Greetings, and welcome to the Oshkosh Corporation Fiscal 2023 Second Quarter Results Conference Call. [Operator Instructions]. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Pat Davidson, Senior Vice President of Investor Relations for Oshkosh Corporation. Thank you. You may begin.

Good morning, and thanks for joining us. Earlier today, we published our second quarter results. A copy of the release is available on our website at oshkoshcorp.com. Today's call is being webcast and is accompanied by a slide presentation, which includes a reconciliation of GAAP to non-GAAP financial measures that we will use during this call and is also available on our website. The audio replay and slide presentation will be available on our website for approximately 12 months. Please refer now to Slide 2 of that presentation. Our remarks that follow, including answers to your questions, contain statements that we believe to be forward-looking statements within the meaning of the Private Securities Litigation Reform Act. These forward-looking statements are subject to risks that could cause actual results to be materially different from those expressed or implied by such forward-looking statements. These risks include, among others, matters that we have described in our Form 8-K filed with the SEC this morning and other filings we make with the SEC. We disclaim any obligation to update these forward-looking statements, which may not be updated until our next quarterly earnings conference call, if at all. Our presenters today include John Pfeifer, President and Chief Executive Officer; and Mike Pack, Executive Vice President and Chief Financial Officer. Please turn to Slide 3, and I'll turn it over to you, John.

Thank you, Pat, and good morning, everyone. I'm pleased to report another quarter of strong results for Oshkosh Corporation with significant growth in revenue, operating income and adjusted EPS compared to last year. For the second quarter, we grew revenue by 17% and operating income by over 200%, resulting in adjusted EPS of $2.69. These results were notably higher than our expectations entering the second quarter as a result of improving supply chain conditions and the benefit of our actions over the past several quarters to improve our production resiliency in a constrained supply chain environment. We are also pleased that both the access and vocational segments delivered double-digit operating margins in the quarter. We continue to book healthy orders for our products and innovations and closed the quarter with a consolidated backlog of $15 billion. Strong demand is supported by ongoing robust nonresidential construction metrics infrastructure spending, mega projects and solid municipal budgets. During the quarter, we announced our plans to acquire the AeroTech business from JBT Corporation. We are pleased to tell you that the transaction closed today, and we'll talk more about AeroTech in a few moments. In mid-July, we published our tenth annual sustainability report which highlights our commitment to a sustainable future as we strive to reduce emissions as well as our carbon footprint while making a positive impact on the lives of our team members our communities and, most importantly, the people who use our products. As a result of our strong performance in the second quarter and our expectations for continued momentum into the second half of 2023, I am pleased to announce that we are raising our full-year adjusted EPS expectations to be in a range of $8, significantly higher than our previous estimate of approximately $6. Over our longer-term planning horizon,…

Thanks, John. Please turn to Slide 8. Consolidated sales for the second quarter were $2.4 billion, an increase of $347 million or 17% over the prior-year quarter. The increase was primarily driven by a $351 million or 36% increase in sales at Access as well as a result of higher sales volume and improved pricing. Sales meaningfully exceeded our expectations as a result of higher production output, particularly at access, driven by improved supply chain conditions as well as the benefit of operational actions we have implemented over the past several quarters. Adjusted operating income increased $161 million over the prior year quarter to $237 million or 9.8% of sales, a 610 basis point improvement versus the prior year. The improvement in adjusted operating income was largely driven by higher sales volume and favorable price cost dynamics, particularly at access, offset in part by higher incentive compensation costs. Access delivered very strong results in the quarter with a 15.9% operating margin. Adjusted operating income significantly exceeded our prior expectations as a result of higher sales volume stronger price realization and favorable mix. Adjusted earnings per share was $2.69 in the second quarter versus $0.49 in the prior year. The strong result is particularly noteworthy given we are still facing a constrained supply chain environment, we have not yet begun delivering the substantially higher-priced orders in Vocational's backlog which we expect to drive notable margin improvement in 2024 and beyond. Now let's turn to our outlook for 2023. Please turn to Slide 9. Over the past few quarters, we have reiterated that demand is strong, but our financial results were limited by supply chain conditions. While our prior guidance assumed modest improvements during 2023, we shared that if supply chain conditions and production throughput improve at a faster pace, we could…

We delivered a strong second quarter as a result of a better-than-expected supply chain and production throughput. We're executing well and our increasing capacity in our Access and Vocational segments. Our backlogs are robust, and demand continues to be strong. And we just closed on the company's most significant acquisition in more than 15 years. Finally, we raised our expectations for 2023 significantly and expect that our strong momentum will carry into 2024. This is a very exciting time for our company, and we are confident we're taking the right steps to build on this momentum to drive growth and enhance shareholder value. Okay, Pat, let's get started with Q&A.

[Operator Instructions]. Operator, please begin the question-and-answer period of this call.

[Operator Instructions]. Our first question comes from the line of Tami Zakaria with JPMorgan.

Excellent results. So I have 2 quick questions. The first one is on the backlog, which continues to climb. So can you give us some color on what price versus volume impact was on the growth of that backlog number?

Tam, you mean new bookings during the quarter?

Correct. Correct. Correct.

So what I would say is, in general, again, pricing on -- we talked a lot about on the vocational segment that we have that strong pricing and backlog that we're still not realizing the full benefit of expect to realize that in 2024. We look at the rest of the company, again, continue to expect solid pricing in there. And again, we expect to continue to deliver strong margins going forward and the pricing is commensurate with that.

Got it. And second question on AeroTech. Can you remind us of the cadence of the $20 million synergy savings that you expect by 2025 and how much that should accrue to, let's say, the gross margin line versus the SG&A line?

We haven't really -- it's really going to be sort of a steady flow over the next couple of years. I think certainly some impact. I think the way to think about AeroTech is this year we'll have -- we'll get through the initial purchase accounting. We'll have to go through a step-up in basis of inventory. But when we look to next year, we think it's going to be about a $700-plus million revenue business. I would expect around $0.40 of EPS accretion, understanding that there's going to be some interest income or expense impact embedded in that $0.40 and solid double-digit EBITDA margins is what we're thinking about for next year, and we would expect improvement beyond that as we get more synergy benefits.

Yes. Tami, it's John. I'll just add a little bit more color. So we said that we're going to get about $20 million in synergies as we go forward. And that comes from G&A synergies, of course, that's with any time you make an acquisition, you're getting those types of synergies. That will come sooner than later. Then we've got supply chain synergies. We've got channel-related synergies that will take just a little bit longer. So I think you'll see this unfold over 2 or 3 years.

Our next question comes from the line of Mircea Dobre with Baird.

Congrats on a very good quarter. My question is on Vocational, on the fire business specifically. You commented on demand exceeding supply for fire trucks. Maybe you can give us a little more context as to how you see that progressing as you look at 2024. And for fire specifically, this is where I know you had quite a bit of supply chain challenges. How are you seeing that progressing?

So I'll talk a little bit about that, Mircea. So we see the demand for our fire trucks continuing for the foreseeable future. And that is primarily due to a couple of things. It's due to the fact that municipal budgets are healthy and they're prioritizing things like critical fire trucks in their fleets. They're also prioritizing fire trucks because they want new technology. So we've got a lot of municipalities that are lining up for things like our electric Volterra fire trucks. So the second thing that's driving it, though, is aged fleet. We've talked about this for a little while, but there is a significantly aged fleet of fire trucks across the country. So that's another reason we expect demand to be strong for the foreseeable future. So we continue to see a really strong backlog that gives us the confidence to continue to put more capacity in place. We're doing that right now. We've been doing it in Appleton, Wisconsin and doing a lot of Industry 4.0 things with automation in our facilities that we haven't had in the past to improve throughput. And we're doing it in Murphysboro, Tennessee and a brand-new state-of-the-art plant, where we're going to do some production for fire trucks as well, which should allow us to deliver fire trucks faster, and that's good for us. It drives really good health growth.

Understood. Then my follow-up on Defense. I appreciate the comment that the remaining programs give you some visibility in $1 billion worth of revenue. I'm sort of curious as to how you're thinking about any restructuring or any adjustments that you need to make to your existing footprint or cost base in order to be able to deliver that mid-single-digit to high single-digit margin range on that revenue.

Yes. So I'll kind of give you the main context of what's going on in Defense. So I'll take you back a few years and some -- we've talked about this a little bit. We've known for a while that tactical wheeled vehicles are under pressure from a Department of Defense budgetary standpoint. So we've said, hey, we've got to move into some adjacencies like combat vehicles and like last-mile delivery vehicles for the government. Well, combat may not be as big as last-mile delivery. These are really important programs for the future of our defense business. Now if you go to the current business, the FMTV, the FHTV, the Stryker MCWS, that's -- as we said, that's all going to provide over $1 billion of base business, and we'll deliver mid- to high single digits on that business. So as I talked about in my prepared remarks, we've already converted one Defense operation to Access equipment. We'll be producing JLTVs in the current plant through the end of 2024. So it remains to be seen exactly what the outcome of that operation is. We're a healthy growing company. We have a need for more capacity, and we'll let you know how we're going to change the business as we go forward when the time comes.

Our next question comes from the line of Steve Volkmann with Jefferies.

I wanted to ask about the Access margin, which is obviously very impressive. It sounds like there's still -- John, I think you mentioned something like 75% on-time deliveries from suppliers. Normal is more like 90%. So I'm guessing there's still some productivity inefficiencies in that 16%. Is there any way to think about what that would look like if supply chain was normal?

Steve, I'll start with that and if John has anything to add and you certainly can. So bottom line, it was a very good quarter. I think a couple of things, I think, to understand the quarter, first of all, obviously, we're from a volume throughput perspective, we saw improvement. We had a very, very strong mix in the quarter two, and that certainly benefited our margin in the quarter. The mix in the next two quarters, while very solid, is not quite at the same level. We did have a lot of large booms in it. I would say while on-time delivery metrics are still not back to historic norms, a lot of activities we've done are really having a big impact, including carrying a little bit more inventory, and that is helping. So we're starting to see that manufacturing labor efficiency come back. So I think there's certainly continued opportunity that I think great mix, great results for the quarter and excited to continue the momentum.

So Steve, I'll just add a little bit to that. A little bit of a shout-out to the Access team. We've been in a really constrained environment for quite some time now, and we have had enormous amounts of effort to determine how we can operate more efficiently in a constrained supply chain environment. A lot of engineering hours have gone into this, working with our supply base to figure it out. We've gotten a lot of improvement in efficiency because of that work. But I think that, that Access team would be the first ones to tell you that as the supply chain continues to open up and go from, say, 75 to 90, they'll definitely benefit even more from that improvement.

Great. Okay. That's what I thought. And then the related follow-up, I think you said 50% of Access in '24 is in backlog already. Just any commentary on sort of price cost expectations on that part that's already in backlog?

Yes. I'd say overall, we're sort of back in that price cost balance. We were behind, obviously, for this past year and had challenges. So that's in balance. You see the strong margin this quarter. So I really focus on the margin next year and the comments that John and I just made, we expect strong margins to continue in the future for Access.

Our next question comes from the line of Tim Thein with Citi.

Just to continue on that thought. Just on Access pricing in the first quarter, I believe it was up kind of low teens, is the revised guidance for this year? Does that -- and the expectation like most others that year-over-year change moderates as we go through the year. Did that change as in tandem with the revised full-year revenue guidance for Access?

No. I think to the extent where we got some more where price was a bit of a driver this quarter is because our volume was higher. So with more volume comes more price. But, yes, we were still, I think, ultimately, we're largely there from what we've implemented from a pricing perspective, there was an Access. So there is still some lag even in the first quarter. So I think really, this is -- the pricing that we see right now is what we expect for the balance of the year.

Okay. Okay. And then Mike, maybe just, I guess, a bit more big picture just on vocational and a lot of talk about the pricing you have in the backlog. But -- and you layer in a lot of moving pieces as we go into '24 as AeroTech ramps up. You have the full year with the mixers out of the portfolio. A lot of these factory inefficiencies that have been a headwind, presumably or less than a headwind. Any kind of handholding you'd give? I know it's early, but just as kind of a guidepost to think about location margins in '24.

Yes. We're not going to provide guidance, as you said, yet at this point. But I think the things to look at, so you have the sort of the base or not the legacy Vocational business, if you will. We talked about the strong margin profile we expect next year in that business. with the pricing coming online. So -- and certainly, the supply chain improves, we would expect volume to increase. So that's similar to what we talked about last quarter, we see some strong dynamics. And then you bring on the great AeroTech business that we're very excited about. And that's going to be a business that we expect, again, is going to be solid mid-double-digit type EBITDA margins. We will have a burden of some amortization that plays into the margin profile in the segment. But that's really some data on how we view next year.

I think what's really exciting about this Vocational business, some of the investments we've made in the products. You look at the electric Volterra fire trucks, the airport rescue and firefighting vehicles which are electrified. You look at the new electric refuse collection and recycling collection vehicles, there's innovations on IMT's products. This is going to drive really strong growth for years into the future. And we're just -- we're in inning 0 on these new products. It's really exciting.

Our next question comes from the line of David Raso with Evercore.

Sorry for [indiscernible] modeling question here. But just trying to figure out the Vocational margins, the second half of the year, right, they're down to 5.6% after 9.2% in the first quarter. And I understand the acquisitions weighing on that, including maybe some amortization from the deal. But just assuming -- and I'm trying to figure out why the third quarter EPS declined as much as it does sequentially. So there's a indebted, what interest expense are you assuming in the model here so we can get there? And then the fourth quarter, the implied EPS is similar to the first quarter on similar sales. and base case, you would think the margins would be better on similar sales fourth quarter versus first quarter, right, given all the supply chain and so forth. But again, vocational is weighing it down. So there's a lot there. But I guess, a, can you help us with the interest expense and b, am I looking at the vocational margins correctly in the second half? And then C, the third thing is Access. The fourth quarter is when a lot of the rental companies have the big decline in their CapEx year-over-year. So maybe if you could help us a little bit with the cadence of access, maybe better help us understand the fourth quarter with Access. There is a lot there, I apologize...

I'll try to remember everything, but I'll love -- if I forgot something, let me know. So I guess, number one, from an interest expense, think about the borrowings on our revolver in that $5.50 to $5.75 range, we'll carry interest on that. I would expect some paydown over the course of the year. So that's essentially what we'd expect. And obviously closed today. So I think that's -- as we look, that is -- I think the -- really, the 2 biggest bridging items are 2 bigger bridging items from Q2 to Q3, is looking at interest expense. But conversely, we've been carrying cash balances. So there's also interest income that we're not going to see at the same level. That's going to carry into the fourth quarter as well. So I would say that's sort of the background there. As we look to Vocational, I think certainly we are going to be picking up amortization, and we just closed today. So we need to get through the valuation and the purchase price allocation. But the key things that we know is we're going to have some depreciation and amortization on that volume. We also know the nuance of purchase accounting is that you typically are going to have a step-up in basis of inventory that's on hand, particularly finished goods. We believe that finished inventory levels or inventory levels in general are going to be a bit higher than our previous expectations. So there's a step-up in basis that's just sort of a temporary phenomenon. That plays into the margin. We also said -- and really finally, we're making, as John said, some significant investments in the segment for our electrification efforts. So we do see higher spending sequentially in the back half of the year on the McNeil's eRCV product, both for the new product development effort as well as for getting that facility ready for production. So those are really the big moving pieces. In terms of the volume in the fourth quarter, it literally -- and we've signaled this on previous calls, it completely comes down to in this very strong demand environment, the number of production days you have in the quarter. And with the holidays, there's fewer production days, and that's what drives that is a fewer production days and then as well as the other items that we've talked about.

And was that an Access comment? Because essentially, your backlog is so large, you would argue we don't need much by way of orders to ship well and access in the fourth quarter. But obviously, some of the rental companies are saying, look, we don't want to take as much in the fourth quarter as we did last year. So I'm just trying to level set everybody the cadence for that...

That doesn't have anything to do with it. It's purely everything that we produce right now, we're shipping with the exception of stuff that's in transit on the water between our facilities essentially. So it's really a function of fewer production days yields lower revenue, it has nothing to do with demand or delivery cadence to our customers. By the way, that comment -- all the comments apply both to Access. It also applies to Vocational and Defense. There's just simply fewer days. With fewer production days, you have less manufacturing absorption. So there's all the implications of just -- and that's typical that we typically see that in our fourth quarter.

Our next question comes from the line of Jerry Revich with Goldman Sachs.

I'm wondering if you could just talk about the margin opportunity in fire & emergency. So pre-COVID, you folks were running mid-teens margins on the way to high teens. And I'm just wondering with the price increases that you have in backlog, are we back at that path in 2024, Mike? Or how are we thinking about getting back the levels of outstanding performance that you folks were at pre-COVID.

As we look at that -- and we're not -- I guess for core fire trucks, we've talked about it, and the margin, there's no reason why our products don't get back to prepandemic levels with the pricing we have. We need to get to that higher price backlog. And as supply chain continues to improve, we'll get the throughput. So -- and then we've talked a lot about the AeroTech impacts. And so again, those strong EBITDA margins will have [indiscernible] D&A. That will be our depreciation and amortization that will be present. But again, we're very confident, as we've said in our Analyst Day targets and so on, that this is a business that, over time, a solid double-digit segment. And so we're excited about the growth prospects.

Super. And you folks have some great analytics with your telematics installed base. So I'm wondering if you could just tell us for access equipment. It seems like the used equipment inventories are tighter than for other equipment categories. Can you tell us what the utilization numbers look like year-over-year in terms of operating hours per unit? And North America and Europe? Are we at a point where that's flat to up year-over-year? Or can you just give us context on what you're seeing in the data?

Well, what I can tell you is that the metrics are still healthy in terms of utilization metrics. We pay very, very close attention to it. Now one thing that I think you may notice is last year, at this time, we were under the industry. I'm talking about the whole industry, but certainly us, JLG, we were under a constrained environment. So we were really not able to ship as many products to our customers as they wanted. This year, the industry is doing a better job of getting products into the hands of customers as customers need the product. So you would see a little bit of normalization happening and that's a really good thing. It's a good thing because it means that our customers can continue to grow their fleets because they need to grow their fleets, but it's also a good thing because you'll start to see a gradual replacement of older fleets. And I think you're starting to hear some customers talk about that. But even with the more fleet coming into the market, right now this year versus a year ago, the utilization metrics are still very healthy, and I think you hear that in remarks from our customers as well.

[Operator Instructions]. Our next question comes from the line of Nicole DeBlase with Deutsche Bank.

Maybe just with the supply chain, that was obviously a source of upside for you guys this quarter from a volume perspective. What have you embedded in the second half? Like have you embedded continued progress on supply chain constraints reducing? Or have you kind of like flatlined, I guess, what you've seen in the second quarter?

At this point, Nicole, similar to what we've done in our previous guide, our expectation is that it's largely similar to how we exited this quarter. And then it really comes down to the number of production days that we have in the subsequent quarters to the extent that we're bearing volume.

Okay. Got it. Makes sense. And then on price cost, can you just talk about like is this quarter -- are you seeing kind of the pinnacle of price cost tailwind from a margin perspective? Or is the price-cost tailwind that you expect in the second half of the year comparable to what you're seeing or what you saw in the second quarter?

The one thing I would say, first of all, just to caution, it's a price cost year-over-year is favorable, but it's really in balance again. So it's not -- so the extent that we were behind last year now were towards neutral, I would say, similar in most of our businesses that we should see similar price cost dynamics the remainder of the year with the exception, a portion of Vocational with the fire trucks that there's still more pricing to come more meaningfully next year to get them back into full balance.

Our next question comes from the line of Seth Weber with Wells Fargo.

I wanted to ask about Defense margin. A couple of questions. The -- I guess your full-year guide implies second half kind of ramps back to that single-digit range, I think. And then I guess I'm just trying to understand whether you changed your kind of medium-term margin guidance. Now it seems like now you're kind of mid- to high single digits. Is that a moderation from before? Is that just purely a reflection of JLTV going away? And does that include the USPS ramp?

Sure. First of all, just from an expectations perspective, as we said in the prepared remarks, our expectation is we do have -- we do expect some orders in the back half of the year, that will help -- that will generally produce positive estimates at completion or adjustments. So that's a bit of the improvement. We also have a stronger aftermarket mix in the back half of the year. So there's some mix and orders at play there. I think that in terms of just the mid- to high single digits, that is just what you would consider the tactical wheel vehicle or sort of a core defense business, excluding NGDV. NGDV is, obviously, a big multibillion-dollar program that's additive. But just isolating that just the defense piece of it, it's $1 billion-plus. That's not -- we're not saying that's really post-JLTV. So I think sort of 2025 and beyond is how you should think about that $1 billion-plus at mid- to high single digits.

Okay. That's helpful, Mike. And then just on the Access strength, can you just give us any regional color as to what's going on? North America, we assume, is strong, but any trends that you'd call out in Europe or China?

Sure. I mean we've seen actually a pretty healthy growth rate globally. I think maybe domestic China is one area that we haven't seen growth. We've seen a little bit of contraction. But everywhere else in Asia has been really strong. Europe has been really, really strong for us, surprisingly perhaps. But we see continued strength across the Access markets going forward. I can't stress that enough. We pay attention to a lot of metrics, and we work really closely with our customers and our customers are much -- are really good at forecasting what's happening in the market. So if you look at the aggregate of nonresidential construction metrics, and we don't just look at it for this year and next year, we look at it over 5 years. And it's really, really healthy. The Dodge Momentum Index is still up at a high level, and the ABI is above 50 still. Those are all very positive indicators. And we all know about the CHIPS Act and the IRA and some of these other bills that have been passed that are spanning these mega projects. It's all pointing to continued healthy growth in the Access equipment markets for the foreseeable future.

Our next question comes from the line of Steven Fisher with UBS.

Just to follow up on that. Maybe can you just talk about how broadly the orders in the access business were spread around the customer base in North America? I think there's some concern that -- some of the larger customers are perhaps a bit more cautious based on some of their CapEx messages for later this year and maybe the rest of the industry is going to add too much fleet. I guess I'm curious, what was the breadth of the orders in the quarter and kind of your reaction to the concern about the rest of the industry adding too much fleet?

What we're continuing to see is very strong demand, and that's with the large -- our larger customers as well as independent rental companies. So a solid mix of orders across the board in the quarter. But I think it's even beyond just the orders we have in the quarter, Steve. We have really good visibility to requirements even beyond our -- what's actually booked, and we'll continue to book those orders through the back half of the year. So our visibility demand is very, very solid for next year is what I can say.

Yes. And I'll just add to that. I don't think you see too much fleet in the market. I think it's just the opposite. I think the reason you see the used market and the condition that it's in, it's because there's so much demand for equipment that our customers who have aged fleets, can't really replace that fleet. So they're not selling off any of their old fleets because they need it. So they haven't even started just barely, maybe, just barely started fleet replacement. So I don't think that there's too much fleet in the marketplace.

Okay. And you may have addressed this in some of your earlier comments about pricing, but there's obviously some messaging from some bigger customers last week about reversing surcharges and discounting pricing for next year. I guess I'm curious, what's your reaction to the suggestion that pricing will come down next year? And maybe if we're starting at a margin percentage of close to 16%, it doesn't matter so much at this point, but I'm just curious what your reaction to that is.

Yes. So first of all, I'll tell you that we've got really, really strong demand for our products. I mean, we're booking orders for the second half of 2024 right now. We've never had this kind of really good visibility in Access in the past. So the market is very strong and the demand is very strong. Now with regard to pricing, we're always open, and we are always fair with our customers on how we price our products. But I want to make -- just make sure to make a specific point is that input costs are still very, very elevated. When you look at it in aggregate, input costs are very elevated. You see inflation moderating recently but we haven't seen and other metrics deflating. We haven't seen deflation. Now you can pick at one thing here or one thing over here that you may have seen some relief on. But overall, input costs are very elevated. We've got good demand, but we'll always be open and fair with our customers on how we price our product.

Our next question comes from the line of Steve Barger with KeyBanc.

John, you sound great on visibility right now. And you just took this year's guidance above where consensus is for next year and not far below 2025. And you've alluded to a lot of this, but without getting into numbers, can you talk about how you're thinking about a multiyear growth path from this updated guide? Or should we be thinking about a flattening out at some point from a high level as we think out 5 or 6 quarters? Just trying to gauge your ability to grow from here.

Yes. So first thing I'll mention, Steve, is as we look at the quarter we just reported, we're very, very pleased with it, but we are not surprised with it. I mean what's happening in this quarter, we knew what's going to happen. It's just happening a little bit faster than we had previously forecasted would happen, but we always knew this performance was there. And that's why we never ever came off our 25 Analyst Day guidance. We always maintain that, yes, this is what we see achieving in 2025. And we still see that today. So we still see a lot of tailwinds in our business. We talked about demand in the Access segment, not just in North America, it's really nice global demand. But then we've got the vocational business, which is really just starting to pick up momentum and we see the opportunities to drive big margin improvements in 2024 with that business, a lot of new products. We've got new acquisitions from Hinowa to AeroTech, which are going to provide benefits for us. The postal contract comes online next year. So these are all reasons why we never came off 25. We believe the 2025 guidance is appropriate for our business.

Understood. That's great color. And then when you get to run rate production on the Volterra, how will that margin compared to a traditional RCV? And where do you think the mix of electric versus ICE goes over time, not just for Volterra, but for any product where you have an electric option?

Well, I think it's going to be different depending on the end market. So for example, I'll give you an example with the Postal Service because that's been relatively public, the Postal Service started with only 10% of their orders, BEV units versus ICE units. Now a very short time later, they're at 75% BEV units versus ICE units, right from the beginning. So they've accelerated it dramatically before we've even produced and delivered unit. I think -- but some markets will be a little bit slower. There's a lot of customers extremely interested in our fire & emergency, fire trucks that are Volterra, but the average fire truck stays in the market close to 20 years. So that will run -- the growth that, that will drive will run for a long time. There's also a lot of interest in our eRCV products. And so that's going to run for a long time. It's kind of hard to predict just how fast fleets will electrify. But I will tell you that every time we put an electric unit into the market, it's a higher price point. There's good total cost of ownership for our customers, and there's really healthy margins on these products.

Steve, one other exciting thing. I think if you start thinking about the eRCV, you really need to almost think of more like our Pierce custom fire trucks where in a lot of cases, we're not actually buying the chassis, but now we're going to be participating as we -- as volume ramps those -- really the entire truck, including our purpose-built chassis. So that's -- you see the margin profile and the opportunity that we see on fire trucks historically, and that's -- we view it very much in a similar vein.

Understood. And just a follow-up to my first question to confirm the EPS range for 2025 was $11 to $13, is that right?

Yes, right.

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

All right. Thanks, Christine. Thank you for joining us today, everybody. We're pleased with a very strong first half of 2023 and that our operations and supply chain metrics are continuing to improve. Before we end the call, I'd like to highlight our plans for a field trip to meet with Access segment management and tour our JLG factory in Shippensburg, Pennsylvania on August 23. Investment professionals who are interested in seeing our world-class manufacturing operations up close and have not yet made plans to attend, please reach out to Victoria or myself, and we'll be happy to get you the information. Thanks, everybody, and have a great day.

Ladies and gentlemen, this does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation, and have a wonderful day.