Greetings, and welcome to the Oshkosh Corporation First Quarter 2024 Results Conference Call. [Operator Instructions]. It is now my pleasure to introduce your host, Pat Davidson, Senior Vice President of Investor Relations for Oshkosh Corporation. Thank you, sir. You may begin.

Good morning, and thanks for joining us. Earlier today, we published our first quarter 2024 results. A copy of that release is available on our website at oshkoshcorp.com. Today's call is being webcast and is accompanied by a slide presentation, which includes a reconciliation of GAAP to non-GAAP financial measures that we will use during this call and is also available on our website. The audio replay and slide presentation will be available on the 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 announce another strong quarter with year-over-year growth in revenue and earnings. This solid start to 2024 is a testament to our Innovate, Serve, Advance strategy and the hard work of our people as we continue to launch new innovative products and technologies while adding capacity for several of our businesses. For the first quarter, we achieved an 80% increase in adjusted operating income, leading to an adjusted operating margin of 10.8% and adjusted EPS of $2.89. These results were led by outstanding business execution across our segments and supported by the benefit of acquisitions. We continue to focus on execution. Importantly, we're driving improvements in our businesses, contributing to strong performance in the quarter and supporting our positive outlook for the remainder of the year. We are also focused on becoming a more resilient company throughout the business cycle while driving long-term growth, and we are confident we're making meaningful progress. Our confidence is fueled by several key factors, including significant investments in market-leading technologies that we expect will drive demand for the next decade and beyond; robust backlogs that provides strong visibility; the ramp-up of several new innovative products, including Next Generation Delivery Vehicles and the benefits of strategic acquisitions such as AeroTech. Based on our first quarter results, along with solid execution and healthy demand for Oshkosh products, we are raising our full year outlook for adjusted EPS and to be in the range of $11.25 per share. Notably, our current expectations place us within the range of our Investor Day target of $11 to $13 per share a year early and demonstrates our ability to continue to drive accelerated growth and shareholder value. Please turn to Slide 4, and we'll get started on our segment updates. Our…

Thanks, John. Please turn to Slide 7. Consolidated sales for the first quarter were $2.54 billion, an increase of $276 million or 12.2% over the prior year quarter. The increase was driven primarily by the benefit of $176 million of AeroTech sales in the Vocational segment as well as increased volume in all 3 segments and the benefits of improved pricing. Adjusted operating income increased $124 million over the prior year quarter to $275 million or 10.8% of sales, a 410 basis point improvement versus the prior year. The improvement in adjusted operating income was largely driven by improved price cost dynamics, favorable mix, increased volume and the benefit of AeroTech results. Adjusted operating income exceeded our most recent expectations primarily due to higher volume at Vocational, favorable customer mix at Access and lower spending. Adjusted earnings per share was $2.89 in the first quarter versus $1.63 in the prior year. During the quarter, we repurchased approximately 130,000 shares of common stock for a total of $15 million. Please turn to Slide 8 for a review of our updated expectations for 2024. With our strong start to the year, we are revising our full year outlook. On a consolidated basis, we are estimating 2024 sales and adjusted operating income to be in the range of $10.7 billion and $1.075 billion, respectively, which are up from our prior expectations of $10.4 billion and $990 million, respectively. We are estimating adjusted earnings per share will be in the range of $11.25 versus our prior estimate of $10.25. At a segment level, we are estimating Access sales and adjusted operating margin to be in the range of $5.4 billion and 15.5%, respectively, up from our prior expectations of $5.2 billion and 15% due to improved production throughput and improved sales mix. Compared to…

We continue to focus on execution, supporting our customers and empowering our people as we grow and strengthen our business. We raised our expectations and now believe we can achieve our Investor Day targets for 2025 revenue and EPS, 1 year earlier than we originally expected, which is a testament to our team and our strategy. We are investing in new products and deploying technologies that support our customers and keep our company at the forefront as leaders in our industries. This is an exciting time for Oshkosh, and we look forward to continuing to execute our growth strategy to drive shareholder value. All right, Pat, let's get started with the Q&A.

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

[Operator Instructions]. Our first question comes from the line of Stanley Elliott with Stifel.

Can you talk, I guess, maybe a little bit of more of a longer-term question for you. I mean there's a number of kind of EV next-gen programs out as you're moving kind of through this preproduction phase into more of a meaningful revenue generator. It sounds like that will be more into early 2026. Just to clarify that. And then how should we think about this from a margin perspective from you all? Is it similar gross margins, but higher gross profit dollars? Just trying to get a framework for how this could evolve?

Sure. Stanley, I can take that one. Just thinking about the ramp of NGDV. So what we talked about this year is we're going to have some startup cost, so it will be -- about -- between that and NPD, we said last quarter about a $0.35 drag. As we get into next year, there's going to be a pretty significant ramp of volume. So we're going to start getting the margins with that will start to follow. And by the time we get to 2026, we'll be at full rate production, well north of $1 billion of revenue from the program. And then you'll see those good solid margins. And what we've talked about from a margin perspective, really on that program is to be better than our traditional tactical wheeled vehicle margins.

Yes and Stanley, that Mike just commented on the NGDV for the U.S. Postal Service. That's our biggest electrification program. But we have electrification programs in other segments as well. You look at our Vocational segment, with the electric fire trucks, the electric airport rescue firefighting vehicles, the electric refuse and recycling vehicles and there's others as well. Those are -- the margins are all healthy margins. The adoption rate is different based upon the end market, but these will all provide healthy long-term growth drivers as over time, we see municipal fire stations. We see our customers in the refuse and recycling segment, upgrade fleets to better, more modern vehicles over time. So we look at it as a long-term move for us. It's not something that's going to happen overnight in some of these other segments.

That's great. And then, I guess, we hear a lot about stimulus for construction and other sorts of things. But there's a considerable amount kind of allocated for airports, too. Can you talk about kind of within the AeroTech portfolio, how much more product do you need to potentially get refreshed? It sounds like you have some mobile charging stations coming down the line. Just curious kind of how you see that business ramping and evolving now that you have maybe a little more R&D firepower to put behind it?

Yes. Well, I think on the electrification front, we're kind of in our infancy. A lot of the electrification that's in the airport markets today with the ground service equipment is really lead acid. So kind of the old-fashioned electric, and we're going to continue to move that to lithium-ion, thus the AmpCart, because you have to have a way to repower vehicles efficiently on the tarmac of an airport. And that's what the -- that's kind of what the AmpCart does. I think our AeroTech people have been doing a phenomenal job with autonomous functionality for cargo loading and other applications, and we're going to continue to accelerate it there as well as in the electrification space. But in electrification for ground service equipment, we're really, really early, early innings for that.

And Stanley [indiscernible] and orders, we're seeing really strong order intake in that business, and we expect that to continue for the reasons you mentioned.

Our next question comes from the line of Jamie Cook with Truist.

I guess just two questions. One, just the margins for Access equipment in the first quarter were exceptional at 17%. I think based on the guide, it implies your margins for the remaining 3 quarters would be below, I mean, prior year. And I'm just trying to understand why that would be the case with -- it looks like based on your guide, the top line should be -- the top line growth should be better than what we saw in the first quarter? So if you could help me on that. And then, John, I guess the question specifically for you with Postal Service starting to ramp more significantly this year and next year. Can you just talk about conversations you're having with customers around opportunities on last mile delivery? I'm wondering whether we can start thinking about adding more of -- benefiting from the Postal Service win and expanding your market share in last mile delivery?

Sure. Thanks, Jamie. I'll let Mike start with the Access question and then I'll go on the Postal question.

Sure. On the Access margins, as I mentioned in my prepared remarks, we did see a favorable mix in the first quarter. That was certainly a driver of the margin. We also did see -- we talked about on the last call expecting to see higher new product development spending of about $20 million for the year. We also have roughly $10 million of Jefferson City, Tennessee start-up costs. A lot of those are really going to -- those costs are going to be largely occurring in the next 3 quarters. That mix moderates. So that's really -- it's really a mix and the timing of that spending that's driving the margin difference.

Yes. And with regard to last mile delivery, Jamie. So first of all, I want to say that we are intensely focused today executing the NGDV program for the United States Postal Service and modernizing their fleet. We just went into production, started to produce vehicles, and I want to make sure to make this clear. I think everyone knows it. This is the largest fleet of last mile delivery vehicles in North America, probably in the world. So there's no bigger opportunity that we could execute on than the one that we've already got. And it will drive really nice growth for us for a long time. Of course, we're talking to many other service providers in last mile delivery. But we're one step at a time. We're going to make sure we make the NGDV successful. And I think in the future, we may have some other things to talk about. But right now, we are really focused on this -- making sure the U.S. Postal Service is very successful with this modernization.

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

I wanted to ask in Fire & Emergency. Obviously, not a reportable segment anymore, but pre-COVID that business ran in the mid-teens margins. And I'm wondering if you can comment, given the pricing that's in backlog? What's the potential for that business to go into the high teens in this cycle with not only pricing but also logistics costs normalizing? Can you just talk about the opportunity there, please?

Sure. We're very excited about the progress we're seeing in Vocational. We talked about when we combined the segments that it could be a $12-plus billion segment, operating margin with over $3 billion of revenue, reiterated that with the AeroTech acquisition. And you see the great progress we're making on that with our quarterly results and also our outlook. And we're still -- we'll continue to benefit from the segment synergies to bring the segment together, AeroTech synergies, as you mentioned, we have pricing and backlog. We have a lot of exciting new products coming out that will be margin and enhancing. So we believe we're just at the beginning of our journey to continue to drive enhanced margin opportunity in this segment, and see a lot of opportunity there.

And Jerry, just in general, I'll tell you, we really have an outstanding outlook for our Vocational segment. I'd say that long term. We've got healthy markets. We've got really good backlog, strong demand. We continue to execute on long-term opportunities with technology application. We think this is a really healthy, stable business for us.

And John, can I ask on the U.S. postal truck, you had mentioned in your prepared remarks on track to exit '25 at the full production run rate. Can you update us on what the anticipated mix is at full production between EV and ICE as we exit '25?

Yes. It's interesting, they've continuously -- as I probably said before, they've continuously increased the mix towards battery electric vehicles, which we think is great, and the Postal Service wants. So they're about -- so for the first 50,000 units, they're going to do about 75% battery electric and about 25% internal combustion. When we go beyond that, so that will take us in the first few years of the program. Beyond that, I expect -- we don't know for sure, but I expect they'll yet even increase the battery electric even more, maybe even go to 100%. But this is going to be mostly zero-emission battery electric vehicles. And reminding you, this is the first time that the Postal Service or anyone in last mile delivery has had a purpose-built vehicle, adding the productivity benefits that we're adding with this vehicle. So it's really a big step forward for the entire industry.

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

Maybe you can help us think through the cadence in Defense. I mean there's a lot going on here. You have the JLTV program that's winding down. You have NGDV that's ramping up. So as we're thinking about the cadence of revenue through the year and what's implied in the guidance? And what kind of carries into 2025? Can you help us understand this dynamic here? How we should think about revenue? And then also associated with this, what should happen with margins here as NGDV ramps up?

Yes. So I'll -- Mig, it's John. I'll start. Mike may want to add a few things to my comments. A lot we talk about Defense going through a big transition and Defense is going through a big transition. We still have production of JLTVs through 2024. So when we get into 2025, and by the way, in 2024, we're in production today with the NGDV, the postal truck. But that's low rate production through 2024, and it starts to really increase in 2025. So as you get into 2025, JLTV for the domestic JLTVs goes out of production, but we're ramping the postal NGDV. So we expect that the revenue we create in '25 through the Postal NGDV will exceed what we have gone out of production with on NGDV in terms of revenue. Giving you a little bit higher perspective of what's happening in the Defense world. Defense will continue to drive better margins as they get to sole-sourced contracts for many of the vehicles that we have today. And that allows us to reset price to the realities of where -- of what inflation has done to input costs. So that, as we get those sole-source contracts over the next 18 months, that's a good thing for the margins in the defense business. We've also won some smaller combat vehicle programs and are buying for other combat vehicle programs. These are high priority for the DoD. So the margins are good. and we've got an improving international landscape in terms of lots of countries that are increasing their Department of Defense spending as a percent of their GDP. That's also a bit of a good outlook for improving the defense side of the business. But '25 is the year where it really changes from JLTVs to NGDV.

And just to follow up on this, to be clear, we shouldn't expect some sort of a material drop in revenue or maybe yet another decline in operating income in 2025 in Defense?

No, that's not our expectation. Again, we would expect the revenue. There's about $700 million of domestic JLTV revenue we expect this year. We expect NGDV to be greater than that next year. So really, we should -- we'll start returning to growth next year and 2026 should be, you'll see a meaningful step-up even from there.

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

I wonder if we could go back to the Access margin. I'm just trying to think about how the year progresses here. Starting off as strong as you are, but obviously, having to come down to meet your full year guidance. Is that sort of a step down and then sort of flattish for the remaining 3 quarters? Or do we kind of trend down and the exit rate might be significantly lower? I'm just trying to think about that cadence.

No, I think there's -- we certainly don't see growth slowing in that business at this time. There is strong demand. I think as we talked about in our last call, just there is definitely more seasonality to our deliveries as deliveries have normalized. So what I would expect is our strongest quarters will be the second and third quarters and then the fourth quarter, I would expect to be lower as you start getting into the winter months. And then, again, just returning to that more traditional cadence. And you even see that in the first quarter. If you were to see within the month you see more activity as you're approaching the spring time. So certainly, March from a shipment standpoint is more -- is typically more robust. So it's really just a return of seasonality. And again, I think the big drivers -- the mix was a big driver this quarter. And then I think the timing of some of those investments, I mentioned before, factor into it as well.

Okay. And then maybe just switching briefly back to Vocational. I know you gave the revenue impact of the acquisition. But can you say anything about the margin there and how that impacted the segment?

Yes. We're certainly benefiting from it. We certainly have some integration costs upfront and you'll see the drivers. But it -- we're near double-digit margins. I think that will certainly improve as we have some DT or information technology integration costs and so on early in the year, but view that solidly going to be a good double-digit margin performer for us over time.

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

So you were clear that the customer mix was an upside surprise for Q1 in Access. So I guess I'm just wondering what are the variables that you see out there for Q2 in Access that you don't have your visibility on at the moment? I mean I know you seem to be pretty well sold out. And I would think you'd have a good view on the cost. So is it -- how does that customer mix kind of take shape within a quarter? And what other variables might be a factor for Q2 at this point?

Yes. I would say on the mix. It's really just the timing of shipments. So you go back to the beginning of the quarter, we were booked. We have a production plan that you can always have timing of deliveries. So again, going back to the comment I just made a minute ago with sort of this return of seasonality, our finished goods are up a bit. In fact, one of the things we really were pleased with is the throughput we saw at Access. We had about, call it, 75 million to 80 million of additional finished goods that are ready to be shipped that will be going out early in the second quarter. So it's really just a timing matter that it wasn't. So I guess as I look to the rest of the year, you could have some nuance gives and takes. But I don't -- again, we're booked for the year, so it's really going to shake out over the course of the year, because, again those products and the customers are going to our known at this point.

Well, and Steve, you have a mix of aftermarket in there, too, right? Aftermarket is a spot order spot buy business. And sometimes it can go up or down a little bit versus expectations in a quarter, and that's a very strong margin business, so it does affect the margins.

Okay. And then just as a follow-up. To what extent are there any cancellations that you're seeing in the Access business or changing in timing or push-outs or anything like that coming from customers?

I'll tell you, Steve, that we, we're really pleased with the market in Access. We see continued demand drivers going forward. We talked about the Q4 order book was really strong. The $940 million that we just booked was better than our expectations. So we're booked well through 2024 right now. And I'm telling you that because when I give you the health in terms of the marketplace, we don't have any unusual cancellation activity going on. It's just the opposite customers are focused on when can I get the equipment and when are you going to slot it for me in your production schedule.

Our next question comes from the line of Angel Castillo, Morgan Stanley.

This is Brendan on for Angel. I just want to talk about your CAT telehandler supply partnership. That should be ending, I believe, at the end of this year. So can you talk to your expectations for renewal of that relationship beyond 2025? And then just any potential implications from a price or profitability perspective?

Sure. Yes. Good to hear from you, Angel. So I want to first say, "Hey, CAT's been a long-term partner of ours, and they've been a great partner." I mean, there's hard to find a better partner than CAT to work with in the industry. I'm not going to comment on the contract specifically. What I will say is that JLG is the premier provider of telehandlers in the industry. And if we had more capacity we would be shipping a lot more telehandlers today. We are really paced by the capacity that we have. So that's why we're increasing capacity. We see new markets opening up. We talk about all the time, that's one of them. That is a real opportunity today and will continue to grow over time. So we expect, no matter what happens, that we will continue to grow our share and our revenue in the telehandler marketplace for the foreseeable future. That's what I can tell you about that market. And it's a -- we see it as a good, healthy growth area for us.

Okay. And then just touching on the free cash flow guide. So new guidance is a little bit earnings are higher than you previously thought. You mentioned I'll call it, CapEx is the same. So I'm just kind of curious what the puts and takes are for why the overall free cash flow hasn't gone up as well?

I would say right now, it's early in the year. And I think exiting. We have a little bit more working capital exiting the first quarter. So that's something we're going to we're going to continue to monitor throughout the year. But it is something that certainly we expect to be a good strong free cash flow generator. And so really, it comes down to timing in a lot of cases with working capital. But I think bottom line is we talked about it. We expect to be a strong free cash flow generator over time.

Our next question comes from the line of Tami Zakaria with JPMorgan.

So I have two quick questions. One is the strength in Vocational, excluding AeroTech, can you comment on the price versus volume growth you saw in the quarter?

Yes. We're certainly seeing the benefits of improved price cost dynamics. You'll see in the -- in the Q that it is -- it's really the biggest driver in the quarter, about $30 million of our operating income year-over-year benefit was really price cost, which is what we expected, and that's going to continue to be a nice strong driver as we look into the future.

Got it. That's very helpful. And then on Access equipment, I think orders were down, but still better than what you initially expected. But could you provide some color on orders in North America versus Europe or other regions?

Yes, Tami. Access has been running at a really healthy clip, and we expect that to continue due to all the demand drivers that we talk about regularly. With regard to the global outlook, U.S. is our biggest market, of course, and the U.S. is really healthy. When you look at our guide, you see that we're going to increase our revenues for the year in the high single digits, I think 8%, 9% in terms of the revenue growth. The orders across the globe are -- and the revenue creation that we're seeing for the most part is positive and healthy. The only area that has turned not so good as Europe. Our European business this year is down and Europe's -- we'll continue to invest in Europe for the long-term future. But Europe is the one outlier for us today when you look at the global market. Asia is doing well. South America, Latin America is doing well. That's kind of the global outlook.

Our next question comes from the line of Nicole DeBlase with Deutsche Bank.

Maybe just on Vocational. You talked about price cost being a big factor there. I guess you guided to 11.5% margin for the full year. I know that's up versus prior guidance, but it does imply like a step down versus what you achieved in the first quarter. So can we just talk about the puts and takes there going from like 1Q to the rest of the year?

Sure. I would say very similar, Nicole, to Access. The timing of some of the investments we're making in the business are occurring more Q2 -- or Q2 through Q4 so Murfreesboro, Tennessee, some of the other new product development spending, some of our integration costs. We had a bit in Q1. So we talked about that a minute ago, but there's more of the rest of the year. So it's really that we -- again, we expect price cost to be -- continue to be a driver throughout the year when we look at it on a year-over-year basis.

Okay. Got it. That's clear. And then sticking with the price/cost topic then. Can we also talk about that, how that's impacting Access? So is the expectation that part of the margin -- part of the explanation for margins through the year is perhaps the price cost tailwind was biggest in the first quarter and that starts to moderate through the rest of the year. Do I have that right?

I guess, ultimately, from a price/cost perspective, I think we're -- our pricing is essentially fixed for the -- or is set for the year. So I think -- the price and cost dynamics are largely there. I would say the bigger drivers just as we go through the year is just, again, some of that customer mix nuance.

Nicole, it's really an access Q1 to the rest of the year. It's mix. And its R&D investment in the second half of the year that it's not price/cost.

Correct.

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

So my questions on order cadence and recognizing that you've already booked out '24. Like how should we think about orders over the next couple of quarters? Is it more typical seasonality? Are you going to see more of the '25 orders in the fourth quarter? Just trying to think through that.

So right now, when customers place orders, Chad, they're primarily placing orders for units they're going to receive in -- at some point in 2025. And so it makes it very difficult on our customers to have such -- in the Access equipment market when we have such big backlogs and such, therefore, longer lead times. So that's why we're saying and we talk with our customers all the time about this and when is the best time for them to be placing orders for the future. And right now, as we're booked out through in '24 and into '25 they're focused on finishing up their 2024 and then starting to order for 2025 a little bit later in the year. So we think that will start probably in the second half, Q3, let's say, and build into Q4. That's our expectation. Now having said that, in Q1, our orders were better than what we thought they were going to be. So we still have a lot of customers that are willing to place orders for '25 even though we're so far from '25 still at this point in the year. That's what I can say.

Great. That's helpful. And then just shifting over to defense. I think you mentioned that you had some combat vehicle programs that you're potentially bidding for. Could you give a little bit more color what are the programs, when should we expect that down select with the products?

So the most notable one the Robotic Combat Vehicle. It's an autonomous vehicle with a lot of technology on it. We won the prototype contract, so they will select the production -- they'll award the production contracts in 2025, probably early 2025. It's a $1 billion type business, maybe $1 billion-plus type contract. But right in cross airs of where the DoD priorities are, because it's a high-tech vehicle, there's good margins on that vehicle. That's a prime example of where we can make a difference with our capabilities in the combat world.

ROGUE Fires, so too, like you mentioned in the prepared remarks.

ROGUE Fires is a program that we're selling today, and we'll continue to sell.

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

This is actually Christian Zyla on for Steve Barger. Given 1Q's strong operational beat, if you were to see upside in the back half of the year guidance, any thoughts on what segment that would come from?

No. We just -- I guess what I'd say is we had a strong Q1, a solid increase to our revenue expectations and EPS than -- and you certainly see that our businesses are performing well, and that will continue to be the focus for the year. So certainly, we see strength right now in Vocational and Access.

Yes. And Christian, I like the question. We feel really good about all of our businesses, and we feel good about them, because they all have good opportunities. Vocational got great opportunities to continue to outperform and in manufacturing and delivery with big backlogs and really good programs. But Defense, I could say the same thing about. I can say certainly Access is always that way. The team is always going to try to strive and continue to drive improvement in the business. So we look at the world as half full -- where the glass is half full as we look forward, we got opportunities in our businesses.

Great. And then it looks like you're already going to hit the bottom end of your $11 to $13, '25 targets by the end of this year. Not looking for guidance, but is it the high end of that range, what you're thinking about for '25? And any thoughts on what comes after that, given the order and backlog visibility really into '25 already?

Well, I mean, thanks for the question, Christian, because we are delighted that we are hitting our 2025 long-range guidance 1 year early, which as you just said, is exactly what we're doing. Now that doesn't surprise us, this type of performance, we always knew we'll get to this level of performance. We're just doing it a little bit faster than what we had forecast to the world we would do it at. That's all really, really good. We're not providing guidance today for 2025. We will provide guidance for 2025 when the timing is right. But we look at the health of the access market. We look at the strong position that we have in the Vocational market. And in 2025, we'll start to see some positive change in the Defense business. We -- that's what I'll say about it.

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

As you get closer to volume ramp on the postal truck and you've gotten obviously a little more familiar with the BEV production process. And obviously, it sounds like a large majority from the get-go is going to be BEV. Can you give us an update where you're comfortable thinking about profitability for that program? I know you're not going to give us an exact number, but just give us some update on your thoughts now that obviously, we kind of started to think to be a little more ice to start, but obviously, now it's clear, it's going to be BEV from the get-go. So I'm just curious.

You want to answer it, Mike?

Yes. I would say, David, our view hasn't changed. I think ultimately, we said by 2026, we'll be at full rate production, we would expect, as we've said all along, stronger margins in our traditional tactical wheeled vehicle margins. This year, we'll have some start-up costs, so it's not -- and volume is relatively low. So next year, we see a really strong ramp, so it's going to be between that. And I think that's about what we're going to -- what all we'll say at this point in time. But we're pleased with the progress and the outlook.

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

Thanks, Christine. And thanks to everybody for joining us today. We're pleased with our strong start to 2024. We look forward to speaking with you at a conference or one of the trade shows where we will be showcasing our technology and mobility. Our Volterra ZSL will be on display at WasteExpo from May 7 through the 9. It will also be shown at the Advanced Clean Transportation Expo in Las Vegas on May 21 through 23, and along with the U.S. Postal Service's Next Generation Delivery Vehicle. Please reach out to us if you have any follow-up questions, 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.