Greetings, and welcome to the Oshkosh Corporation Third Quarter 2024 Earnings Conference Call. [Operator Instructions]. As a reminder, this conference is being recorded. It's now my pleasure to introduce your host, Pat Davidson, Senior Vice President of Investor Relations for Oshkosh. Thank you. You may begin.

Good morning, and thanks for joining us. Earlier today, we published our third 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 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, Chief Financial Officer and President of our vocational segment. 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 solid quarter with revenue growth of 9% and an adjusted operating margin of 10.3%. Our adjusted EPS of $2.93 was in line with our third quarter expectations we shared during our second quarter earnings call. We continue to see improving performance and growth across our vocational business portfolio and an improving defense segment outlook with new contract award pricing. While our access segment is experiencing softer market conditions in North America in the near term, we expect we will continue to deliver resilient healthy margins. In light of somewhat softer access equipment markets, we are updating our full year 2024 outlook for adjusted EPS to be approximately $11.35 per share versus our prior estimate of approximately $11.75 per share. During the quarter, we achieved a significant milestone as the United States Postal Service began placing our next-generation delivery vehicles, or NGDV, in service for last mile delivery. The NGDV leveraged our market-leading innovation and technological capabilities to provide the U.S. postal service with the industry's most state-of-the-art purpose-built delivery vehicles that modernize and decarbonize their fleet while enhancing driver safety. We are pleased with early positive feedback on NGDV performance in the field, and we remain focused on executing our production ramp-up, which is progressing well. Last month, the science-based targets initiative notified us that they approved our greenhouse gas emission reduction targets. SPTI's validation of our targets reflects another important step in our journey of reducing our carbon footprint while consistently delivering groundbreaking solutions that shape a more sustainable future. Please turn to Slide 4, and we'll get started on our segment updates. The Access team delivered year-over-year third quarter sales growth. While we believe mega projects and fleet ages remain tailwinds, pockets of slowing nonresidential construction…

Thanks, John. Please turn to Slide 7. Consolidated sales for the third quarter were $2.74 billion, an increase of $232 million or 9% over the prior year quarter. Our top line growth was driven by the benefit of increased organic volume in all segments an additional month of AeroTech sales in the current year as the business was acquired on August 1, 2023, and the benefit of improved pricing primarily in our vocational segment. Adjusted operating income increased $6.2 million over the prior year quarter to $283 million or 10.3% of sales. The improvement in adjusted operating income was largely driven by higher sales volumes and improved price cost dynamics, offset in part by higher SG&A and engineering costs. Adjusted earnings per share was $2.93 in the third quarter versus $3.04 in the prior year. The modestly lower adjusted earnings per share on higher operating income was driven by a higher interest expense on our revolving credit facility. Please turn to Slide 8 for a review of our updated expectations for 2024. We are reducing our full year adjusted earnings outlook. On a consolidated basis, we now estimate 2024 sales to be approximately $10.6 billion versus our prior expectation of $10.7 billion. We are estimating adjusted operating income to be approximately $1.1 billion, down from our prior estimate of $1.14 billion and we are now estimating that adjusted earnings per share will be approximately $11.35 versus our most recent estimate of approximately $11.75. At a segment level, we are estimating access sales to be approximately $5.1 billion with an adjusted operating margin of 16% compared to our prior expectations of approximately $5.3 billion and 16.5%, respectively. The reduced revenue and slightly lower margin expectations reflect the softer market conditions in North America previously highlighted. We expect vocational sales will be approximately $3.25 billion, and we are increasing our expectations for adjusted operating margin to be approximately 13.25%, up from our prior expectation of 12.75%. We expect stronger price/cost dynamics and lower spending to drive our improved margin outlook. For Defense, we are now -- we now expect sales to be approximately $2.15 billion, and we are maintaining our expectations for adjusted operating margin of approximately 2.25%. Our estimate for corporate and other costs is $190 million. Our expectation for tax rate remains 24%. Our expectation for share count is also unchanged at 65.8 million shares. We are reducing our CapEx target by $25 million to $275 million. We are also reducing our estimate for free cash flow by $25 million to $350 million. I'll turn it back over to John now for some closing comments.

We reported another solid quarter and while we are reducing our expectations for 2024 adjusted EPS, we continue to expect meaningful growth in revenue, adjusted operating income and adjusted EPS compared to 2023. We continue to benefit from strong long-term growth drivers, and we believe the strength of our people, innovative products and our businesses will continue to drive long-term shareholder value. I'll turn it back to you, Pat, for the Q&A.

Thanks, John. I'll remind everyone to please limit your questions to one plus a follow-up and please stay disciplined on your follow-up question. After that follow-up, we ask that you rejoin the queue if you have additional questions. Operator, please begin the Q&A session.

[Operator Instructions]. Our first question is from Mircea Dobre from RW Baird. [Operator Instructions]. We'll go on to our next question here from Angel Castillo from Morgan Stanley. Please go ahead.

This is actually Stefan Diaz sitting in for Angel. Thanks for taking my question. So, I guess regarding your lower sales outlook, you indicated this was due to softer outlook in access However, if I'm not mistaken, I recall your access backlog give you full coverage for 2024. So maybe if you could give us more color on the exact puts and takes on what drove the revenue decline and whether there were any order cancellations or delays. If you could help us bridge 2024 to your more optimistic outlook for 2025, that would be great as well?

Yes. Thanks, Angel. I'm sorry, Stephan, thank you for the question, and thanks for sitting in for Angel today. When we talk about our backlog, we talk about our backlog and how it stretches into 2025. But in any given quarter, you enter the quarter mostly booked. There's timing to -- the thing that's important to remember there's timing to backlog. Some of our backlog is scheduled to ship next year, some scheduled to ship in the fourth quarter. So, in the fourth quarter, we have a lot of our backlog that's already booked with customers, but there's still some orders to come in to fill out the quarter. And so that's some of the change that you saw. I think it's really important, though, to pay attention to backlog versus just order intake mean orders are really important, of course, but I think backlog is a little bit more telling. And we have a very healthy -- even with low orders in the third quarter, which we expected. We have a very healthy backlog, and I think that, that's indicative of a still relatively healthy access equipment market. Yes, we have had some pushouts in our backlog, pushing things out to '25 and we have had some cancellations and the cancellations make the orders look a little bit lower in Q3. But overall, we still have a healthy backlog at over $2 billion. Typically, in the access equipment world. If we have a 3-month to 6-month backlog, that's considered healthy and normal, and we're at kind of the high end of that right now. So, we feel pretty good about the backlog that we've got.

Great. Thanks for the color. And then for my follow-up, within vocational, can you talk about the degree of incremental price upside that's embedded in your backlog? And maybe if you could remind us how we should expect that to flow through the P&L within the next couple of years. And then I'll turn it over.

Yes. This is Mike. We still have strong double-digit price increases in our backlog. That will continue to read through over the next the next few years, really, we're starting for fire trucks, we start getting out into about a 3-year backlog. So that will continue to read through. So, what that means is we expect to continue to see not only growth top line of the business from volume, we continue to expect to see the benefit of price cost.

Our next question is from our next question is from Jerry Revich from Goldman Sachs. Please go ahead.

Good morning, everyone. John, nice to hear the update on the improved economics in defense. Can you update us on how you're thinking about the path towards the 9% to 10% margin targets that you have for the business? How big of a step forward do you expect in 2025 and any updated thoughts on the cadence, please?

Yes. I think you'll see a step forward and the short answer is you see a step forward in '25, and you'll see a bigger step forward in 2026. And a lot of this comes from our core defense business and the new contracts that we're getting. We've gone through 40 years with relatively low inflation until 2021. And with fixed price contracts when you have unexpected inflation it kind of disrupts your business as we've seen. So, the good news is that there is -- this business is going to improve dramatically over the next couple of years because we're getting new fixed price contracts that are priced to the realities of today's input costs. So, you think about the big heavies the medium vehicles that we do as well as then layering in some of the combat programs that we have and some international business that we have. That's all really healthy margin for us, and we fully expect this business will recover to its normal kind of near 10% margins. It's going to be a little -- the core defense business will be a little bit smaller because we won't have the core JLTV business for the DoD going forward, but it will be a profitable core defense business of over $1 billion in revenue. And then you layer on top of that the postal contract, the NGDV that's a gigantic program. That's what drives growth in this business into the foreseeable future, and that's also a good margin business for us. So, going forward, that business is going to improve materially over the next couple of years.

Super. And in Access Equipment, you folks have made a lot of operational and process improvements over the past couple of years. When we do see demand cycle weaker, how should we be thinking about decremental margins looks like in the fourth quarter, the implied guidance is about 35% decrementals. I'm wondering if you could just talk about if we do see demand surprise to the downside? How should we think about any potential for improved decrementals versus history, given the process improvements?

Yes. First slide says, I'd say I think from a incremental margin perspective, I would -- it's a little bit easier to look at it on a full year basis. And we're expecting very strong incrementals for Access on a full year basis of around 60% based on our implied guidance. I think when you look specifically on a quarter-to-quarter basis, you can have some nuances. So, looking specifically to this quarter, we did have -- we had a particularly favorable freight material environment in Q3 last year. What we saw Q3 is more favorable than Q2 last year and Q4 of last year. So, I think a bit of a tough comp. I think we're not going to get into decrementals for next year as it's still early in our negotiation process. But the bottom line is we expect to continue to deliver solid margins, as we've talked about, even if we see some market softness next year.

Our next question is from Tami Zakaria from JPMorgan. Please go ahead.

Good morning. Thank you so much. So, my question first question is on the vocational segment, really strong performance. I'm wondering, are you considering raising capacity for this segment? Because it seems like there's very high backlog. You have visibility into demand. So, have you considered raising capacity?

Yes, Tami, that's -- it's a great question, and it's a huge focus area for us. So, I think what you're going to see in our existing facilities, particularly on the fire and refuse and recycling sites, we are in the process of adding capacity. We have our new, Murphysboro, Tennessee Facility where we ramping up the electric refuse and recycling vehicles. We're also using that for some fabrication activities for the broader segment. My expectation is that we're going to continue in our existing facilities to continue to increase that capacity through some capital investments and so on. And we'll continue to look at additional capacity through additional facilities over time. But that is clearly going to be a focused area. We expect that we're going to see top line growth from that over the next several years.

Got it. That's helpful. And then one more question on AeroTech. It's been 1 year. What are some of the things that pleasantly surprised you versus your expectations when you bought it about a year ago?

Yes, Tami, there's a lot to like about AeroTech. We certainly acquired it because of the close adjacencies, particularly from a technology standpoint, you look at electrification, autonomy, connected intelligent products, a lot of overlap with our other company-wide innovation initiatives. So great synergies on that front, and I think that's going to allow us to expedite across the company, some of those efforts. I would say the synergies between our -- between -- from a commercial standpoint between our businesses has been very positive as well. We -- as John mentioned in the prepared remarks, we had JLG products, ground support products as well as our ARC vehicles at the Lisbon ground support equipment show a lot of overlap in our customers and so it's just been -- and of course, the industry dynamics are very strong. So, we continue to expect to see profitable growth in that business.

Yes, I'll just make one further comment, Tami. When we -- after we acquired the business, we really got to know the customers better and the relationship that AeroTech and AeroTech people have with the customers. And it's really strong. These are household names, Delta, United, Federal Express, and others. And they really are positive about our ability to continue to innovate the product with Mike talked about it, electrification and autonomous functionality because that drives better performance for them. And that's exactly what our business model is, innovation around technology to improve productivity and improve safety for our customers and for the people that are doing the tough work. So, it just continues to be a really strong fit for what we do.

Wonderful. Thank you, so much.

Next question is from Kyle Menges from Citigroup. Please go ahead.

Good morning, guys. I was hoping if you could just talk a little bit more on what you're seeing in the access market and maybe if you could kind of bifurcate the market between some of the larger rental customers versus the smaller, more local players and just really which customers you're seeing the most, I guess, demand softness and any push outs into 2025? Is it just that it's more from the big rental guys or some of the smaller players?

Yes. Thanks for the question. So, I try to frame this. We've just come through a period the last few years of really, really strong demand. and we're all aware of that. You're aware of that. And I think we're experiencing right now a market that's kind of normalizing. And we've talked about our customers going back to a more normal seasonal pattern where they're planning in Q4 and Q1 for what's going to happen in 2025. And they know that lead times are back to normal. I talk about our backlog being 3 months to 6 months, which is kind of where it sits right now, and that's a healthy backlog. But I want to stress, we really believe that -- and our customers believe you hear the public customers that we serve talk about this -- we believe the long-term drivers remain intact. We talk about these significant infrastructure investments, mega projects, data centers. We can't build enough data centers. We can't build enough power generation, there's also still aged fleets in many categories that we provide. All those are really good things. Now we do realize that there is some pressure right now with regard to nonresidential construction, and that's kind of private construction mainly is what we're talking about. High interest rates, I think have been the main driver of some concern there. So that's what's causing a little bit of pressure. We don't think that '25 is going to be any kind of significant downturn. We just think the market is going to be a bit soft. We'll see healthy conditions in the mega projects. We'll see some softness probably in private construction. And then we expect, after a short-term period, it will continue to grow again. So, our -- and our outlook through that calls for us to be able to deliver strong, resilient margins. So, talking about the big nationals versus the independents. I don't know if it's a national versus independent. I think when you have an independent that is exposed to a lot of private construction, they might be feeling it a little bit more than an independent also participate in these big megaprojects that are independent that is exposed to mega projects where they operate. So, I think the difference is, is it private nonres versus kind of these big trends we're seeing.

That's helpful. And then I was curious -- I guess I was hoping you could talk a little bit more about just how the NGDV ramp-up is going more so in the near term. I did notice it seems like NGDV deliveries actually went down a bit sequentially in the quarter. So, I understand that might just be a seasonality thing, probably you shouldn't read into that too much, but I love to hear just how it's going so far?

You shouldn't read into those deliveries at all. Actually, deliveries went up, not down. It's just a cost-to-cost accounting method that drove that. That's all it was. Deliveries are going up. This -- I'll start with, this is a -- we're really happy with where we are. We work really closely with the postal service. The carriers are delighted with the vehicles that they're using today to deliver e-commerce and mail that are on the streets and with the deliveries that we've made. This is a revolutionary vehicle, incredible performance, safety vehicles, ease-of-use, superior ergonomics it's really unlike any delivery vehicle that's out there. So, we're today ramping up production. When you go through -- you take a brand-new vehicle to market, we believe, together with the postal service that a prudent production schedule is better than trying to start by sprinting. So, we're ramping up today. We'll be at full production throughout 2025 as we go through 2025. We -- again, this will more than offset in 2025, anything we lose from the JLTV contract going away. It's a great program, long-term program, good for a lot of reasons. Thanks, Kyle.

Our next question is from Jamie Cook from Truist Securities. Please go ahead.

Good morning. I guess two questions. One, Mike, on the free cash flow, we've been lowering the free cash flow guide throughout the year, understanding some of it's the guidance cut this quarter, but it still implies a pretty big ramp to achieve your free cash flow guidance for 2024 in the fourth quarter. So, if you could just help us understand what's going on there. And then understanding you don't want to talk about decrementals for 2025 on access being sort of said your -- answer implied you think we'll have decrementals in 2025 based on an earlier question, which means you're saying now that sales are going to be down for access equipment. So, I guess one of the concerns that are out there is just pricing, that pricing starts to go negative. So, can you give any color on how you're thinking about pricing? Or can we assume sort of a normalized 25% decremental margin? Like what would be the reason why we wouldn't be able to achieve that if sales are down?

Sure. Starting with cash flow. Big -- there's a number of big items. Obviously, we had another big shipping quarter. Q4 is typically implied the revenue is lower. So, you get a natural bleed-off of working capital, certainly some inventory timing specifically in our Defense segment, there can be big timing impacts of when the acceptance process of vehicles takes place, and that really shifts from the unbilled receivables to the billed receivables. So, we see a big impact and benefit of those unbilled receivables coming down in the fourth quarter. Those are really the biggest items. I think next -- we're not calling next year kind of shifting to the -- your other question. So, I think ultimately, Obviously, the market is a little bit softer right now that could continue. So -- but again, we're going to I think the key is we want to get in a little bit further into the negotiations with customers, the mix and the volume and all those elements. But I think importantly, we think it's going to be a solid year next year with solid margins.

Our next question is from Steven Fisher from UBS. Please go ahead.

Thanks, good morning. So, the vocational bookings and book-to-bill was certainly a bright spot. Wondering how to think about the order trajectory and vocational over the next quarters. Is there any visibility you have on that? And how lumpy do you think it might be on an ongoing basis?

Yes, I'd say from a backlog perspective, the backlog continues to grow in the business. So, I'd kind of revert back to my earlier comments to Tami that we're highly focused on throughput -- our -- the market dynamics in each of our business remains strong. I think if you look at vocational, particularly when you look at AeroTech and McNeilus the -- you can have some lumpiness in the orders as we're booking large national account orders and sort of in blocks at times, but we expect demand to remain very strong going forward. And I think that quarter-to-quarter, there can be some quarter-to-quarter lumpiness.

Yes. I think, Steve, one thing to note about these vocational markets that we're in, they are resilient markets, the airport market, for example, where AeroTech is in some of our other business, that will continue and is projected by pretty much every third party that measures it to continue to grow into the future because of shortage of capacity in the airport world. And fire truck would be the same. These are resilient markets, not very cyclical and that's one of the reasons that we think this is a great place for us to be in this segment.

Great. And just a follow-up. So obviously, it sounds like vocational doing very well. You've already talked a bit about access in '25 being still having a relatively healthy backlog and overall reasonable market and defense, you have NGDV ramping. So, I guess as we think about your prior expectations on earnings per share for 2025, that range that you had, I mean, should we be assuming that you're still thinking at the moment that, that range is still broadly appropriate?

Well, we're already in that range today. So, I'll start there. I can't guide for 2025 at this point in time. We'll be able to -- as we go through, a lot of work this quarter, particularly with our access customers, we'll be able to give much better guidance in January as to where we think '25 is actually going to be. But remember, we're already in '24 where we said we'd be in '25.

Our next question is from Tim Thein from Raymond James. Please go ahead.

Yes. Thank you. Good morning. Maybe just -- well, first of all, Mike, congrats on your new role. I'm sure you're going to miss hosting these calls. So...

I still get a mic, Tim, don’t worry about it.

There you go. The -- just on access, the -- just kind of the market, obviously, we'll see what it gives you for next year. But just as you think about, obviously, customer and geographic and product mix can play an important role in terms of the makeup of the margins. At this point today, do you envision just if you kind of simplify it between aerials and telehandlers? Do you anticipate again, not making a market call? But just from a product standpoint, much of a change in terms of -- or the shift in the complexion of whatever those -- that revenue base may look like? I guess I'll start with that one.

I would say, in general, telehandlers have been strong, but I think it's early still that I think the mix will continue to evolve as we get into next year. So, I think it's a little bit too early to call exactly what the dynamics of each one of those buckets is going to be...

Yes. I was going to emphasize the same thing, Tim. Telehandlers has been particularly strong. Although booms are strong as well. But telehandlers been particularly strong. I mentioned that because we're building new capacity for telehandlers, and we're already in production. We'll continue to improve that or increase that production in 2025. And we are not slowing down on that by any stretch. We see lots of demand there. We don't have enough capacity today to meet the demand of the telehandler market. And we see new -- we talk about new end markets opening up like ag and that's real. And that just continues to give us the confidence that that's a good place to be. It's hard to pinpoint today if there's going to be any kind of material mix shift, though, between one product and another in 2025.

Okay. And as my follow-up because I know Pat's counting. But the I'll ask the same question, John. I think I asked you that the quarter when you announced that telehandler capacity expansion. Is there an update? And do you have a big one specific customer that you've call out your filings for years in terms of a contract that is due to expire here soon. Any update on that in terms of to the extent there's a potential revenue loss associated with that? Or -- just maybe an update on that?

Yes. I mean I'll comment on it. We've got -- we're talking about Cat. Tim didn't mention it, but I'll mention it. I mean Cat's a great partner of ours. They have been for many years. they'll be a good partner of ours going forward as well. We've got a good relationship with them. Sure, the structure of our partnership with Cat is changing. But I guess what I can say is that we'll continue to support Cat and Cat dealers with JLG equipment going forward. It's got great recognition and acceptance in the market. And that I think you'll continue to see it there.

Our next question is from Mig Dobre from R.W. Baird. Please go ahead.

Good morning. Thanks for coming back to me. just to sort of follow up here on the Access discussion. I guess understanding that you're not guiding for '25, but you have added capacity in the segment and things seem to be turning softer. So, I guess John, how do you approach next year here? What are some of the things that you can do to manage the cost basis? Should we maybe get ready for some restructuring here? Or do you have enough levers to kind of deal with potentially lower volumes not meeting such action?

Yes. So Mig, thank you for this question. Sorry, you got cut off somehow when we started the call, I apologize for that.

It was my fault. Yes.

Okay. So, thanks for the question. So, we've been working on our resilience for a while. It's not like, "Oh, my god, we got to start working on resilience. This has been going on for a while. And really, it starts in our manufacturing plants and how flexible we can be under different demand environments with regard to our fixed cost. So, there's a lot that goes into that. We've done a lot of work on that. We also -- as we go into these -- continue to improve the resilience of the business. We do a lot of work with our aftermarket, our recurring revenue streams. So, we've made investments in the past few years on our ability to distribute and expand our aftermarket parts business, and we think that, that will continue to help us as we continue to manage that and grow that going forward. The other thing that we'll do, as I've talked about 2025, we look at the outlook over a 5-year horizon. Our plans go out 5 years, and these are detailed plans. And we feel great about the next 5 years. We think '25 is a bit of a soft period as we continue on that growth curve. So, we may see some sales decline, although we don't think it's going to be big, but we think there'll be some sales decline. We have some other levers, of course, with regard to cost reduction work that we do. I wouldn't call it significant restructuring, but we have material cost reduction initiatives, some that we'll continue to work on to mitigate anything that might be unfavorable in 2025. So -- there's a lot of work that we've been doing for a while on the resiliency of this business.

Understood. Then my follow-up back to refuse collection. You talked about the success you're having with Volterra -- and I guess 2 questions. I'm curious as to whether or not you having this proprietary chassis represents a differentiator and competitive advantage. And if that's the case, maybe you can kind of help us understand why -- and then where is the market trending here, side-loaders, versus front loaders? Obviously, you have both of those products, but I'm curious as to kind of how you see demand evolving in that space?

Sure. First of all, with the Volterra ZSL that we do believe that the chassis gives us a strategic advantage. And that's what that is or a competitive advantage. And what that is, is because it's fully integrated. So, if you think about traditionally a refuse collection vehicle, it's sort of a separate body and chassis. So, you're limited in the level that you can integrate create those two pieces of the chassis together with a fully integrated unit, very much like a pure Spire truck, you really have more advantages that you can add safety features to the vehicle that are all fully connected ultimately, so safety productivity benefits, ease of entry into the cab and exit. It just makes the entire driver experience more positive. Of course, ultimately with the electrification benefits of it, our customers are seeing that they have an advantage from a total cost of ownership perspective as well. So that's what we see. So, we believe that this is going to be a decade-long trend that as fleets continue to electrify. In terms of where the market demand is. Frankly, the market is pretty strong across the board. As we're looking at capacity, we see capacity opportunities both on size and fronts. So that both are going to be a focus, and we see strength in both of them right now.

Our next question is from Chad Dillard from Bernstein. Please go ahead.

So, my first question is on pricing and access. So first of all, what was price realization in the third quarter? And then secondly, I recognize that you guys are going through negotiations for '25. But at least in terms of what's in backlog right now, how do you expect price and, I guess, price cost to evolve at least through the first half of '25 based on looking backlog?

Yes. So ultimately, from a price cost perspective, again, we -- I think ultimately, we had a more challenging year-over-year comp that we expect to be quite price cost positive on the year. You see that, that's really what's driving that 60% incremental on a full year basis. Again, I think the -- as we look to next year, again, it's going to come -- there's some backlog there. Obviously, that's going to carry into next year. But we're very early in our negotiations and so on. So that mix really matters, both product and regional as well as customers. So, I think it's -- again, we're not going to speculate at this point on incrementals or decrementals for next year. Again, going back to, we expect that the market's softer, we'll continue to deliver solid margins in that business.

Okay. That's fair. And then just second, on the capacity additions in access. Just trying to think through like the kidneys of the ramp-up as we go into 2025 and then is there any absorption to consider given that it may take a little time for factory to fill up and then finally, I just wanted to confirm, I think in the past, you talked about like a 25% increase in capacity. I just want to make sure that's still the plan?

So, you're talking about Jefferson City, where we're expanding our telehandler capacity. There's a little bit of cost in the first part of '25 on start-up costs in that facility. But as we get to the second half of the year, you'll start seeing some absorption benefits and things and it will be at full production by -- at some point in the second half of next year. So, this is -- it's a good driver of both sales and margin improvement for the company as it gets to its full production level.

Our last question is from Steve Barger from KeyBanc Capital Markets. Please go ahead.

Another Volterra question. You got a nice call out on the Republic call yesterday. My question is, as you introduce more electric offerings, are those supply chains fully built out from a capacity standpoint -- or are there potential challenges you'll face if the uptake rate is better than you expected?

Yes. I think ultimately, from a ramp-up perspective, supply chain as one of the top focus areas. And I think -- as with many of our large programs, we have a very -- we have a very regimented approach as we as we increase the capacity and the throughput in the facilities. And so, we're very much in lock stuff with our supply chain on the product. A lot of overlap and a lot of the components with other suppliers we have throughout the company. So, we -- at this point, we feel good about it. And again, this is going to be something, Steve, that we're going to be ramping this up. We're going to continue to see growth in demand on this really over the next 5 years to 10 years that this is going to be a long-term play as fleets are replaced.

Yes. But also, just to mention, in general, it's still a relatively new market, electrification of vehicles, whether they're big commercial vehicles like ours or their passenger cars still a relatively new industry. So, we're constantly working with the supply chain because it's still new in terms of whether battery cells, battery modules, battery packaging and then you've got e-drives and lots of other components. And we're in constant work with our supply base as it continues to grow and develop. And we feel very optimistic about it because in our commercial markets, we are able to provide an economic benefit for the most part for our customers. They can see total cost of ownership improvement because their productivity is better, the functionality of the vehicle is better the ways we can integrate it with autonomous functionality and its responsiveness is better. That's all really good economic improvements in commercial markets, different from passenger cars versus the commercial market space that we're in. So, we feel this is going to be a -- we don't feel like someone's going to flip the switch and all of a sudden, everything we're going to be building is electric. We don't see that happening. We just see nice growth in electrified product in several of our end markets over the next 10, maybe even 20 years. Remember, electric propulsion is a more efficient form of propulsion than diesel propulsion is. So, it's not going to shift overnight. But because it's economically viable now, it will shift over a long period of time and will help the supply chain develop together with us as we go through that period, but a very positive story for sure.

And just for my follow-up, Mike, you noted the 3-year backlog in fire being really long, and you've talked about how strong prices in backlog. If input costs were to come down for some reason, is that pricing locked in? Or is there a potential for adjustment?

The pricing is locked in.

So, this concludes the question-and-answer session. I'd like to turn the floor back to Pat Davidson for any closing comments.

Thanks, and thanks, everybody, for joining us today. We look forward to speaking with you at upcoming conferences and trade shows where we will be showcasing our technology. In particular, we're displaying at the CES show in Las Vegas in early January. We are proud of the innovation and technology we bring to the market at Oshkosh, and we'll be showing these capabilities at the Las Vegas Convention Center. We hope you will consider making that trip and visiting us. Please reach out if you have any follow-up questions, and have a great day.

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