Oshkosh Corporation (OSK) Q4 2024 Earnings Report, Transcript and Summary

Greetings. And welcome to the Oshkosh Corporation Fiscal 2024 Fourth Quarter and Full Year Results Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Pat Davidson, Senior Vice President, Investor Relations for Oshkosh Corporation. Thank you, sir. You may begin.

Good morning and thanks for joining us. Earlier today, we published our fourth quarter and full year 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 it’s 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 Matt Field, 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 strong results for Oshkosh Corporation with 2024 revenue and adjusted earnings per share for the full year of $10.8 billion and $11.74, respectively. We achieved an adjusted operating income margin of 10.5%, a 110-basis-point increase over 2023. This is an exciting time for our company, as we work to capitalize on solid growth opportunities, particularly in our Vocational segment. I’m also happy to welcome our new CFO, Matt Field, to the company. Matt brings exceptional leadership to our team, as well as extensive financial and international experience. I look forward to working with him as we continue to execute our innovate, serve, advance growth strategy. Let’s get started with a recap of the fourth quarter. We delivered another solid quarter of growth with a revenue up 6.3% compared to the fourth quarter of 2023. Our adjusted operating income margin was 9.4%. Our adjusted EPS of $2.58 reflected strong sales growth and margin expansion in our Vocational segment. And while Access -- while our Access segment is experiencing softer near-term market conditions, we expect to deliver robust, resilient margins and the long-term prospects for this business remain favorable with mega projects, infrastructure build-out and data centers driving demand for our equipment. Earlier this month, we participated at CES in Las Vegas, where we showcased Oshkosh’s innovative products and technologies aimed at making the work of everyday heroes safe, intuitive and more productive. We demonstrated our strong capabilities, including AI, autonomy and connectivity, as well as our practical and thoughtful approach to applying these technologies to deliver meaningful benefits for our customers. Our display featured the job site of the future, the airport of the future and the neighborhood of the future, incorporating these innovations. We also featured our next-generation delivery vehicle, which we started building for the United States Postal Service in 2024. This is one of the most significant new products in the history of our company. We’re pleased with the early positive feedback on the NGDV from postal carriers and look forward to ramping production throughout 2025. Our HARR-E concept designed for an on-demand autonomous refuse collection robot was recognized with a CES Picks Award as one of the best new products at the show. With HARR-E, residents of neighborhoods will be able to request refuse and recycling pickup with a smartphone app or a virtual home assistant. The robot will autonomously navigate to homes, collect refuse or recycling, and return to a central collection base to unload and recharge. We believe this technology has significant potential, especially for large planned residential communities. Lastly, I’m pleased to share that we were named to the Dow Jones Sustainability World Index for the sixth consecutive year. Companies must be rated in the top 10% of their peer group for sustainable business practices to be considered for the index. This recognition reflects our commitment to driving profitable, sustainable growth that benefits our people, communities and environment, as well as shareholders. Please turn to Slide 4 for a recap of 2024 and our 2025 expectations. I’m proud of our performance in 2024. Our 18,000 plus team members continue to deliver strong results, positioning us to be a growing, more resilient company for the future. For full year 2024, we grew revenue by 11.4% to $10.76 billion and grew adjusted operating income by 24.5% to $1.13 billion leading to adjusted earnings per share of $11.74. We are pleased with our progress. We are also announcing our 11th consecutive double-digit percent increase in our dividend, raising the quarterly dividend by $0.05 to $0.51 per share, a nearly 11% increase. This reflects our expectation of strong long-term cash flow generation and our Board’s confidence in our ability to sustain profitable growth. Turning to our outlook for 2025, we expect to deliver adjusted EPS in the range of $11. This reflects a balanced assessment of near-term outlook in Access equipment, opportunities in Vocational and the expected ramp-up of the NGDV program in Defense and investments in new products and technologies. Please turn to Slide 5 and we’ll get started on our segment updates. The Access team delivered solid fourth quarter sales as the industry continues to normalize. We’re seeing demand moderate in response to softer non-residential construction activity and elevated interest rates. As we’ve previously mentioned, we anticipate lower sales in 2025, particularly in the first half of the year. Our team is focused on execution in this environment and we are confident that we can deliver resilient margins for the year. We expect improving conditions in the second half of 2025, which are expected to provide momentum going into 2026. We ended the year with a healthy backlog at $1.8 billion, after booking orders of $856 million in the quarter. We continue to engage with customers on 2025 requirements and expect to book additional annual purchase orders in the first quarter. Furthermore, we remain confident in the market’s long-term health. Our Access team continues to advance its products with state-of-the-art technology and job site connectivity. ClearSky Smart Fleet was also featured at our Job Site of the Future CES exhibit, driving job site productivity. We now have over 100,000 connected assets as part of this technology platform. This is one of the world’s largest fleets of connected equipment on the job site. Customer adoption is strong and enthusiasm continues to build for ClearSky’s ability to enhance productivity, boost efficiency and maximize machine uptime. CES attendees also experienced our Galileo all-electric boom lift and roto-telehandler concept, as well as its companion, our autonomous mobile recharging robot. These advanced concepts demonstrate potential opportunities to enhance safety and productivity for the job site of the future. Please turn to Slide 6 and I’ll review our Vocational segment. Our Vocational segment achieved strong year-over-year revenue growth of nearly 20% in the fourth quarter and a robust adjusted operating income margin of 14%. Increased volume and strong price realization drove double-digit revenue growth and key product lines in the segment. The backlog is also robust, providing excellent visibility into demand. We remain focused on increasing production levels across the segment to support strong demand and a healthy backlog, which we expect will deliver meaningful revenue and income growth over the coming years. Another important announcement from CES was the launch of our all-new Volterra ZFL eRCV, the industry’s first purpose-built, fully integrated electric front-end loader refuse and recycling collection vehicle. This joins our Volterra ZFL side loader refuse and recycling vehicle to provide the most capable electric refuse vehicles on the market. We also highlighted future technologies, including our advanced AI capabilities to identify waste and recycling stream contamination, as well as our all-electric side loader refuse collection arm, which eliminates hydraulics and features autonomous operation. We believe these innovations will continue to revolutionize safety and productivity in the industry, which we expect will drive future growth. Global air passenger metrics continue to strengthen with the International Air Transport Association’s November figures showing growth of 8.1% year-over-year. We believe strong market conditions combined with technology and innovations in our iOPS connected solutions, electrified product offering and autonomy are fueling growth for our market-leading products at AeroTech, where we saw revenue grow more than 9% compared with the fourth quarter of 2023. Let’s turn to Slide 7 for a discussion of the Defense segment. Defense results continue to be impacted by legacy fixed-price contracts. In the future, we expect better results with improved pricing terms on TWV programs and the launch of the next-generation delivery vehicle. We look forward to finalizing our FMTV three-year contract extension in the first half of 2025. This sole-source contract is expected to include improved pricing and economic price adjustment provisions, similar to our recently announced FHTV contract extension, which will improve the resiliency of margins over time. We expect to complete domestic JLTV production in early 2025. International interest in tactical wheeled vehicles including JLTVs remains solid and we see the potential for additional international orders during the year. We are pleased with the progress on the production ramp-up for the NGDV program, which will be an important component of Oshkosh’s growth over the next decade. NGDVs are the delivery industry’s most state-of-the-art vehicles and are modernizing and decarbonizing USPS’ fleet while dramatically enhancing driver safety and productivity. These purpose-built vehicles are equipped with the latest safety features that will support the success of USPS for the next two decades. We expect to increase our NGDV production rates throughout the year and achieve full rate production by the end of 2025, which should provide strong revenue growth during the year and into 2026. When we combine the NGDV ramp with revised pricing on the FMTV and FHTV programs, it’s clear why we have a strong outlook for profitable growth in 2026 and beyond. With that, I’ll turn it over to Matt to discuss our results in more detail, including our expectations for 2025.

Thanks, John. I’m grateful to join the team at Oshkosh and excited by the growth opportunities for the company, including those highlighted at CES. I also want to thank Mike Pack and the finance and accounting team for their support and patience during my transition. Please turn to Slide 8. Consolidated sales for the fourth quarter were $2.62 billion, an increase of $157 million or 6% over the same quarter last year. Our topline growth primarily reflected increased volume and improved pricing in our Vocational segment. In fact, solid performance at Vocational is the primary driver for our strong Q4 results. Adjusted operating income was $245 million or 9.4% of sales, an increase of $5.5 million over the same quarter last year. The improvement in adjusted operating income was largely driven by higher sales volume and improved price-cost dynamics, offset in part by CCAs and Defense. Adjusted earnings per share was $2.58 in the fourth quarter, essentially in line with $2.56 in the prior year. The roughly flat adjusted earnings per share on higher operating income reflected the impact of higher interest expense on our revolving credit facility. We repurchased nearly 500,000 shares of our stock during the quarter at a cost of approximately $50 million. Full year free cash flow was about $270 million for the year, including capital expenditures of approximately $280 million. This was lower than our expectation due, in part, to timing delays on unit deliveries and Defense that we expect to reverse in 2025. Turning to our expectations for 2025 on Slide 9, we expect consolidated sales to be approximately $10.6 billion. We are estimating adjusted operating income to be approximately $1 billion and we estimate that adjusted earnings per share will be approximately $11. While we expect lower sales in Access, we expect to grow both sales and adjusted operating income for the Vocational and Defense segments. These estimates assume that present levels of tariff rates, raw material prices and supply chain performance continue into 2025 without significant disruption. At a segment level, we are estimating Access sales to be approximately $4.4 billion with an adjusted operating margin of about 13%, reflecting market conditions in North America and Europe. We expect the decline in revenue will be most pronounced in the first and fourth quarters, reflecting market softness as well as traditional seasonality. In Vocational, we see sales of approximately $3.8 billion with expectations for adjusted operating margin to be approximately 15%. We expect a continuation of favorable price-cost dynamics and volume growth to drive our improved margin outlook. For Defense, we expect sales to be approximately $2.3 billion with expectations for adjusted operating margin of approximately 4%, reflecting less adverse CCAs and the ramp-up of NGDV production. We expect to invest about $250 million in CapEx and our estimate for free cash flow is in the range of $300 million to $400 million. This cash reflects the projected adverse impact of timing differences from Vocational deposits on units produced as we work down the backlog. These can vary from year-over-year and normalize over time. We expect first quarter results to be the lowest of the year with adjusted EPS to be approximately $2. This reflects our expectations around the Access industry dynamics as well as the impact from the progressive ramp-up in NGDV production in Defense. With that, I’ll turn it back over to John for some closing comments.

We reported another solid quarter to finish off an impressive year at Oshkosh and we expect to continue to deliver healthy results moving forward. We have excellent visibility to grow revenue in our Vocational segment and our planned NGDV ramp-up supports growth in our last-mile delivery business. Additionally, we remain confident across the company in the long-term growth opportunities driven by our people, innovative products and strong businesses, which we expect will continue to deliver shareholder value. We just announced our guidance for 2025, which we believe is balanced and realistic given current business conditions. Furthermore, we plan to share more details about our longer-term outlook at our Investor Day later this year. This will be an outstanding opportunity to learn about our company and industry leading technologies from our business leaders. We look forward to speaking with you at the event. I’ll turn it back to you, Pat, for the Q&A.

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

Thank you. [Operator Instructions] Thank you. Our first question comes from the line of Jerry Revich with Goldman Sachs. Please proceed with your question.

Yes. Hi. Good morning, everyone. What obviously…

Good morning, Jerry.

Hi. What obviously stands out in the quarter is the outstanding performance in Vocational in the fourth quarter and the outlook for 2025. I’m wondering if you could just talk a little bit more about what the growth outlook in the core appears business versus the other parts of the portfolio. How broad-based is the topline and margin strength that you’re looking for in that business with a bit more context, please, if you don’t mind?

Yeah. Sure, Jerry. Thanks for the question. Yeah. Vocational is just continuing to do what we expect it to do, which is be a really resilient growing business, continuing to grow margins. We expect to continue to grow margins going forward. Our municipal fire truck business is a really, really important part of that business. We have big backlogs across all of our businesses in Vocational. I think that the fire -- the municipal fire truck business kind of is the leader in terms of the strong order intake that we’ve had and we’ve built up this big backlog. So what we’re doing in our fire business is we’re really driving investment and effort in getting throughput through our four manufacturing plants. We’re even adding some capacity at our new Murfreesboro plant, which is primarily building environmental vehicles, but we’re also doing some cabs down there to continue to increase throughput. But we have got -- we’ll continue to drive growth and we will -- in both units as we continue to get better throughput, and we’ll get continued pricing realization, which is in the backlog, that’s also going to help us continue to perform really, really well in this business. So, the municipal -- the market in general for municipal fire trucks is strong. Municipalities want new technology and we’re giving them new technology, and they’re upgrading their fleets, and this is a really foundational part of that Vocational story.

Really well done. And in terms of shifting gears to Defense, as you hit the full production rate for the U.S. Postal contract exiting the year, what level of margins are you anticipating from an exit rate standpoint within your guidance for this segment and is it fair to think about that exit rate as the run rate into 2026 or what other moving pieces should we be thinking about in terms of the margin cadence exiting this year?

Hi, Jerry. It’s Matt. So we’re really pleased with the ramp-up we’re seeing, and as you mentioned, we’ll progressively grow the pace of production across the year. While we don’t provide specific guidance on USPS, we do see it as accretive to our overall Defense business and so we’ll talk more about that at our investor day, but also obviously once we get closer to 2026.

Thank you.

Thanks, Jerry.

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

Thanks. Good morning. Congratulations. Just wanted to ask you a little bit about the visibility in Access on the first half versus the second half and how that compares to usual at this time of the year and maybe some of the key drivers in your mind of the improving conditions you mentioned in the second half of the year in Access.

Yeah. Thanks, Steve. I’ll take your question. So, I’ll kind of give you a quick rundown of the market. We look at the market from a lot of different angles, but the primary angle that we have on the market is our relationship and communication with our customers, and we’re always -- our customers have really good forecasting capability. They’ve got good visibility. Of course, we look at all the metrics. We look at from the Dodd-Hill Minimum Index [ph] to non-residential construction metrics, but customers give us a lot of insight into the market. So it’s a combination of that that really goes into what we’re expecting to see in the market in 2025. And fleet metrics in terms of fleet utilization is healthy. It’s not unhealthy. Our fleet metrics are healthy, but you -- but combined with that, you’ve got non-residential construction, primarily private non-residential construction that’s under a bit of pressure and that’s why we’re seeing more -- a lot more fleet replacement happening because fleets are still aged, but not so much fleet growth happening, and when we look at the market, we pay attention to what our customers are expecting, and that gives us the insight to say, hey, more typical seasonality, a little bit lower in the first half, but building momentum in the second half.

Okay. That’s helpful. And then just to follow-up on the Vocational side of things, maybe looking at the AeroTech business in particular, I’m just curious, how you see the evolution of that integration and the synergies looking like in 2025 as you embark on this third year of ownership. We had a sense at CES that maybe still some of the best things are still to come here. How do you see the incremental contributions from AeroTech here relative to other parts of Vocational?

Yeah. Thanks for that question. AeroTech’s a really strong business for us. It’s doing what we had expected it would do. These markets are in secular growth. We’re the leader across North America. I think CES is really a great way to view what we see the future of AeroTech being. And why we acquired AeroTech? I mean, AeroTech, we showed cutting-edge technology like autonomous jet bridges and our iOPS connected solutions. Those are available today, by the way, to future concepts like autonomous vehicles on the tarmac, like carrying luggage autonomously. That will happen in the near-term future. But that’s really the biggest synergy that we saw when we decided that AeroTech was a great fit to our portfolio is the technologies that we know and that AeroTech knows and needs are common and we can accelerate them by working together. We’re really excited about AeroTech. We see a continued healthy future for this business.

Perfect. Thank you.

Our next question comes from Angel Castillo with Morgan Stanley. Please proceed with your question.

Hi. Good morning, and thanks for taking my question, and congrats on a strong quarter. Maybe just wanted to dive a little bit deeper into the Access sales decline. I was hoping you could give us some color or specifics as to maybe how much price decline versus volume decline is kind of embedded in the guidance, and if you could split that also in kind of first half versus second half, that would be helpful?

Hi, Angel. It’s Matt. So, overall, we do see this more pronounced in the first half. I think that’s embedded in our guidance for Q1 with our EPS. In terms of price cost, we’re not going to provide specific guidance, but we do obviously take a disciplined approach to pricing, and then volume is really where we see most of the decline in the Access as we think the first half is going to be weaker. We’ve had good dialogues with our customers and so we have good visibility into how we think the year is going to shape up, but that’s kind of how we see Access for the year.

Got it. And then maybe just on the point or the commentary around what you’re hearing from your customers, could you maybe parse that out or kind of split it up between what you’re hearing from nationals versus the independents and how the kind of different channels might be suggesting the activity or the demand level is kind of shaping up across your key customers?

Yeah. Sure, Angel. So when we talk to nationals versus the independents, it can -- the nationals tend to get the lion’s share of the mega projects that we all talk and hear about every day, and that’s real, and it’s continuing and it’s actually continuing to accelerate. So is -- with the independents, it really is dependent upon the market that they’re serving, and some are serving markets that are very healthy or they might be getting part of the big mega projects and others might be exposed to a lot of private construction where they’re under a little bit of pressure. So it’s a bit inconsistent between some of the rental companies depending on the end market that they’re serving. I think the most important thing, though, is that equipment utilization is healthy. It’s come down from all-time highs, but it is at a healthy level. Our customers are comfortable with what their utilization rates are, and we think that 2025 is, again, mostly just pressured by private non-residential construction being off due to persistent interest rates where they are.

So just to clarify, is it fair to assume then that the independents and maybe some of those kind of smaller markets that don’t have as much mega projects, that’s where you’re seeing that’s what’s driving the volume move more than anything or any difference in replacement demand there?

Yeah. In 2025, I think, that you’ll see, we had a mix that kind of went towards the independent rental companies in 2024. I think in 2025, it’s going to come back to more national -- a little bit more national mix than independents. That’s what I can tell you, but it’s very different from one independent rental customer to the next.

Thanks, Angel.

Our next question comes from the line of Tami Zakaria with J.P. Morgan. Please proceed with your question.

Hi. Good morning. Thank you so much and very nice results.

Hi, Tami.

So my first question is on NGDVs. I think I heard you say you’re going to hit run rate by the end of the year. So I’m curious, what’s embedded in terms of the mix of ICE versus BEB and that assumption?

Yeah. It’s business as usual, Tami. This is a contract for 165,000 units and they’ve given us the first order for 50,000 that we’ve talked about for a little while. That mix is consistent with what it’s been. It’s all -- it’s business as usual. We’re on schedule with production. We talk to the Postal Service all the time about our current pace of continuing to increase production. The Postal Service is delighted with the vehicles that they have that are delivering mail and delivering e-commerce today in terms of the productivity benefits that they get out of this vehicle, which is really the first time the industry has ever seen a vehicle like this. So there’s nothing really to report on the mix. It’s consistent with what we’ve always talked about.

Got it. That is very helpful to know. And then my second question is, I know the situation around tariffs remains fluid, but…

Yeah.

… could you just remind us, what your exposure is in terms of imports from Mexico and Canada, and how you’re thinking about it? Should there be any tariffs on imports from any of those countries?

Yes. I will. I think it’s a great thing to bring up, so thank you. First, I want to emphasize that we are an American manufacturer. The vast majority of products that we sell in the United States are made in the United States. So I just want to make sure that that part of it is clear. Most of what we sell in the U.S. is made in the U.S. Sure, we’re a global company, so we have some movement of certain categories in and out of the U.S. and a global supply chain. We tend to be a pretty resilient company in terms of we use our global footprint to adapt based upon how we can get the best cost that we need to get. So I’ll give you an example. If we have to move something from one manufacturing plant to another, we typically can do that relatively quickly. Europe instituted tariffs recently from Access equipment coming from China to Europe. We were supplying product from China to Europe. Essentially, we understood what the Europeans were telling us. We want you to make product for Europe in Europe. We’ve already shifted our production of product from our China operations to our European existing operations, no new bricks-and-mortar, to serve the European market because the Europeans want us to serve Europe from Europe. If there’s tariffs that affect us in terms of our supply chain or our products that we might be bringing in from an operation outside the U.S., we will make similar adjustments to mitigate the impact of the tariff and do what the U.S. is telling us to do, manufacture more in the U.S., but the vast majority of what we do in the U.S. is made in the U.S.

Got it. Thank you.

Thanks, Tami.

Our next question comes from Steve Volkmann with Jefferies. Please proceed with your question.

Thank you, guys. Curious if there’s any commentary around how we should think about the Defense margin sort of trajectory through the year here. It sounds like the timing of FMTV contract maybe is a catalyst, but just anything we should think about sort of as the quarters progress relative to your 4% guidance?

Hi, Steve. It’s Matt. So as we said, we got into 4% as this is a transition year, ramping up NGDV. So accordingly, I would expect that margin to ramp up across the year. So 4% is obviously the average and starting lower and ending a little bit higher.

Okay. All right. Thanks. And then back to Access specifically, any commentary around what you’re seeing in telehandlers? I think you had a bit of a potential hole to fill in that business. Just how should we think about that in 2025?

Yeah. Thanks. I’ll take that, Steve. We are -- first of all, we have been get -- we’re encouraged with our telehandler business in total, really encouraged with it. We’ve been encouraged by share gains that we’ve been getting recently, which we expected to get. We’ve got a new line of agricultural telehandlers that we organically developed and then we made an acquisition of AUSA in Spain. That also complements and gives us other agricultural telehandler products. So that’s another area that gives us a lot of optimism as we continue to be the number one provider of telehandlers in the marketplace. So we kind of finished 2024 on a high note and we think that that’s good momentum going into 2025, especially with the new market that we’re entering in the ag space. Now, the other comment here is, of course, we’ve had a change in agreement with CAT. I’ll just bring that up. That’s a bit of a speed bump. This is not unexpected. We’ve known about this for a few years. So we’ve got great relationship with CAT. We still do. We’ve got a really good relationship with our dealers. We supply their dealers with a full line of product. We will continue to supply their dealers with product as we go forward and we’ll continue to execute on our telehandler priorities and we feel very good about it.

Great. Thank you, guys.

Thanks.

Our next question comes from the line of Jamie Cook with Truist. Please proceed with your question. Hi.

Hi. Good morning and congrats on a nice Access margin guide this year, given the sales decline. But, so, John, question for you. Obviously, the Access margins are healthy here, but just trying to understand, again, under possibility of tariff, what your pricing strategy will be, what I mean, with Access equipment relative to what happened last time, like how do you think about firm pricing versus using escalators? So, question there. And then I guess my second question, the Postal Service Award, obviously it doesn’t sound like you see any risk to that contract, but just under DOJ and things that are coming out under the new administration, do you see any risk to that contract in terms of change in ICE versus EV or push out just given risk of DOJ? So, anything you could provide from that context. Thank you.

So, going to your first question, which is on Access.

Tariffs and pricing.

Tariffs, I’m sorry. Let’s go back to your first question.

Yeah. Tariffs and pricing specifically.

So, our Access, our JLGs are really, is becoming more resilient every year that goes by, and that’s why they’re continuing to deliver healthy margins in the face of a downturn that you can see in our guidance because of the resiliency that they have. So, we believe that we’ve got a whole playbook on potential different scenarios that might unfold with regard to tariffs and Access has a very good mitigation plan depending on what may or may not occur with tariffs. So, we think that we can mitigate a lot of it. Now, within the supply chain, where you’ve got global supply chains, sometimes there’s things that you have more difficulty mitigating and we’ll try to minimize or even potentially eliminate any need for price increases as a result of tariffs, but that’s essentially kind of the general MO that we have with regard to tariffs. It’s what we did in Europe, right? We were able to mitigate most of those tariffs by using our footprint to manufacture differently to avoid the tariffs. On the U.S. Postal Service, what I can tell you is that, we’re happy with whatever mix the United States Postal Service orders from us. This is a great contract. It’s a lot of vehicles. The Postal Service needs these vehicles. They’re using high-cost, unproductive vehicles today that were designed 40-plus years ago, and so every time they take a new vehicle with us -- from us, their productivity goes up. So, this is a really important program for the United States Postal Service. We are in contact with them every day. We, again, will deliver the mix that they want us to deliver to them and we’re pretty pleased with progress on this program, and I think, the United States Postal Service is pleased with the vehicles that they’re getting. They’re absolutely delighted with, so that’s what I’ll tell you.

Thank you.

Thanks, Jamie.

Our next question comes from the line of Tim Thein with Raymond James. Please proceed with your question.

Thank you. Good morning. John, back to the Access commentary with respect to how you think the year plays out and presumably are largely influenced and educated by what you’re hearing from your customers. Do you, and not that you want to be in the business of forecasting orders, but I guess I’ll ask it anyways, just how you expect the seasonality of orders has gotten kind of thrown around in post-COVID, but I guess just quite bluntly, would you expect, you see maybe a year-over-year pickup as we get into the second quarter and then maybe a little stronger accordingly in the back half of the year or just any kind of thoughts with respect to the timing and how you think that looks as we go through the year from an order standpoint?

Yeah. I think in general what’s happening is the industry is reverting to more normalized seasonal order patterns and I think that’s why you’ve seen some unusual order patterns the last few quarters. I think the thing to pay most attention to with our business is we’ve got a $1.8 billion backlog. A $1.8 billion backlog for JLG and our Access business is a healthy backlog, a healthy backlog in normal times with JLGs, three months to six months of backlog, and we’re right in the middle of that at our current size with $1.8 billion. And so our customers look at our lead times, and they say, okay, we’re going to order in accordance with your lead times. Your lead times are good right now. They’re normal. We’ll order in accordance with those. We did get annual purchase orders in the fourth quarter, but we’ve got a lot more annual purchase orders coming in the first quarter right now that we’re in today. So I think the most important thing to pay attention to is what does the backlog look like and we’re happy with the $1.8 billion backlog today.

Okay. And then just on Vocational, as you think, you mentioned the price-cost being an expected tailwind in 2025 to margins. I think from memory, at least the first nine months of 2024, pricing was kind of a 6% to 7% year-over-year tailwind in 2024. Is that a similar number we should be thinking about, higher or lower? How would you kind of characterize that in terms of the pricing benefit you’re expecting in 2025 versus what you realize in 2024?

Hi, Tim. It’s Matt. So we’re still working through the pricing and the backlog, so I would expect some of that price dynamic to continue, certainly. The price-cost, the team’s done a nice job managing in Vocational. The other thing I would just highlight is we talk a lot about peers, but what you saw in the sales numbers and what we’re really proud of as well is our refuse and recycling business, which has performed extremely well, specifically in the fourth quarter and is also a nice, healthy business for us.

All right. Thank you.

Thanks, Tim.

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

Thank you. Good morning. I’m going to try Steve Volkmann’s question one more time on Defense margin in terms of cadence. I guess the way I’m going to ask it, when I was thinking about the Q1 EPS guidance, what sort of Defense margin do you have baked in there? Is it going to be lower sequentially versus what we saw in the fourth quarter?

So, hey, Mig. It’s Matt. So, thanks for taking a second stab at a good question. So first quarter, obviously, that’s kind of our lowest production quarter of the year on USPS, so you can expect that. At least we would expect that to be our lowest quarter in Defense as well. I’m not going to comment specifically on quarter-over-quarter dynamics, but I think you should think about that as the lowest quarter for Defense.

Okay. And I guess my follow-up, sticking with this segment, if we’re thinking about you getting to full production on the NGDV, it sounds like the other Defense contracts that you’ve got are starting to normalize from a pricing standpoint. Should we be thinking in 2026, this segment will be operating as you previously deemed as normalized margins or is that still pretty premature to factor in at this point?

So I’ll take that, Mig. I think one of the big movers of Defense, of course, is new pricing contracts. We’ve taken some of our big programs and we’ve gone to what’s called a sole-source contract, which allows us to reset price to the realities of input costs. So when you look at it, we’ve got the heavies that we’ve already done and the mediums will be done shortly. In terms of the pricing contracts, we start to get the benefit of the heavies not until sort of the late part of 2025 and then through 2026 and beyond. And then the mediums, it’ll be starting in 2026 in terms of getting the benefit of those pricing contracts. So a little bit slower to get the benefit there. And of course, the NGDV margin as we’re in production ramp builds throughout the year as we continue every week to increase production output.

So I’m going to take that as a yes.

Okay.

Okay.

Our next question comes from the line of Kyle Menges with Citi. Please proceed with your question.

Thank you. I was hoping, so just within the Access outlook and Access implied down 15% for the year, could you just help me just with maybe some range of how you’re thinking about AWPs versus telehandlers in 2025?

We don’t really give that level of guidance within the guide that we’ve got. I think the most look at the down 15% we’re guiding at $4.4 billion in revenue for Access equipment. That’s in line with all of the customer conversations we’re having and all the metrics that we look at and what we expect with non-residential construction how it’s going to impact the market. And it also includes the changing nature of the CAT agreement. But suffice it to say that telehandlers have been strong for us and we expect telehandlers to continue to be strong going forward.

Got it. And then I was curious how you’re thinking about telehandler capacity now with some hooks and takes with the CAT contract, but then coming out with this new line of telehandlers. Just it would be helpful to hear how you’re thinking about that?

Yeah. Well, the CAT -- what’s happening with CAT is not new news to us. We’ve known about this for a long time. And we’ve known about it before we put the plans in place to put more capacity in Jefferson City, Tennessee. So when we make capacity decisions, we make them because of five-year-plus outlooks. We don’t make them because of a one-year change in the market. And we see the five-year outlook being continuously healthy for our business because of all the reasons that we talk about, new markets that we’re putting the product into, megaprojects, et cetera, et cetera. A lot of construction will continue to happen over the next five-plus years, both in North America and globally. So when we put those plans together, that’s what’s in our line of sight, not just the next 12 months. We’re 100% continuing forward and continuing to get output and increasing output in that Jefferson City, Tennessee plan and we need the product.

Got it. Helpful. Thank you.

Thanks, Kyle.

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

Hey. Good morning, guys.

Good morning.

Good morning.

So I have a question on Access. So first of all, I think you guys talked about annual purchase orders in 1Q. Just wondering if that’s shifted from a seasonal standpoint. I guess, in other words, would orders be a little bit stronger than the normal seasonality would suggest in the first quarter? And then secondly, in terms of your capacity additions in Access, how should we think about the cadence in terms of ramping and to what extent is there any absorption baked into the guidance for this year?

Yeah. Thank you. I think that there’s been a slight shift in terms of annual purchase orders. In terms of what I mean is they used to mostly come in Q4 and now we’re also working through annual purchase orders in Q1. And I think part of that’s due to our backlog. Customers are saying, hey, I’ve got visibility out four months or five months. So I’m going to wait a little bit to put this annual purchase order in. That’s kind of a little bit of dynamic that’s happening. So a little bit of seasonality in there that’s different from maybe the past. In terms of the Jefferson City telehandler plant, the -- that’s all in our guidance in terms of the ramp for those products. We’re in production today. We’re shipping products today. But we don’t get to full production until the back half of the year and the costs for doing that are all in our guidance.

Great. That’s helpful. Second question on NGDV. Could you comment on the production rate that you’re seeing, I guess, maybe exiting the fourth quarter and then just walk me through the -- I guess, like the shape of the ramp as we go through 2025?

Well, it’s kind of consistent as we go through 2025. We work with the United States Postal Service. We did a deliberate kind of a low rate production to start, which not only helps us, but also helps the Postal Service onboard vehicles and get the onboarding right and we’re continuing to progress and increase production every month and every quarter that goes by. And we will be at full rate production by the end of the year.

Thank you.

Thanks, Chad.

Our next question comes to the line of Mike Shlisky with D.A. Davidson. Please proceed with your question.

Hey, guys. Good morning. Thanks for taking my question. I wanted to go back to one of your earlier first comments you made, John, about Access, about the first half and second half. You kind of said that it could be a bit stronger in the second half and it positions itself well for 2026. So I know it’s only January, but -- and of course, the economy is quite fluid still. But is your first instinct that 2026 could be an up year in Access, and perhaps, that’s a better way to ask the question is kind of what you’re seeing currently in 2025 more of a blip than a multiyear downturn that you’re kind of seeing the first phases of here?

Yeah. So first of all, I can’t guide for 2026 right now. But what we -- when we make those comments, we work with our customers closely. They’ve got a backlog of projects. They have a visibility to their backlog of projects. And really, I think, ultimately, that’s what gets baked into our forecasts of equipment needs and when the equipment is needed and -- because we know when those projects are coming online because our customers tell us that. So that’s really kind of what gives us the insight to say that we’ll be doing a little bit more on the back half than the front half.

Okay. And then maybe secondly, if we can just dig a little bit deeper into the backlog in Vocational. Could you comment on if the Pierce backlog got any better in the quarter? Was the book-to-bill above 1 there or at least if you were to order a fire truck today, what year would you be able to deliver it?

Hi, Mike. It’s Matt. So the book-to -- sorry, the backlog continued to grow over the quarter. So we took more orders, specifically in Pierce. So really pleased with the continued demand we have and the production ramp up the team is working on to support that demand. So it is the book-to-bill, I believe, was over 1. So we’re continuing to support those customers with everything we can build.

Thank you.

Thanks, Mike.

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

Good morning. This is actually Christian Zyla on for Steve Barger. Thanks for taking the question.

Okay. Great. Good morning.

Just looking at the second half of 2024, your incremental margin was 3% in 3Q and 4% in 4Q on high single-digit and mid-single-digit revenues, respectively. Why was that? And does that get better in 2025?

So in terms of that -- it’s Matt, sorry. So you’re really looking at a couple of things there. You’re looking at business mix driving that as well. So the strong Vocational performance obviously impacts the sequential incremental margins. So really strong performance in Vocational drives a lot of that in the quarter-of-quarter performance.

Got it. Thank you. Next question, just balance sheet and leverage look pretty healthy. Are there parts of your portfolio that you think you are missing capabilities or that you can add via M&A or can you just frame up which of your segments could benefit the most with any incremental M&A like we saw with AUSA and AeroTech? Thanks.

Yeah. So we do have a healthy balance sheet and we think that’s good. You saw us do more aggressive share buybacks in the fourth quarter, because for a lot of reasons and you’ll probably see us continue to be deliberate about share buybacks going forward. One of the benefits that we have of a healthy balance sheet. But when we look at M&A, we have an always-on process. We are always looking at targets. Every day, there’s targets that we look at and debate. And when we look at things, we’re very focused. So we look at ourselves as technology for the everyday hero. We say the purpose of the company is we deliver for the everyday hero and to make their lives better. And so where we have the opportunity to apply our technology and our capability to make a material difference, i.e., that’s the synergy, that’s adjacent, a near adjacency to what we do. So AeroTech’s a great example. We were already in airports. We saw all these categories that we weren’t in. We said, hey, we can apply -- help with the technology on this product. We worked on that deal. It was a focus for us. It’s a great business for us to be in. We’re continuing to accelerate the synergies that you saw at CES. AUSA’s another example. Hinowa in Italy’s another example. Near adjacencies to JLG where we can drive a lot of goodness in synergies because of technology and capability. So that’s what we look at. We’re always looking at targets, but we’re also very careful. We are very deliberate and patient when we look at targets.

Thanks, Christian.

Our next question is a final question from David Raso with Evercore. Please proceed with your question.

Hi. I know we’re running late. I’ll be quick. Maybe I’m being a little greedy, but the Vocational implied incremental margins of 25%, can you lend some insight to why that wouldn’t be stronger? And maybe within that, if you look at the revenue growth for the whole segment guided shade below 15%, which are the categories within do you think will be above and below that 15% to maybe help us with the next question? Thank you.

Hi, David. It’s Matt. Thanks for the question. So in terms of the incremental in Vocational, really what you’re looking at there is some of our investments in terms of capacity and otherwise. So you’re getting good growth across the business, but also investing in the business at the same time. So that’s a little bit what you see in the guide. And I just want to point out, again, I don’t think you guys have highlighted enough on the call, the strong Vocational operating income guidance we’ve provided and the strength that that provides to the overall business, I have to say. In terms of the mixed products, obviously, Pierce continues to deliver. I mentioned McNeilus, which is a good business with good, strong margins that continues to grow. You saw that in the sales numbers we posted as well. And then AeroTech is a great bolt-on business that we acquired and embedded and have a fantastic new leader there as well. So I’m not going to provide specific guidance across those three, but that’s where we see the growth for the year.

To nudge us a little, sorry, Matt, is it fair to say Pierce is growing the fastest?

I don’t -- we’re not going to provide that level of specificity at this time. We can talk more about that in our quarterly results, but Pierce certainly has a good, healthy backlog with good opportunities to grow.

But, David, the good news is in that Vocational business, they’re all growing. Yeah.

Yeah. No. Just Pierce, I think, leads the show there with margins, if I’m correct. So just curious how much of that backlog we can unleash in 2025 just to offset any access or wrinkles around the Defense margins as the year plays out. So that was the spirit of the question. Okay. I appreciate it. Thank you. Okay.

David, we think that the Vocational business really pairs well with our Access business. They’re both great businesses. They’re both driving really good margins. And I think that the two really complement one another well and you’re seeing that in 2025 as we continue to grow in Vocational well Access positions itself for the future.

I appreciate that. Thank you.

Thank you.

Thank you. Mr. Davidson, I would like to turn the floor back over to you for closing comments.

Yeah. Thanks very much. As both Matt and John mentioned, we’ve got our Investor Day coming up a little bit later this year. Between now and then, we will be at a couple of different conferences in Florida and New York, and we hope to see you there. Thanks very much for dialing in today.

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.