speaker #3: While the segment is navigating a temporary softness in refuge collection vehicles, ESG's Q2 bookings increased versus the prior year, the first year-over-year increase since the first quarter of 2025.

Speaker #3: Indicating that a momentum could be building going into 2027. Long-term demand for refuge collection vehicles is intact, including a regular replacement cycle and customer interest in technologies such as automated site loaders, third-eye camera systems, and back-office software that can improve productivity and safety for our customers and their operators.

Speaker #3: In environmental solutions, long-term demand is supported by a large installed base of refuse collection vehicles digital and aftermarket activity. And robust transmission demand in utilities.

Speaker #3: While the segment is navigating a temporary softness in refuse collection vehicles, ESG Q2 bookings increased versus the prior year, the first year-over-year increase since the first quarter of 2025.

Speaker #3: TEREX utilities is benefiting from demand tied to grid modernization, renewable energy investments, data center-related power needs, and storm-hardening activities, which we expect to support the business over the next several years.

Speaker #3: Indicating that a momentum could be building going into 2027. Long-term demand for refuse collection vehicles is intact, including a regular replacement cycle and customer interest in technologies such as automated site loaders, third-eye camera systems, and back-office software that can improve productivity and safety for our customers and their operators.

Speaker #3: In materials processing, the U.S. mobile crushing and screening market is showing growth in fleet utilization and rent-to-purchase conversions. We also saw increased bookings for material handling and concrete mixers, which supports our view that the segment's overall demand is broadening.

Speaker #3: TEREX Utilities is benefiting from demand tied to grid modernization, renewable energy investments, data center-related power needs, and storm hardening activities, which we expect to support the business over the next several years.

Speaker #3: In aerials, customer demand is supported by non-residential construction activity, with customer mix in the quarter skewed toward national accounts that have greater exposure to mega-projects.

Speaker #3: Turning to execution, I believe it is important to point out that after we completed the two largest transactions in our history in just the last 2 years, both the ESG acquisition and the merger with Rev are trending above their respective business cases to date.

Speaker #3: Across our new and bigger portfolio, our focus is to convert backlog more profitably, improve throughput, realize synergies, and continue to bring exciting new products to market for our customers.

Speaker #3: The Q2 demonstrated our progress in all those areas. Starting with specialty vehicles, the Rev Group integration is proceeding well, and the segment delivered record earnings performance.

Speaker #3: The teams are executing against the integration plan, and synergy realization is progressing as expected. Our near-term priorities for the segment are to improve throughput, reduce lead times, and expand capacity in targeted product categories.

Speaker #3: During the quarter, we made significant progress with the expansion of our ladder truck plant in Ocala, Florida, and we're nearing completion of the expansion in Brandon, South Dakota.

Speaker #3: The Brandon investment is intended to increase capacity of the S-180 semi-custom pumper and further reduce lead times, directly supporting our longer-term growth objectives. We expect the first deliveries from our Brandon expansion within the Q4.

Speaker #3: In environmental solutions, ESG is making progress with its ongoing manufacturing efficiency improvements in an already world-class facility. In utilities, we are aggressively ramping up shipments to keep up with the accelerating demand and our executing our planned capacity expansion.

Speaker #3: The Brandon investment is intended to increase capacity of the S-180 semi-custom pumper and further reduce lead times directly supporting our longer-term growth objectives. We expect the first deliveries from our Brandon expansion within the Q4.

Speaker #3: Utilities also introduced the TRX product line, including 4 different models with different working heights, eliminating the need for a commercial driver's license. Giving our customers more flexibility to operate their fleet.

Speaker #3: The product line is an industry-first, with a production unit of a 50-foot aerial on a Class 6 chassis. In aerials, the team continued to navigate tariff headwinds and execute mitigation efforts in their supply chain and improve operational efficiency.

Speaker #3: As expected, our price-cost position improved in the Q2, and we believe the full year will be price-cost neutral based on the visibility we have within our backlog and our ongoing cost-out out actions.

Speaker #3: The product line is an industry-first with a production unit of a 50-foot aerial on a Class 6 chassis. In aerials, the team continued to navigate tariff headwinds and execute mitigation efforts in their supply chain and improve operational efficiency.

Speaker #3: Before turning to our 2026 guidance, let me provide an update on our strategic review of the aerial segment. We are pleased with the progress we are making.

Speaker #3: We have interest from multiple parties in our working towards an outcome that maximizes value for our shareholders. We do not have any specific details to share at this time, but we will update you as the process unfolds.

Speaker #3: Based on our Q2 performance, our backlog coverage and synergy pipeline, we are raising our full-year guidance. The increase reflects strong first-half execution overall, increased volume in aerials, and improved performance in materials processing.

Speaker #3: Before turning to our 2026 guidance, let me provide an update on our strategic review of the aerial segment. We are pleased with the progress we are making.

Speaker #3: We now expect sales of $7.9 to $8.2 billion adjusted EBITDA of $960 to $1 billion, adjusted EPS of $4.70 to $5.10. And with that, I'll turn it over to Jen to walk through the financials in more detail.

Speaker #3: Based on our Q2 performance, our backlog coverage and synergy pipeline, we are raising our full year guidance. The increase reflects strong first-half execution overall, increased volume in aerials, and improved performance in materials processing.

Speaker #2: Thank you, Simon. And good morning, everyone. Let's review our Q2 results, starting with consolidated performance on slide 4. Consolidated sales including the results of specialty vehicles were 2.24 billion.

Speaker #2: Up 751 million. Of 51%, as reported. On a proforma basis, excluding the sale of the claims and Amy West businesses, sales increased 175 million, or 8.5%, with growth across each of our segments.

Speaker #2: Adjusted EBITDA margin was 12% compared to 11.8% on a proforma basis in the prior year. Adjusted EBITDA increased by 26 million driven by healthy demand for our products, operational execution, and realized synergies.

Speaker #2: Up 751 million. Of 51% as reported. On a pro forma basis, excluding the sale of the claims and a Meet West businesses, sales increased 175 million, or 8.5%, with growth across each of our segments.

Speaker #2: And spike-ups significantly higher tariffs compared to those times last year. Adjusted earnings per share was $1.37, including a net benefit of $8 million, from IEPA tariff refunds, plus a one-time unfavorable customs-related approval.

Speaker #2: Adjusted EBITDA margin was 12% compared to 11.8% on a pro forma basis in the prior year. Adjusted EBITDA increased by 26 million driven by healthy demand for our products, operational execution, and real-life synergies.

Speaker #2: Working capital continues to improve. Net working capital declined to 15.2% of sales. Compared to 16.7% in the Q1, and 22.8% a year ago. Primarily driven by the merger with Rev Group.

Speaker #2: And spike-ups significantly higher tariffs compared to those times last year. Adjusted earnings per share was $1.37, including a net benefit of 8 million, from an EPA tariff refund plus a one-time unfavorable customs-related approval.

Speaker #2: We generated $128 million of operating cash flow, and $101 million of free cash flow within the quarter. Net debt ended the quarter with 2.28 billion, including $407 million of cash on hand, and net leverage improved to 2.3x, net debt of 12 months adjusted EBITDA.

Speaker #2: Working capital continues to improve. Net working capital declined to 15.2% of sales. Compared to 16.7% in the Q1, and 22.8% a year ago. Primarily driven by the merger with Rev Group.

Speaker #2: We also returned $20 million to shareholders through dividends in the quarter. Turning to segment performance, starting with environmental solutions on slide 5. Environmental solutions sales increased by 26 million of $5.9% versus the prior year, to $456 million.

Speaker #2: We generated $128 million of operating cash flow and $101 million of free cash flow within the quarter. Net debt ended the quarter with $2.28 billion, including $407 million of cash on hand, and net leverage improved to $2.3x, net debt of 12 months adjusted EBITDA.

Speaker #2: Growth was driven by strong demand and increased shipments and tariff utilities, which more than offset temporary softness in demand for ESG. Despite the temporary unfavorable mix, the segment reported an adjusted EBITDA margin of 17.5%, down 250 basis points year over year, due to the aforementioned unfavorable mix.

Speaker #2: Coupled with production wrap-up inefficiencies, and lower exhaustion in ESG. Moving to material processing on slide 6. Materials processing sales increased 11.1% of 47 million to $464 million.

Speaker #2: Driven by healthy demand, particularly for mobile crashes in the US, supported by infrastructure, data centers, and other industrial projects. Adjusted EBITDA margin expanded 440 basis points to 18.8%, reflecting a favorable product mix, and price-cost discipline.

Speaker #2: Coupled with production wrap-up and efficiencies, a lower adsorption in ESG. Moving to material processing on slide 6. Materials processing sales increased 11.1% of 47 million to $464 million.

Speaker #2: One-time benefits contributed approximately $180 basis points to the margin performance within the quarter. Turning to specialty vehicles on slide 7. Specialty vehicles sales increased 38 million, of 6.2% to $650 million driven by improved throughput and fire.

Speaker #2: Driven by healthy demand, particularly for mobile crashes in the US, supported by infrastructure, data centers, and other industrial projects. Adjusted EBITDA margin expanded 440 basis points, to 18.8%, reflecting a favorable product mix, and price-cost discipline.

Speaker #2: As the adjusted EBITDA margin improved 210 basis points to 14.5% compared to last year, reflecting favorable mix, operational efficiencies, and price realization, partially offset by cost inflation.

Speaker #2: One-time benefits contributed approximately $180 basis points to the margin performance within the quarter. Turning to specialty vehicles on slide 7. Specialty vehicle sales increased 38 million, of 6.2% to $650 million driven by improved throughput and fire.

Speaker #2: Turning to aerials and slide 8. Aerials sales increased 10.9% year over year to $673 million, driven by demand from national accounts that supported by mega projects.

Speaker #2: As the adjusted EBITDA margin improved 210 basis points, to 14.5% compared to last year, reflecting favorable mix, operational efficiencies, and price realization. Partially offset by cost inflation.

Speaker #2: Adjusted EBITDA margin was 5.7% in the quarter, down 340 basis points from last year, which had significantly less tariff impact. As expected, aerials improved margins sequentially in the Q2 by 560 basis points, reflecting improving price-cost dynamics and higher production volume.

Speaker #2: Turning to aerials on slide 8. Aerials sales increased 10.9% year over year, to $673 million, driven by demand from national accounts that supported by mega projects.

Speaker #2: We are on track to be price-cost neutral for the year. The IEPA refunds we received in the quarter will offset by a one-time unfavorable customs approval.

Speaker #2: Adjusted EBITDA margin was 5.7% in the quarter, down 340 basis points from last year, which had significantly less tariff impact. As expected, aerials improved margin sequentially in the Q2 by 560 basis points, reflecting improving price-cost dynamics and a higher production volume.

Speaker #2: Please note tariffs do not accrue for future refunds not yet received. Turning to bookings on slide 9. As Simon mentioned, consolidated Q2 bookings were $2 2 billion, up 400 million or 25% year over year on a proforma basis.

Speaker #2: We are on track to be price-cost neutral for the year. The idea for refunds we received in the quarter will offset by a one-time unfavorable customs approval.

Speaker #2: And environmental solutions bookings were $417 million, an increase of 18% versus last year's quarter, mostly driven by utilities. We expect bookings and utilities to be solid for years to come, and our focus is to ramp throughput to meet the accelerating demands.

Speaker #2: Please note tariffs do not accrue for future refunds not yet received. Turning to bookings on slide 9. As Simon mentioned, consolidated Q2 bookings were $2 billion, up 400 million or 25% year over year on a pro forma basis.

Speaker #2: And ESG, bookings were up year over year, which could indicate momentum in building going into 2027. Having said that, given the conversations with our customers and suppliers, we no longer expect a material second-half pre-buy of RCVs ahead of 2027 EPA regulations.

Speaker #2: As a result, we're updating our second-half ES segment revenue outlook to low single-digit growth. Materials processing Q2 bookings of $469 million increased 18% on a proforma basis.

Speaker #2: And ESG, bookings were up year over year, which could indicate momentum building going into 2027. Having said that, given the conversations with our customers and suppliers, we no longer expect a material second-half pre-buy of RCVs ahead of 2027 EPA regulations.

Speaker #2: While aggregates demand was the main driver, bookings also increased meaningfully in material handling. MP ended the quarter with $599 million of backlog, up 232 million, of 63% year over year, supporting an updated full-year outlook of low double-digit sales growth.

Speaker #2: As a result, we're updating our second-half ES segment revenue outlook to low single-digit growth. Materials processing Q2 bookings of $469 million increased 18% on a pro forma basis.

Speaker #2: This implies high single-digit year-over-year growth in the second half. Specialty vehicles bookings were $588 million in the quarter, up 9% versus the prior year, led by the previously announced City of Chicago order.

Speaker #2: While aggregate demand was the main driver, bookings also increased meaningfully in material handling. MP ended the quarter with $599 million of backlog, up 232 million, of 63% year over year, supporting an updated full-year outlook of low double-digit sales growth.

Speaker #2: Increased throughput drove higher sales and lowered the segment's backlog, as intended. We expect the segment will execute against this backlog, and our outlook remains high single-digit revenue growth for the year.

Speaker #2: Finally, aerials Q2 bookings of $530 million reflect 71% growth versus last year, particularly from national customers tied to large funded projects and infrastructure and non-residential construction.

Speaker #2: Increased throughput drove higher sales and lowered the segment's backlog, as intended. We expect the segment will execute against its backlog and our outlook remains high single-digit revenue growth for the year.

Speaker #2: Aerials ended the quarter with $914 million backlog, an increase of 200 million or 28% versus the prior year. Given aerials' first-half performance, healthy bookings, and backlog visibility, we're updating the full-year outlook to low double-digit sales growth.

Speaker #2: Now turn to slide 10 for our update to the consolidated 2026 outlook. We're operating in a complex environment with many macroeconomic variables and geopolitical uncertainties.

Speaker #2: Aerials ended the quarter with $914 million backlog. An increase of 200 million or 28% versus the prior year. Given aerials' first-half performance, healthy bookings, and backlog visibility, we're updating the full-year outlook to low double-digit sales growth.

Speaker #2: And results could change negatively or positively. The outlook we're providing today reflects our current portfolio and does not account for any costs to achieve the synergies purchase accounting adjustments or other non-recurring items.

Speaker #2: Now turn to slide 10 for our update to the consolidated 2026 outlook. We're operating in a complex environment with many macroeconomic variables and geopolitical uncertainties.

Speaker #2: Today, we are increasing our outlook for the year with 2026 sales expected to grow approximately 7.4% at a meet point on a proforma basis to a range of $7.9 to $8.2 billion.

Speaker #2: And results could change negatively or positively. The outlook we're providing today reflects our current portfolio and does not account for any cost to achieve the synergies purchase accounting adjustments or other non-recurring items.

Speaker #2: We now expect proforma EBITDA to grow by approximately $124 million, of 14.5% year over year, to between $960 million and $1 billion. Our 12.2% EBITDA margins at the meet point.

Speaker #2: Today, we are increasing our outlook for the year with 2026 sales expected to grow approximately 7.4% at a meet point on a pro forma basis to a range of $7.9 to $8.2 billion.

Speaker #2: Included in our EBITDA outlook is approximately $28 million of synergies that we're well on our way to realizing. Updated guidance reflects 22% incremental adjusted EBITDA margin conversion at a meet point, proforma despite a dynamic tariff environment.

Speaker #2: We now expect pro forma EBITDA to grow by approximately $124 million, of 14.5% year over year, to between $960 million and $1 billion. Of $12.2% EBITDA margin at the meet point.

Speaker #2: We anticipate interest and other expenses to approximately $185 million, based on average debt outstanding of $2.7 billion. The effective tax rate for the full year is still expected to be 21%, despite favorability in the first half of the year.

Speaker #2: Included in our EBITDA outlook is approximately $28 million of synergies that were well on our way to realizing. Updated guidance reflects 22% incremental adjusted EBITDA margin conversion at a meet point, pro forma despite a dynamic tariff environment.

Speaker #2: We now expect 2026 EPS between $4.70 and $5.10, with slightly more earnings per share in the third quarter, and a typical seasonal step-down expected in the fourth quarter.

Speaker #2: We anticipate interest and other expenses to approximately $185 million based on average debt outstanding of $2.7 billion. The effective tax rate for the full year is still expected to be 21% despite favorability in the first half of the year.

Speaker #2: Please note the share count for the second half will be approximately $114 million. Finally, we expect to deliver $300 to $350 million of free cash flow in 2026.

Speaker #2: We now expect 2026 EPS between $4.70 and $5.10, with slightly more earnings per share in the third quarter and a typical seasonal step-down expected in the fourth quarter.

Speaker #2: With that, our turnover assignment for this closing remarks.

Speaker #1: Thanks, Jen. I would like to thank everyone again for joining today's call just to quickly summarize what we shared today. We see strong demand from most of the markets we compete in, and we see clear momentum from the execution of our strategy.

Speaker #2: Please note the share count for the second half will be approximately $114 million. Finally, we expect to deliver $300 to $350 million of free cash flow in 2026.

Speaker #1: The Rev integration is progressing as planned. Our synergy pipeline is building, and the new specialty vehicles segment is improving throughput quarter after quarter. Environmental solutions is well positioned with its manufacturing know-how, digital offering, and multi-year demand in utilities.

Speaker #2: With that, our turnover back to Simon for his closing remarks.

Speaker #1: Materials processing is executing effectively, and together with aerials, benefiting from investments in infrastructure, data centers, manufacturing, and overall power generation. We are raising our full-year guidance because of the performance we delivered in the first half and the visibility we have in the backlog and the momentum we're building.

Speaker #1: The Rev integration is progressing as planned. Our synergy pipeline is building, and the new specialty vehicle segment is improving throughput quarter after quarter. Environmental solutions is well positioned with its manufacturing know-how, digital offering, and multi-year demand in utilities.

Speaker #1: Taken together, these results demonstrate the strength of the new TEREX, a more diversified, more resilient, and higher-performing company with clear opportunities to grow, improve margins, generate cash, and create value.

Speaker #1: Materials processing is executing effectively, and together with aerials benefiting from investments in infrastructure, data centers, manufacturing, and overall power generation. We are raising our full-year guidance because of the performance we delivered in the first half and the visibility we have at the backlog and the momentum we're building.

Speaker #1: I want to thank our global team members for their dedication, our customers and dealers for their partnership, and our shareholders for their confidence in TEREX.

Speaker #1: And with that, we'll turn the call over to the operator for questions.

Speaker #3: We will now begin the question and answer session. Please limit yourself to one question and one follow-up. If you would like to ask a question, please press *1 to raise your hand.

Speaker #3: To withdraw your question, press *1 again. We ask that you pick up your handset when asking a question to allow for optimal sound quality.

Speaker #1: I want to thank our global team members for their dedication, our customers and dealers for their partnership, and our shareholders for their confidence in TEREX.

Speaker #3: If you are muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. Your first question is from the line of Mig Dobre from Baird.

Speaker #1: And with that, we'll turn the call over to the operator for questions.

Speaker #3: We will now begin the question and answer session. Please limit yourself to one question and one follow-up. If you would like to ask a question, please press *1 to raise your hand.

Speaker #3: Your line is open. Please go ahead.

Speaker #4: Go ahead.

Speaker #3: To withdraw your question, press *1 again. We ask that you pick up your handset when asking a question to allow for optimal sound quality.

Speaker #5: Thank you very much. Good morning, everyone. Maybe I would like to start with a double-clicking a little bit on environmental solutions here. Can you give us a little perspective as to what's embedded in that low single-digit revenue outlook, revenue growth outlook, I should say, how you think about the refuse business versus utility?

Speaker #3: If you are muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. Your first question is from the line of Mig Dobre from Baird.

Speaker #3: Your line is open. Please go ahead.

Speaker #5: And I guess the second part here, just the guidance seems to imply compression revenue compression in the second half. How should we think about the effect that would have on margins for this segment?

Speaker #4: Go ahead.

Speaker #5: Thank you very much. Good morning, everyone. Maybe I would like to start with double-clicking a little bit on environmental solutions here. Can you give us a little perspective as to what's embedded in that low single-digit revenue outlook, revenue growth outlook, I should say, how you think about the refuse business versus utility?

Speaker #1: Yeah. Good morning, Mig. I'll take the first one, and I'll let Jen weigh in on your second question. So yeah, from a top-line perspective, for the segment overall, obviously, strong bookings, 18% year over year, sequential also growth in bookings, 20% versus prior quarter.

Speaker #1: I know you asked about refuse, but part of environmental solutions is obviously also utilities. We see a lot of accelerating demand in utilities, and we're expanding capacity to keep up.

Speaker #1: In ESG, which is the refuse collection vehicle business within environmental solutions, we're actually saw bookings were up as well year over year, and sequentially.

Speaker #1: And we do see momentum building for 2027. And when we look at when we look at that business, we look at booking strengths, we look at fleet utilization, we look at telematics, we look at what customers are telling us.

Speaker #1: And we clearly see that in the first half, maybe even starting late last year, there was probably a little bit too much fleet in the system.

Speaker #1: In ESG, which is the refuse collection vehicle business within environmental solutions, we're actually saw bookings were up as well year over year and sequentially.

Speaker #1: It's not that America is producing less waste or that there are less garbage trucks on the road, but clearly, there was a little bit of re-syncing that needed to happen between supply and demand.

Speaker #1: And we do see momentum building for 2027. And when we look at that business, we look at booking strength, we look at fleet utilization, we look at telematics, we look at our customers are telling us.

Speaker #1: And we think that that happened in the first half, and there's now mostly behind us as we see bookings coming back up. That's the first piece.

Speaker #1: And we clearly see that in the first half, maybe even starting late last year, there was probably a little bit too much fleet in the system.

Speaker #1: The second piece in our initial guide, we assumed there was going to be some pre-buy activity in the second half, 2026, going into 2027 when the new engine emission regulations come out.

Speaker #1: We now think that that will actually spill over in 2027 as some of those changes are grandfathered and delayed by a couple of months.

Speaker #1: And we think that that happened in the first half, and there's now mostly behind us as we see bookings coming back up. That's the first piece.

Speaker #1: So we don't see as much of an uptick in pre-buys in the second half as originally assumed. We still think that bookings will sequentially recover.

Speaker #1: We still think that 2027 is most likely a growth year for refuse. We just see it being delayed by a couple of months because of the delayed in pre-buys.

Speaker #1: We now think that that will actually spill over in 2027 as some of those changes are grandfathered and delayed by a couple of months.

Speaker #1: Jen, you want to weigh in on the margins?

Speaker #4: Hey, good morning, Mig. So from the margin perspective, we expect I would say for Q3 to be very similar based on what Q2, given that it's going to be driven at top-line growth is going to be continue to be driven by the utilities.

Speaker #1: So we don't see as much of an uptick in pre-buys in the second half as originally assumed. We still think that bookings will sequentially recover.

Speaker #4: And they have a very different margin profile. But we do expect that from Q3 to Q4 to be a step-up in the margin at the segment level driven by favorable product makes.

Speaker #1: We still think that 2027 is most likely a growth year for refuse. We just see it being delayed by a couple of months because of the delayed in pre-buys.

Speaker #1: Jen, you want to weigh in on the margins?

Speaker #2: Hey, good morning, Mig. So from the margin perspective, we expect I would say for Q3 to be very similar based on what Q2, given that it's going to be driven the top-line growth is going to be continue to be driven by the utilities.

Speaker #4: Favorable customer makes. And then the inefficiencies that I mentioned in my prepared remarks, especially in utilities, to be behind us. So those are the big three drivers in terms of the step-up in the margin.

Speaker #5: I appreciate that. That's helpful. And my follow-up, maybe on specialty vehicles and this is kind of a bigger picture question. As you're starting to operate this asset and working with the rev team, I'm curious as to what you're discovering in terms of opportunities for either manufacturing efficiencies or being able to use some of the scale that TEREX has that could bring to this business on a go-forward basis.

Speaker #2: And they have a very different margin profile. But we do expect that from Q3 to Q4 to be a step-up in the margin at the segment level driven by favorable product makes, favorable customer mates, and then the inefficiencies that I mentioned in my prepared remarks, especially in utilities to be behind us.

Speaker #2: So those are the big three drivers in terms of the step-up in the margin.

Speaker #5: I appreciate that. That's helpful. And my follow-up, maybe on specialty vehicles and this is kind of a bigger picture question. As you're starting to operate this asset and working with the rev team, I'm curious as to what your discovering in terms of opportunities for either manufacturing efficiencies or being able to use some of the scale that TEREX has that could bring to this business on a go forward basis.

Speaker #5: And I do understand that you have communicated on the synergies near term and also the capacity additions that you have. So my question, I guess, extends beyond that, if possible.

Speaker #5: Thank you.

Speaker #1: Yeah. I'll let Jen talk about the synergies. But yeah, very pleased with how the integration is going. It's been five months now. We're very pleased that they booked a record quarter in terms of EBITDA performance.

Speaker #5: And I do understand that you have communicated on the synergies near term and also the capacity additions that you have. So my question, I guess, extends beyond that, if possible.

Speaker #1: And Mig, you know this business. You know the momentum that that team was building and has been building over the last two to three years before we merged with Rev.

Speaker #5: Thank you.

Speaker #1: So we were obviously very keen and very focused on making sure we would maintain that momentum, that continuous improvement momentum, if you will. And that's exactly what has been happening so far in the first five months.

Speaker #1: It's the exact same leadership team, operationally, that runs SV today that was running Rev before the merger. And we continue to improve. We continue to improve throughput.

Speaker #1: And Mig, you know this business. You know the momentum that that team was building and has been building over the last two to three years before we merged with Rev.

Speaker #1: We were up again in units produced in the second quarter. But then to your point, with the acquisition of ESG, we think we acquired one of the best specialty vehicle manufacturers in the industry.

Speaker #1: It's the exact same leadership team, operationally, that runs SV today that was running Rev before the merger. And we continue to improve. We continue to improve throughput.

Speaker #1: And so what we see what our game plan is and has been, and will be, is we see that manufacturing excellence in high-mix, low-volume of ESG now helping TEREX utilities.

Speaker #1: So you see TEREX utilities margins coming up. And we expect that same manufacturing know-how to help SV going forward. At the end of the day, it's all about continuous improvement.

Speaker #1: And continue to try to reduce the number of hours per truck. But the most immediate focus is on just making sure we keep that momentum that we have in SV.

Speaker #1: And so what we see, what our game plan is and has been, and will be, is we see that manufacturing excellence in high-mix, low-volume of ESG now helping TEREX utilities.

Speaker #1: And we're very pleased with how the integration is going and how the synergy pipeline is building. Jen, any context?

Speaker #4: Yeah. So Mig, from a financial standpoint, we committed that 28 million of synergies for the 11 months post-merger we have and they are largely corporate.

Speaker #1: So you see TEREX utilities margins coming up. And we expect that same manufacturing know-how to help SV going forward. At the end of the day, it's all about continuous improvement and continue to try to reduce the number of hours per truck.

Speaker #4: And that's what I said in my previous call. We have real life about 20% of that in Q2. With a very good visibility of converting the remaining 80% in the second half, the year, with a sequential step-up quarter over quarter.

Speaker #1: But the most immediate focus is on just making sure we keep that momentum that we have in SV. And we're very pleased with how the integration is going and how the synergy pipeline is building.

Speaker #1: Jen, any context?

Speaker #4: So like what Simon said, we're very confident of the integration that now translates to synergies that drops through the bottom line.

Speaker #2: Yeah. So Mig, from a financial standpoint, we committed that 28 million of synergies for the 11 months post-merger we have and they are largely corporate.

Speaker #2: And that's what I said in my previous call. We have realized about 20% of that in Q2. With a very good visibility of converting the remaining 80% in the second half, those year with a sequential step-up quarter over quarter.

Speaker #5: Next question, please.

Speaker #3: Your next question. Your next question comes from the line of Jamie Cook at Truest Securities. Your line is now open. Go ahead.

Speaker #5: Hi. Good morning. I guess two questions. First one on specialty. Can you just sort of elaborate what you're seeing in the fire truck business?

Speaker #2: So like what Simon said, we're very confident of the integration that now translates to synergies that drops through the bottom line.

Speaker #5: I think backlog for total specialty was down about 1%. Your peers are experiencing declines. Just your growth has been better. So if you could elaborate there, in terms of backlog orders and the outlook for fire truck.

Speaker #1: Next question, please.

Speaker #5: And then my second question is on aerials. Just trying to understand where the margins in the quarter were relative to your expectations and given we're raising the outlook for aerials, how are you thinking about the setup for margins in the back half of the year?

Speaker #3: Your next question? Your next question comes from the line of Janie Cook at Truist Securities. Your line is now open. Go ahead.

Speaker #5: Hi. Good morning. I guess two questions. First one on specialty. Can you just sort of elaborate what you're seeing in the fire truck business?

Speaker #5: Thank you.

Speaker #1: All right. I'll talk about the fire truck backlog and then Jen can talk about aerials margins. Yeah. So quite honestly, Jamie, we want that backlog to come down because obviously our customers are waiting for a very long time for their truck.

Speaker #5: And then my second question is on aerials. Just trying to to understand where the margins in the quarter were relative to your expectations and given we're raising the outlook for aerials, how are you thinking about the setup for margins in the back half of the year?

Speaker #1: And we are focusing on ramping up continue to ramp up our throughput, which is what we're doing. And we're making another step in Q4 when our capacity in Ocala comes online for ladder trucks.

Speaker #5: Thank you.

Speaker #1: All right. I'll talk about the fire truck backlog and then Jen can talk about aerials margins. Yeah. So quite honestly, Janie, we want that backlog to come down because obviously our customers are waiting for a very long time for their truck.

Speaker #1: And our capacity for S180 pumpers, which is a low lead time product, if you will, a semi-custom product. When that capacity comes online in Brandon South Dakota, so we're pleased with our bookings.

Speaker #1: We as I mentioned, we secured a large order from the city of Chicago. Our bookings continue to grow, but quite frankly, what's more important for us and what you should be expecting if the backlog is to come down is that actually our book-to-bill should stay below 100% in SV just by the virtue of lead times improving.

Speaker #1: And our capacity for S180 pumpers which is a low lead time product, if you will, a semi-custom product. When that capacity comes online in Brandon South Dakota, so we're pleased with our bookings.

Speaker #1: And that's the mission, is to get our lead times down. And we think a more sustainable number for us and for the industry is to get lead times back to about a year or so.

Speaker #1: And that's the mission. And we think that that's what the trend will be over the next 24 months or so, where you will see a consistent below 100% book-to-bill just because lead times are improving.

Speaker #4: And Jamie, good morning. On aerials Q2, they came in better than expected. As I mentioned, my prepared remarks in Q2, we took it on favorable customer pools in aerials, without that accrual we would have achieved 8.3% of adjusted EBITDA.

Speaker #1: And that's the mission is to get our lead times down. And we think a more sustainable number for us and for the industry is to get lead times back to about a year or so.

Speaker #1: And that's the mission. And we think that that's what the trend will be over the next 24 months or so where you will see a consistent below 100% book-to-bill just because lead times are improving.

Speaker #4: Overall, it's going to be from a year-over-year perspective still a relatively top con because last year while the Liberation Day was actually April, but we didn't really see the P&L impact hitting us until June.

Speaker #2: And Janie, good morning. On aerials questions, from a margin perspective for Q2, they came in better than remarks in Q2, we took it on favorable customer pools in aerials, without that accrual we would have achieved 8.3% of adjusted EBITDA.

Speaker #4: Last year, so it was one month of tariff impact last year, versus three months of tariff impact this quarter. What we believe that it's important that we show from a like-for-like basis with the same kind of tariff impact as a sequential improvement that I mentioned in my prepared remarks of 560 basis points quarter over quarter sequential improvement.

Speaker #2: Overall, it's going to be from a year-over-year perspective still a relatively top con because in our last year while the liberation day was actually April, but we didn't really see the P&L impact hitting us until June.

Speaker #4: And that is despite an unfavorable mix, like what Simon mentioned. We saw more nationals coming in in terms of our shipments as well for Q2.

Speaker #2: Last year. So it was one month of tariff impact last year, versus three months of tariff impact this quarter. What we believe that it's important that we show from a like-for-like basis with the same kind of tariff impact as a sequential improvement that I mentioned in my prepared remarks of 560 basis point, quarter over quarter sequential improvement.

Speaker #4: For the second half of the year, we do expect that we continue to see a quarter over quarter improvement in our margin expansion from Q2 to Q3.

Speaker #4: And a seasonal step-down from Q3 to Q4 driven by less scheduled deliveries. We expect that the that we will be able to continue to drive the improved price-cost dynamic, such that we have full-year price-cost neutral for the aerials business.

Speaker #2: And that is despite an unfavorable mix. Like what Simon mentioned, we saw more nationals coming in in terms of our shipments as well for Q2.

Speaker #2: For the second half of the year, we do expect that we continue to see a quarter over quarter improvement in our margin expansion from Q2 to Q3.

Speaker #4: And year over year, that taking into consideration that with a higher tariff because this year we'll have 12 months versus last year 7 months, plus the one-time customer approval, that's actually a 17 million headwinds that we're actually absorbing.

Speaker #2: And a seasonal step-down from Q3 to Q4 driven by less scheduled deliveries. We expect that the that we will be able to continue to drive the improved price cost dynamic, such that we have full-year price cost neutral for the aerials business.

Speaker #4: And driving the cost actions and also price-cost neutrality throughout the rest of the year.

Speaker #1: Yeah. We just see a lot of positive momentum in aerials purely from a top-line perspective. And we see that continuing into 2027. And so our focus is just on sequential improvements.

Speaker #2: And year over year, that taking into consideration that with a higher tariff because this year we'll have 12 months versus last year 7 months, plus the one-time customer approval, that's actually a 17 million payment that we're actually absorbing.

Speaker #1: And that's what the theme is delivering at the moment.

Speaker #5: Thank you.

Speaker #4: You're welcome.

Speaker #1: Thanks, Jamie.

Speaker #3: Your next call is from the line of Angel Castillo from Morgan Stanley. Your line is now open. Please go ahead.

Speaker #2: And driving the cost actions and also price cost neutrality throughout the rest of the year.

Speaker #1: Yeah. We just see a lot of positive momentum in aerials purely from a top lines perspective. And we see that continuing into 2027. And so our focus is just on sequential improvement.

Speaker #2: The aerials string here. Just you talked about some of the incremental bookings, largely being from nationals. So just I guess a couple of things.

Speaker #1: And that's what the theme is delivering at the moment.

Speaker #2: One, what are you hearing from the independents timing or just general kind of demand underlying those customers? And the implications that might have to your margins here in the second half.

Speaker #5: Thank you.

Speaker #2: You're welcome.

Speaker #1: Thanks, Janie.

Speaker #3: Your next call is from the line of Angel Castillo from Morgan Stanley. Your line is now open. Please go ahead.

Speaker #2: And then separately, are you seeing anything as we think about the nationals in particular, is this demand starts to pick up from their CapEx?

Speaker #2: Any ability to take market share or just general shifts in market share there?

Speaker #4: On the aerials, string here. Just you talked about some of the incremental bookings, largely being from nationals. So just I guess a couple of things.

Speaker #1: Yeah. So on the independents, and we said we saw the first signs in the first quarter. And we continue to see those in the second quarter, where independents booking sequentially continue to improve.

Speaker #4: One, what are you hearing from the independents timing or just general kind of demand underlying those customers? And the implications that might have to your margins here in the second half.

Speaker #1: And as you know, Angel, they're a little bit more tied to private construction and commercial jobs, which tend to be more interest rates and input cost sensitive.

Speaker #4: And then separately, are you seeing anything as we think about the nationals in particular, is this demand starts to pick up from their CapEx?

Speaker #4: Any ability to take market share or just general shifts in market share there?

Speaker #1: And so we'll have to see kind of what the long-term impact is going to be on inflation and so on. And we quite frankly think that Europe is probably in a little bit more of a vulnerable spot where we see some markets kind of hinting with stagflation.

Speaker #1: Yeah. So on the independents, and we said we saw the first signs in the first quarter. And we continue to see those in the second quarter where independents booking sequentially continue to improve.

Speaker #1: We think the we see the US market as being a lot more resilient. And as such, we think that that independent bookings pattern will continue to improve.

Speaker #1: And as you know, Angel they're a little bit more tied to private construction and commercial jobs, which tend to be more interest rates and input cost sensitive.

Speaker #1: So that's encouraging. But as Jen said, the nationals just grew faster. Then we had originally assumed in the first half. And that's where the revised top-line guide is coming from.

Speaker #1: And with that, obviously, comes a little bit of unfavorable mix. Yeah. In terms of market share, we typically don't talk about market share on public calls.

Speaker #1: We think the we see the US market as being a lot more resilient. And as such, we think that that independent bookings pattern will continue to improve.

Speaker #1: I do believe in the Genie value prop. And I know I sound biased, but I do believe the team has made tremendous progress with their value proposition, the customers-centric approach, and I do believe they are on a great run commercially.

Speaker #1: So that's encouraging. But as Jen said, the nationals just grew faster. Then we had originally assumed in the first half. And that's where the revised top line guide is coming from.

Speaker #1: So I'll just leave it there for now.

Speaker #1: And with that, obviously comes a little bit of unfavorable mix. Yeah. In terms of market share, we typically don't talk about market share on public calls.

Speaker #2: That's helpful. And then. 2027, dynamics that you mentioned essentially led to the push out of that pre-buy on the refuse. Very good color there.

Speaker #1: I do believe in the Genie value prop. And I know I sound biased. But I do believe the team has made tremendous progress with their value proposition, the customers-centric approach.

Speaker #2: But just curious at a broader perspective, just do those changes including the penalties or phase kind of rollout of those engines from the OEMs, does that have any implications on one your ability to kind of standardize certain equipment or certain vehicles on the fire side?

Speaker #1: And I do believe they are on a great run commercially. So I'll just leave it there for now.

Speaker #2: I think one of the strategies was to be able to kind of create a more standardized vehicle around some of these new engines. I don't know if it's the X10.

Speaker #4: That's helpful. And then. 2027, dynamics that you mentioned essentially led to the push out of that pre-buy on the refuse. Very good color there.

Speaker #2: But just curious if any implications on the ability to actually deliver on those on the kind of standardization. And then separately, just as we think about any potential penalties or implications of cost of those engines, does that have any material impact on your financials or is that just all a pass-through and any ability to kind of get that across?

Speaker #4: But just curious at a broader perspective, just do those changes including the penalties or phase kind of rollout of those engines from the OEMs, does that have any implications on one your ability to kind of standardize certain equipment or certain vehicles on the fire side?

Speaker #1: So you cut out at the beginning of your question. I assume you're talking about SV?

Speaker #4: I think one of the strategies was to be able to kind of create a more standardized vehicle around some of these new engines. I don't know if it's the X10.

Speaker #2: Yeah. I'm talking just generally about the EPA 27 and the engine implications there to particularly your SV standardization of equipment.

Speaker #4: But just curious if any implications on the ability to actually deliver on those on the kind of standardization. And then separately, just as we think about any potential penalties or implications of cost of those engines, does that have any material impact on your financials or is that just all a pass-through?

Speaker #1: Yeah. Yeah. Yeah. So yeah. So as I said, earlier, is that we think that that's all kind of pushed out a little bit. It's not canceled.

Speaker #4: And any ability to kind of get that across?

Speaker #1: So we still very much think and it's confirmed by multiple sources that the engines switch over will take place in 2027. It will be probably more of a phased approach.

Speaker #1: So you cut out at the beginning of your question. I assume you're talking about SV?

Speaker #4: Yeah. I'm talking just generally about the EPA 27 and the engine implications there to particularly your SV standardization of equipment.

Speaker #1: Some engines to your point, like the X10 or some of the other engines might go sooner or later really depends on what engine platform.

Speaker #1: Yeah. Yeah. Yeah. So yeah. So as I said, earlier, is that we think that that's all kind of pushed out a little bit. It's not canceled.

Speaker #1: Yeah. We knew that this was coming for quite some time. And I need to give the legacy rev team a lot of credit that they kind of started designing on where the puck was going.

Speaker #1: So we still very much think and it's confirmed by multiple sources that the engines switch over will take place in 2027. It will be probably more of a phased approach.

Speaker #1: And so as those engines are being introduced, it will actually allow us to further optimize kind of our bill of material and our designs and our commonality.

Speaker #1: Some engines to your point, like the X10 or some of the other engines might go sooner or later really depends on what engine platform.

Speaker #1: So that will be an efficiency gain for us. I think that was the first part of your question. And then Jen, you?

Speaker #1: Yeah. We knew that this was coming for quite some time. And I need to give the legacy rev team a lot of credit that they kind of started designing on where the puck was going.

Speaker #4: And Angel, from a financial standpoint, there's no material impact to tariffs. As what Simon mentioned and as the those benefits will be in 2027 when the EPA regulation gets affected, you're right that the cost of pass-through from OEM.

Speaker #1: And so as those engines are being introduced, it will actually allow us to further optimize kind of our bill of material and our designs and our commonality.

Speaker #1: So that will be an efficiency gain for us. I think that was the first part of your question. And then Jen, you?

Speaker #4: So we don't bear them. In ES, if and when that EPA gets affected, there's some potential benefit again with regards to suppliers having additional flexibility no impact from a financial standpoint for areas and MP on this EPA regulation.

Speaker #2: And Angel, from a financial standpoint, there's no material impact to tariffs. As what Simon mentioned and SV, those benefits will be in 2027 when the EPA regulation gets affected.

Speaker #4: Just because there are largely also the proposals on ongoing. So hopefully that helps.

Speaker #2: You're right that the cost is passed through from OEM. So we don't bear them. In ES, if and when that EPA gets affected, there's some potential benefit again.

Speaker #3: Your next question is from the line of Tim Pine at Raymond James. Your line is now open. Please go ahead.

Speaker #5: Thank you. Good morning. First question is just on the MP segment. If we think about kind of the margin progression for the year, I believe the expectation coming into the year as we go through the year.

Speaker #2: With regards to suppliers having additional flexibility, no impact from a financial standpoint for areas and MP on this EPA regulation. Just because they're largely also the proposals on August.

Speaker #5: But obviously, you've got a bit of a bump here in the second quarter. If we exclude the 180 basis point benefit that you called out, is that still a reasonable assumption or were there some factors that may have pulled some of the performance into the second quarter?

Speaker #2: So hopefully that helps.

Speaker #3: Your next question is from the line of Tim Pine at Raymond James. Your line is now open. Please go ahead.

Speaker #5: Just how are we thinking about the shape for the balance of the year? Is this fair to the

Speaker #4: Hey. Good morning, Tim. Yes. We're very pleased with the MP. I would call it not just Q2, but first half of the year performance.

Speaker #4: As you rightfully said, our Q2 year-over-year margin expansion for MP was 450 basis point, excluding the one-timer. It's still a very strong 270 basis point year-over-year improvement, better than Q1 as well.

Speaker #5: But obviously you've got a bit of a bump here in the second quarter. If we exclude the 180 basis point benefit that you called out, is that still a reasonable assumption or were there some factors that may have pulled some of the performance into the second quarter?

Speaker #4: And that's driven by two factors, mainly on the favorable mix and also a geography mix as well. And price cost disciplined. As we look into the second half of the year, that would say a normalized EBITDA of like that 17% excluding the Q2 one-timers.

Speaker #5: How are we thinking about the shape for the balance of the year? Is this fair of the question?

Speaker #2: Hey. Good morning, Tim. Yes. We're very pleased with the MP I would call it not just Q2, but first half of the year performance.

Speaker #2: As you rightfully said, our Q2 year-over-year margin expansion for MP was 450 basis point. Excluding the one-timer, it's still a very strong 270 basis point year-over-year improvement, better than Q1 as well.

Speaker #4: I would only see potentially a little bit of marginal step down just because we have seen an uptake in the material handling orders. Like what Simon mentioned, and that's from a margin perspective, a little bit lower.

Speaker #2: And that's driven by two factors, mainly on the favorable mates and also geography mates as well. And price positive disciplines. As we look into the second half of the year, that would say anomalized EBITDA of like that 17% excluding the Q2 one-timers.

Speaker #4: So but overall, still a very healthy margin expansion. We expect that the full year from an incremental perspective without the one-timers for MP to be above our normalized incremental margin.

Speaker #1: It's mainly just been a very strong year for MP in terms of execution. They're really executing in a very disciplined manner on price cost.

Speaker #2: I would only see potentially a little bit of marginal step down just because we have seen an uptake in the material handling orders. Like what Simon mentioned, and that's from a margin perspective a little bit lower.

Speaker #1: And that's really helping the segment benefiting from the uptick that they're seeing in bookings.

Speaker #2: So but overall, still a very healthy margin expansion. We expect that the full year from an incremental perspective without the one-timers for MP to be above our normalized incremental margin.

Speaker #5: Okay. Makes sense. And I get it, Simon, you want to keep the comments tight. But just on the review of aerials, I mean, just as investors think about the potential timing of a potential, I don't know, movement on that, is it any sense for I mean, is this a 26 event in terms of an announcement or potentially it slips into next year?

Speaker #1: It's mainly just being a very strong year for MP in terms of execution. They're really executing in a very disciplined manner on price costs.

Speaker #1: And that's really helping the segment benefiting from the uptick that they're seeing in bookings.

Speaker #5: I'm sure there are a number of factors at play here. But just any sense for the timeline that folks should be thinking about? Thank you.

Speaker #5: Okay. Makes sense. And I get it, Simon, you want to keep the comments tight. But just on the review of aerials, I mean, just as investors think about the potential timing of a potential, I don't know, movement on that, is it any sense for, I mean, is this a 26 event in terms of an announcement or potentially it slips into next year?

Speaker #1: Yeah. No. I appreciate the question. Tim, there is no predetermined timeline. We're focused on making the right decision and properly go through this review.

Speaker #1: As I said in my prepared remarks, we're pleased with the progress we're making. We have interest from multiple parties. And we're just laser focused on working towards what is the best outcome for our shareholders.

Speaker #5: I'm sure there are a number of factors at play here. But just any sense for the timeline that folks should be thinking about? Thank you.

Speaker #1: Yeah. No. I appreciate the question, Tim. There is no predetermined timeline. We're focused on making the right decision and properly go through this review.

Speaker #3: Your next question comes from the line of David Raso at Evercore ISI. Your line is now open. Please go ahead.

Speaker #5: Hi. Just a quick clarification on the EPS cadence. Is the thought there sort of just flat sequentially to Q3, Q, and then that step down in 4Q?

Speaker #5: Just want to make sure I understand the framing, and then I'll ask my question.

Speaker #4: Hey, David. Good morning. Yes. Based on our revised guidance and outlook, we have already achieved 48% of our EPS in first half of the year from a quarterly phasing perspective.

Speaker #3: Your next question comes from the line of David Rasso at Evercore ISI. Your line is now open. Please go ahead.

Speaker #4: If you back up the one-time Dutch customer accrual that we have, it's 12.8% of adjusted EBITDA at a tariffs level. So it's fair to say that maybe Q3, very similar kind of profile.

Speaker #5: Hi. Just a quick clarification on the EPS cadence. Is the thought there sort of just flat sequentially to Q3, Q, and then that step down in 4Q?

Speaker #5: Just want to make sure I understand the framing and then I'll ask my question.

Speaker #2: Hey, David. Good morning. Yes. Based on our guidance and outlook, we have really achieved 48% of our EPS in first half of the year from a quarterly phasing perspective.

Speaker #4: And then with a seasonal step down in Q4.

Speaker #5: Thank you. When it comes to the guide raise, because we don't have the exact margin guide by segment, when we think of the revenue guide going up 250 million, but EBITDA only up 15 million the guide, is that solely a function of the mix?

Speaker #2: If you back out the one-time batch customer accrual, that we have it's 12.8% of adjusted EBITDA at a tariffs level. So it's fair to say that maybe Q3, very similar kind of profile.

Speaker #5: Obviously, aerial margins below the other businesses. But just trying to understand if there are other things that change in your view on margins related to a few months ago.

Speaker #5: Thank you.

Speaker #2: And then with a seasonal step down in Q4.

Speaker #4: Yes. And David, you're exactly right. The change, the top-line growth that you see there is primarily driven by our areas coming up from flat to low double digit and our highest, most profitable segment coming down from knit single digit to low single digit.

Speaker #5: Obviously, aerial margins below the other businesses. But just trying to understand if there are other things that change in your view on margins related to a few months ago.

Speaker #4: That mix change is entirely explaining for that drop through in the margin profile. But I would say that even with the revised guide on a year-over-year perspective, at a tariffs level, we are seeing 22% of incremental margin year-over-year on a pro forma basis.

Speaker #5: Thank you.

Speaker #2: Yes. And David, you're exactly right. The change the top line growth that you see there is primarily driven by our areas coming up from flat to low double digit.

Speaker #4: When an all-out three of our four segments are operating at meet to high double digit of EBITDA, while on a year-over-year absorbing close to about significantly higher tariffs and also the customs accrual in total, that number is about 19 million.

Speaker #2: And our highest, most profitable segment coming down from knit single digit to low single digit. That makes change is entirely explaining for that drop through in the margin profile.

Speaker #2: But I would say that even with the revised guide on a year-over-year perspective at a tariffs level, we are seeing 22% of incremental margin year-over-year on a pro forma basis.

Speaker #4: So I would say that that's a very strong performance, 22% incremental full year despite the higher tariffs.

Speaker #5: In summary though, nothing changed negatively in your view. It was truly a mix issue that drove a fairly modest EBITDA bump up for the revenue.

Speaker #2: When an all-out three of our four segments are operating at meet to high double digit of EBITDA while on a year-over-year absorbing close to about significantly higher tariffs and also the customs accrual in total that number is about 19 million.

Speaker #5: Is that a fair conversation?

Speaker #4: Exactly. Exactly. You're right, David.

Speaker #5: Thank you.

Speaker #3: Your next question comes from the line of Kyle Menges at Citigroup. Your line is now open. Please go ahead.

Speaker #2: So I would say that that's a very strong performance, 22% incremental full year despite the higher tariffs.

Speaker #2: Great. Thank you. I wanted to dig into that MP a little bit more and specifically international markets, which are more important for the MP segment than others.

Speaker #5: In summary though, nothing changed negatively in your view. It was truly a mix issue that drove a fairly modest EBITDA bump up for the revenue.

Speaker #2: And just curious, what you're seeing in international markets within MP and any impacts from the Iran conflict and maybe just broadly where would you characterize those markets being at in the cycle?

Speaker #5: Is that a fair conversation?

Speaker #2: Exactly. Exactly. You're right, David.

Speaker #5: Thank you.

Speaker #3: Your next question comes from the line of Kyle Mangus at Citigroup. Your line is now open. Please go ahead.

Speaker #2: And then assuming North America is your most profitable market, is it fair to say that as international markets rebound, there could be somewhat of an unfavorable mix impact?

Speaker #4: Great. Thank you. I wanted to dig into that MP a little bit more and specifically international markets, which are more important for the MP segment than others.

Speaker #1: Hey, Kyle. Thanks for the question. Yeah. So Derek's obviously has changed quite a bit. So 80-plus percent of our revenue is now in North America but to your point, two businesses that have European or overseas exposure is MP and aerials.

Speaker #4: And just curious, what you're seeing in international markets within MP and any impacts from the Iran conflict and maybe just broadly where would you characterize those markets being at in the cycle?

Speaker #4: And then assuming North America is your most profitable market, is it fair to say that as international markets rebound, there could be somewhat of an unfavorable mix impact?

Speaker #1: But even within MP, North America is the largest market. Followed by Europe and then Asia. So the story in MP overseas is Europe started promising in Q1 and then started to cool off a little bit in Q2.

Speaker #1: Hey, Kyle. Thanks for the question. Yeah. So tariffs obviously has changed quite a bit. So 80 plus percent of our revenue is now is in North America but to your point, two businesses that have European or overseas exposure is MP and aerials but even within MP, North America is the largest market followed by Europe and then Asia.

Speaker #1: It's a little bit of a touch and go. Our take on it is that the European economies are just a little bit more sensitive to the current kind of dynamic environment that we're operating in.

Speaker #1: It's more of an export economy versus the US being more of a consumer economy. And so an export economy more sensitive to input costs and rising cost of fuel and inflation and so on.

Speaker #1: So the story in MP overseas is Europe started promising in Q1 and then started to cool off a little bit in Q2. It's a little bit of a touch and go.

Speaker #1: And so we see a little bit of softening, still growth, but a little bit of softening in Europe. But that's baked into the guide that we stop line.

Speaker #1: Our take on it is that the European economies are just a little bit more sensitive to the current kind of dynamic environment that we're operating in.

Speaker #1: India and Australia are the other two large markets. Both of those are actually strong. Australia driven by mining activity, and India driven by infrastructure investments.

Speaker #1: It's more of an export economy versus the US being more of a consumer economy. And so an export economy more sensitive to input costs and rising cost of fuel and inflation and so on.

Speaker #1: And we have a big presence with MP in India, as you know. But we're also have a reasonable presence in Australia. So Australia and India are creative Europe is a little soft.

Speaker #1: And so we see a little bit of softening, still growth, but a little bit of softening in Europe. But that's baked into the guide that we are that we shared for MP stop line.

Speaker #1: And then I would say in terms of margin impact, it's a little bit of a wash I wouldn't give it a blanket summary that all overseas markets are dilutive.

Speaker #1: India, and Australia are the other two large markets, both of those are actually strong. Australia driven by mining activity and India driven by infrastructure investments.

Speaker #1: That's not necessarily the case.

Speaker #1: And we have a big presence with MP in India, as you know. But we're also have a reasonable presence in Australia. So Australia and India are creative Europe is a little soft.

Speaker #2: Okay. That's helpful. And then on aerials, now that it's gaining momentum, returning to growth, just curious if that might change at all how you're thinking about the strategic fit of that business at all and maybe if that's helping demand from potential buyers as well.

Speaker #1: And then I would say in terms of margin impact, it's a little bit of a wash. I wouldn't give it a blanket summary that all overseas markets are dilutive.

Speaker #1: Not really. This is a strategic review. This has obviously long-term implications. We're not going to let one quarter evolve versus another. Let us guide on how we strategically look at this.

Speaker #1: That's not necessarily the case.

Speaker #4: Okay. That's helpful. And then on aerials, now that it's gaining momentum, returning to growth, just curious if that might change at all how you're thinking about the strategic fit of that business at all and maybe if that's helping demand from potential buyers as well.

Speaker #1: Having said that, it's obviously encouraging to see that aerials is cycling up and it's definitely a good problem to have. But no, it doesn't really impact our long-term strategic view on how we perform one quarter versus the next.

Speaker #1: Not really. This is a strategic review. This has obviously long-term implications where we're not going to let one quarter evolves versus another. Let us guide on how we strategically look at this.

Speaker #3: Your next question is from the line of Steve Volkmann from Jefferies. Your line is now open. Please go ahead.

Speaker #5: Hi. Good morning, guys. I just wanted to circle back to the capacity additions that you're doing in fire, I guess, and utility. I don't know if there's others happening as well.

Speaker #5: But when do we sort of expect those to come online and kind of get up to their normal run rates?

Speaker #3: Your next question is from the line of Steve Volkmann from Jefferies. Your line is now open. Please go ahead.

Speaker #1: I would say 2027 for normal run rates. I would say in utilities, we still have a little bit of unfavorable absorption because we're ramping up.

Speaker #5: Hi. Good morning, guys. I just wanted to circle back to the capacity additions that you're doing in FHIR, I guess, and utility. I don't know if there's others happening as well.

Speaker #1: But by the end of the year, in Q4 and certainly going into 2027, we should get into that in a favorable sweet spot in terms of favorably absorbing the assets that we're putting in place.

Speaker #5: But when do we sort of expect those to come online and kind of get up to their normal run rates?

Speaker #1: Similar story for Ocala and Brandon. Mostly coming online in Q4, getting to their run rates in 2027.

Speaker #1: I would say 2027 for normal run rates. I would say in utilities, we still have a little bit of unfavorable absorption because we're ramping up.

Speaker #5: Okay. That's helpful. So is it conceivable then sort of by the end of '27 that we'll be back down to kind of the I think you mentioned a one-year sort of backlog or lead times for these businesses.

Speaker #1: But by the end of the year, in Q4, and certainly going into 2027, we should get into that in a favorable sweet spot in terms of favorably absorbing the assets that we're putting in place.

Speaker #5: Is that possible?

Speaker #1: Not in fire, no. We won't be there in just one year. But I think that we'll probably take two years for us to bring the backlog down by a full year.

Speaker #1: Similar story for Ocala and Brandon. Mostly coming online in Q4, getting to their run rates in 2027.

Speaker #1: We'll probably take us two years. But yeah, I think that's really only the I think a sustainable model is where we take lead times down to about a year in fire.

Speaker #1: And that's what we're aiming for.

Speaker #5: Okay. Great. That's all I got. Thank you, guys.

Speaker #5: Is that possible?

Speaker #1: Thanks, Steve.

Speaker #1: Not in FHIR, no. We won't be there in just one year. But I think that we'll probably take two years for us to bring the backlog down by a full year.

Speaker #3: Your next question is from the line of Steve Barger at KeyBank Capital Markets. Your line is now open. Please go ahead.

Speaker #1: We'll probably take us two years. But yeah, I think that's really only the I think a sustainable model is where we take lead times down to about a year in FHIR.

Speaker #5: Thanks. Good morning.

Speaker #6: As the quarter progressed, I was hearing some more investor concerns about municipal spending. What is the Munie-facing Salesforce telling you about funding and demand visibility for the back half and into next year?

Speaker #1: And that's what we're aiming for.

Speaker #5: Okay. Great. That's all I got. Thank you, guys.

Speaker #1: Yeah. Great question. Good morning. Yeah, we don't see those concerns. We see consistent patterns just like it has been pretty much for the last 10 years or so.

Speaker #1: Thanks, Steve.

Speaker #3: Your next question is from the line of Steve Barger at KeyBank Capital Markets. Your line is now open. Please go ahead.

Speaker #5: Thanks. Good morning.

Speaker #1: So we don't see any concerns, any slowing just a consistent pattern and cadence and sequential growth.

Speaker #6: Got it. That's good to hear. And do you track inquiry to order conversion rates? And can you tell me just how that's trending across fire trucks and refuse trucks?

Speaker #1: Yeah. Great question. Good morning. Yeah, we don't see those concerns. We see consistent patterns just like it has been pretty much for the last 10 years or so.

Speaker #1: Yes. Yes, we do. We actually track that in all of our businesses, not just in fire trucks. Typically, it's a pretty fixed ratio. And we don't see that ratio going up or down.

Speaker #1: So we don't see any concerns, any slowing just a consistent pattern and cadence and sequential growth.

Speaker #6: Got it. That's good to hear. And do you track inquiry to order conversion rates? And can you tell me just how that's trending across FHIR trucks and refuse trucks?

Speaker #1: If anything, it might be a wouldn't call it material. But the center of gravity on our focus in fire is really on throughput and making sure that we build the trucks that we have in our backlog.

Speaker #1: Yes. Yes, we do. We actually track that in all of our businesses, not just in FHIR trucks. Typically, it's a pretty fixed ratio. And we don't see that ratio going up or down.

Speaker #1: That's really where the center of gravity is for this business. It's very much a supply business, if you will. And the center of gravity naturally moves more to kind of demand focus when you get your lead times back in check.

Speaker #1: If anything, it might be a tad up, but I wouldn't call it material. But the center of gravity on our focus in FHIR is really on throughput and making sure that we build the trucks that we have in our backlog.

Speaker #6: Understood. In the meantime, maybe I missed this, but did you talk about trends in standards or semi-custom versus custom?

Speaker #1: I did in my prepared remarks that we have been introducing the S180 semi-custom pumper that is being very well received a lower lead time more custom kind of solution for our customers.

Speaker #6: Understood. In the meantime, maybe I missed this, but did you talk about trends in standards or semi-custom versus custom?

Speaker #1: And that seems to be adopting really well. If your first question is kind of tied to that second question, in that particular category, we definitely see an inquiry to booking ratio going up.

Speaker #1: I didn't. I did in my prepared remarks that we're that we have been introducing the S180 semi-custom pumper that is being very well received.

Speaker #6: Got it. Appreciate the detail. Thanks.

Speaker #1: Thank you.

Speaker #3: Your next question is from the line of Jerry Revich from Wells Fargo. Your line is now open. Please go ahead.

Speaker #1: It's basically a lower lead time more custom kind of solution for our customers. And that seems to be adopting really well. If your first question is kind of tied to that second question in that particular category, we definitely see an inquiry to booking ratio going up.

Speaker #7: Yes, hi. Good morning, everyone. In environmental solutions, the margin performance is pretty good this year considering the moving pieces on the production cut and capacity adds in utilities.

Speaker #7: I'm wondering if you can talk about, as you think about the business in '27, can we approach 20% margins as done under absorption normalizes as you folks get the returns from the utility capacity adds?

Speaker #6: Got it. Appreciate the detail. Thanks.

Speaker #1: Thank you.

Speaker #3: Your next question is from the line of Jerry Rivich from Wells Fargo. Your line is now open. Please go ahead.

Speaker #7: How are you thinking about the path to the 20% plus margin targets in this line of business?

Speaker #1: Yeah. Yeah. Good morning, Jerry. Thanks for the question. Obviously, a strong performing segment. And as we mentioned, earlier on, today is that we see sequential improvement in ESG.

Speaker #7: I'm wondering if you can talk about, as you think about the business in '27, can we approach 20% margins as gone to absorption normalizes as you folks get the returns from the utility capacity adds?

Speaker #1: And we see definitely accelerating demand in utilities. And I also mentioned the second data point that there's been quite some good synergies between the two businesses and ESG has been a great manufacturer of high-mix, low-volume products.

Speaker #7: How are you thinking about the path to the 20% plus margin targets in this line of business?

Speaker #1: Yeah. Yeah. Good morning, Jerry. Thanks for the question. Obviously, a strong performing segment. And as we mentioned, earlier on today, is that we see sequential improvement in ESG.

Speaker #1: And that expertise is actually helping utilities to ramp up. And Jerry, you followed us for a long time. And you kind of know where we were with our utility margins and where we are now.

Speaker #1: So that's really encouraging. Now, obviously, we're not guiding for 2027. We're not ready yet to guide. But we're very pleased with sequential progress that we're making in both of those businesses.

Speaker #7: And Simon, are you willing to comment on the 20% plus margin target and how much progress you think you'll make towards that in '27?

Speaker #1: I think it's a little premature, Jerry. I would prefer to wait for our when we are ready for our guidance for 2027.

Speaker #1: So that's really encouraging. Now, obviously, we're not guiding for 2027. We're not ready yet to guide. But we're very pleased with the sequential progress that we're making in both of those businesses.

Speaker #3: There are no further questions at this time. We have reached the end of the Q&A session. I will now turn the call back to Simon Meester for a closing remarks.

Speaker #7: And Simon, are you willing to comment on the 20% plus margin target and how much progress you think you'll make towards that in '27?

Speaker #1: All right. Thank you, operator. If you have any additional questions, please follow up with Jen or Drew. Thank you for your interest in TEREX.

Speaker #1: I think it's a little premature, Jerry. I would prefer to wait for our when we are ready for our guidance for 2027.

Speaker #1: Operator, please disconnect the call.

Speaker #3: There are no further questions at this time. We have reached the end of the Q&A session. I will now turn the call back to Simon Meester for a closing remarks.

Speaker #1: All right. Thank you, operator. If you have any additional questions, please follow up with Jen or Drew. Thank you for your interest in TEREX.

Speaker #1: Operator, please disconnect the call.

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