Greetings, and welcome to the Oshkosh Corporation Second Quarter 2025 Results Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Pat Davidson, Senior Vice President and Investor Relations for Oshkosh Corporation. Thank you, sir. You may begin.

Good morning, and thanks for joining us. Earlier today, we published our second quarter 2025 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 as well as matters noted at our Investor Day in June 2025. We disclaim any obligation to update these forward-looking statements, which may not be updated until our next quarterly earnings 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. Before we get into the quarter, I want to highlight the positive response we've received to our June 5 Investor Day. This slide from the event highlights the key elements that we believe make Oshkosh an attractive investment, bringing the full strength of our portfolio united by our shared strategy accelerated innovation in autonomy, electrification and intelligent connected products, all supported by favorable long-term trends. I want to reiterate 2 key messages from the event about our 2028 targets. First, we expect to deliver sizable revenue growth; and second, we expect to transform margins. We believe many of the key drivers that support these returns are largely under our control at Oshkosh. Turning to Slide 4. We delivered an adjusted operating margin of 11.5% on revenue of $2.7 billion in our second quarter. This led to adjusted earnings per share of $3.41, an increase of 2.1% over the prior year. These results reflect strong performance across each of our segments which Matt will dig into later in the call. We grew adjusted EPS and maintained adjusted operating income margin year-over-year despite lower revenue, reflecting continued strong performance in our Vocational segment improved returns in our Transport segment and a resilient mid-teens margin in our Access segment, maintaining adjusted operating income margins on lower revenue highlights our commitment to transform margins as we move forward. Our results reflect the disciplined execution of our Innovate, Serve, Advanced strategy, which we show on Slide 5. Through this strategy, we have expanded our portfolio to include strong operations like AeroTech and AUSA that expand our business into attractive adjacent markets while improving our earnings profile. Turning to Slide 6 for Q2 highlights. As I mentioned earlier, we discussed our plans to grow the company at our Investor…

Thanks, John. Please turn to Slide 8. Consolidated sales for the second quarter were $2.7 billion, a decrease of $115 million or 4% from the same quarter last year. Primarily due to lower sales volume in the Access and Transport segments, which was partially offset by higher Vocational sales volume and improved pricing. Adjusted operating income was $313 million down slightly from the prior year as a result of lower sales volume. Adjusted operating income margin of 11.5% was consistent with the prior year despite lower sales. Adjusted earnings per share was $3.41 in the second quarter, $0.07 higher than last year. During the quarter, we stepped up our share repurchases, repurchasing nearly 415,000 shares of our stock or about $40 million, bringing our year-to-date share repurchases to nearly $70 million. Share repurchases during the previous 12 months benefited adjusted EPS by $0.06 compared to the second quarter of 2024. Positive free cash flow for the quarter of $49 million was significantly higher than the second quarter of 2024, which had a net use of cash of $251 million. Improved free cash flow primarily reflected the timing of tax payments and better management of receivables. Turning to our segment highlights on Slide 9. The Access segment delivered resilient adjusted operating income margins of 14.8% on sales of $1.26 billion. Market conditions for Access equipment in North America were in line with our expectations. Sales were $151 million lower than last year, reflecting the expiration of our agreement to produce Cat-branded telehandlers, which ended last year and higher discounts. We also experienced lower sales volume in Europe, which was partially offset by sales at AUSA. Our Vocational segment continued to deliver higher sales volume and improved pricing as we work down our backlog, achieving an adjusted operating income margin of 16.3%…

Thanks, Matt. Despite the dynamic tariff environment, we're well positioned to take the necessary actions to deliver strong performance. We shared our vision for the company, our balanced and resilient business and our path to roughly double adjusted EPS to a targeted range of $18 to $22 per share in 2028. Our performance in the second quarter is just the first step on this journey and we are excited to share our progress with you along the way. I'll turn it back to you, Pat, for the Q&A.

Thanks, John. [Operator Instructions] Operator, please begin the Q&A session.

[Operator Instructions] Our first question comes from the line of David Raso with Evercore.

A quick question. On the Access segment, right? First half margins, 13.3%, implied second half 10.7%. And the decrementals year- over-year similar to the first half, 38%, 39%, 40%. The confidence in that pricing that you mentioned, can you give us a little more detail with the incremental tariff, I would assume cost pressure. When were those costs -- are those price -- prices instituted. How much is that already in the backlog? Or is it related to expected orders through the rest of the year? Like your backlog coverage is 54% of the implied second half guide. So I'm just trying to make sure, is it pricing that's already in the backlog? Do you feel confident you'll get it? Or is it orders to come that you're hoping to get the price?

David, thanks for the question. So the second half results really is 2 things. One, obviously, there's some seasonality in there. But fundamentally, what we expect to see is in -- really, it's more of the fourth quarter, some of the impact on tariffs on the cost side. There's a number of mitigation actions we've taken against tariffs that we talked about on prior calls. And our overall top line, we expect continued discounts relative to last year and a weaker external environment kind of similar to what we saw in the first half, roughly.

Okay. So 3Q is a little bit old pricing, but still more of the older costs. Fourth quarter is really the -- where the price has to show up. And then lastly on -- sorry.

Yes, that's where we'd see more of the cost elements kick in is the fourth quarter plus some of the resourcing actions and other actions we would have from our tariff mitigation.

And then last on Vocational, the margins in the second half at 16.4% implied after 15.6% in the first half. Is that some of the pricing we've heard for a while about we have better pricing in the backlog and even with assuming some tariff input cost, is the backlog already priced where you feel very confident you have better margins in the second half than first half. And I know the backlog coverage is large. So I'm just really trying to figure out do we already have it sort of baked in.

So on Vocational, as we've talked about before and we talked about at Investor Day, we're progressively working through ramping up our capacity. And that's a big driver of the second half relative to the first half as we ramp up capacity. Obviously, there is pricing in the backlog that would come to the [ 4% ]. We would see that continue. But really, you're talking about volume growth over the second half driving improvements.

David, with those backlogs in vocational, we'll continue to get some modest benefits from pricing for the next 2, 3 years.

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

Just a quick clarification on your tariff commentary, what I heard is that you said that you expect to fully offset the headwind. So I'm kind of curious to hear as to -- exactly how you're going to do that. And then for the prior question, it seems that the fourth quarter is where you're starting to experience maybe some higher tariff-related headwinds. Does that -- is that getting fully offset? Or is that becoming more of an issue into 2026 as we're thinking about Access equipment maybe specifically?

Mig, it's John. Thanks for the question. So let me be clear. We -- just like any manufacturer in America still have tariff headwinds coming at us, right? And there's a few things going on. Number one, the tariffs that we're experiencing now, it's a very dynamic situation, changes regularly. So what we're seeing right now is a little bit better tariff environment than we saw 1 quarter ago. So that's part of it. The other part of it is, we're continuing to execute our mitigation strategy. I've always said most of what we sell in America is made in America. That gives us an advantage to start. We have a local-for-local strategy, we're really trying to drive local production for local regions, Europe for Europe example, U.S. for U.S. We do a lot of work negotiating with our suppliers. We do -- we're engaged in resourcing work where we need to or onshoring work where we need to. But we still do have a tariff headwind we just believe that we've got the right strategies in place to be able to deal with tariffs and offset what we need to offset. There's also business outperformance that's helping us get over tariffs as well. And that's why we're back to an $11 guide.

Okay, I see. Then my follow-up, maybe in the Transportation segment, parsing out Q3 versus Q4 margin that's embedded into your guide? And then should we sort of think about that exit run rate as something that's sustainable into 2026 that maybe hopefully you can build upon?

Sure. So as you saw, Transport improved in the second quarter, we would expect steady improvement as we roll on to new contracts. As we mentioned on the call, we started building under the new FHTV contract. And we announced the new FMTV contract. We'll start building on that in 2026 kind of midyear or so. So I would expect to see second half performance as implied in our guide will improve and then we have additional building blocks into 2026. There's a lot of -- go ahead.

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

I just wanted to go back to the Access equipment, a couple of things. I guess, you noted a little bit of kind of sales discounts or higher sales discounts in the quarter. Just hoping you could comment a little bit more on that and just the general kind of competitive environment. And how as you combine that with what you're hearing or seeing from customers in terms of demand and order backlog for the second half, like what gives you confidence that we won't see potential pushout or further pressure from kind of that discounting activity?

Yes. So as I mentioned, Angel, we're seeing an external environment that's about what we expected at the beginning of the year. Discounts in the range of 2% to 3% is consistent with our expectation for the year as well. Book-to-bill has kind of returned to normative levels, so we're seeing a return to normal seasonality. I'll let John comment on customers and some of the conversations we're having there. But overall, the market has been fairly resilient and really overall as we expected.

Yes. Angel, going on with regard to our customers. First thing that I'll highlight is that utilization rates of equipment in the Access industry are fine. They're actually pretty good. And so what our customers are really seeing is there's a really nice pocket of demand which is meaningful, coming from big projects. That's infrastructure spending, which is going to go on for years. It's data centers that will go on for years. And these data centers are gigantic, and they draw a lot of equipment. Power generation -- on the other side of it, you've got private nonresidential, think about building construction, where we're seeing a lot of kind of holding and pausing. We're not seeing any project cancellations in the market to speak of anyways, but there's a lot of pausing and kind of waiting for conditions to stabilize. That might mean interest rates, what's the Fed going to do? It might mean what's -- how is tariffs going to impact end markets before we proceed with this project. So that's on the other side of it. And I think that -- but overall, customers are comfortable with where utilization rates are.

That's very helpful. And then maybe just as it relates to those customer conversations, I guess, one, have you seen any step change in your desire to buy equipment, I guess, given the tax bill? And then could you quantify a little bit more specifically what kind of your guidance for free cash flow in terms of those tax benefits?

Well, we think that the tax benefits in the OBBB are certainly supportive of our long-term outlook and long-term trends. It's an ongoing change to the tax law. So I don't know that we're going to see a specific spike in the near term. There is not an expiration date to the -- to what they did with regard to taxes. But we think overall, it supports the long-term health of the industry when our customers buy capital equipment.

Just building on that in terms of the free cash flow specifically, we did increase our guide from $300 to $400 to $400 and $500 million. That largely reflects some of the tax bill changes on R&D credits and how those get handled.

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

Congratulations on the quarter. Just to follow up again on sort of the second half on the Access side of things and that last question. I guess the -- I just pointed out before, only about half of the second half revenue implied is in backlog. So are you anticipating that sort of activity will actually increase in the second half of the year, and there'll be a lot of sort of book and burn. Is that sort of what you're expecting and your confidence there?

Thanks for the question, Steve. The backlog that we have right now are about $1.2 billion in backlog, it's a totally normal backlog, especially as we're here in kind of the early first 1/3 of the third quarter. And this is -- it's normal for us to come in with orders already booked but also needing to continue to take orders, that's a totally normal environment for us, nothing is abnormal about that. So yes, we do need to book some orders in the third and the fourth quarter, and that's almost always the case. So it's not abnormal at all. $1.2 billion backlog sitting right now is in the line of historical norms.

Okay. Fair enough. And then I know as you said in the release and on the call is a dynamic tariff environment. I think the release said you're reflecting tariffs as of July 30. I'm curious, just -- I don't know if you even had any time to think about it, but the August 1 update, what that might mean relative to kind of what you've already assumed based on July 30.

Well, it's -- well, surely, Steve, it's a dynamic environment. And we're always updating our outlooks and what we need to do based upon the changing environment. The good news is some of our biggest trading partners seem to have, come to some resolution with the administration on what the tariff rate will be think about Europe for -- as one example. So that gives us some comfort. But sure, there could be some disturbances today on August 1 or over the next quarter, and we'll adjust to it as necessary. But we do feel okay because some of our big trading partners have seemed to come to a framework for resolution.

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

The first question is just on the Vocational business, the strength in the fire segment up 20%. Just curious how -- as you think about delivering on that backlog in the back half of the year, should we expect kind of a similar construct in terms of the -- from a product mix standpoint? Or any changes that you'd call out in terms of going back to that earlier question, I would assume that had some positive impact from a margin standpoint in the quarter. So I'm just curious if that's expected to continue in the second half?

Yes, it is expected to continue. Pierce, our fire brand is a very strong business for us. We are continuing to invest in Pierce. It's our -- it's the market-leading brand. We're really focused on continuing to increase capacity. We've got great people and a great team that is executing this. And we're confident that every quarter that goes by, we'll continue to be able to increase supply to our customers and the velocity with which we can supply. But this is a great business. And we think it's going to be for a long time, stable market, not a cyclical market. So yes, is the answer to your question.

Okay. And just a quick follow-up. On the Access business, yet again, on the sales mix was noted as a positive. Was that more of a product mix, i.e., telehandlers being down more than Access or geography with Europe being down or both? And then just what's -- how you're thinking about that dynamic in the back half.

Sure. So it's a number of factors in there. Partly, it would be geography mix. We saw a stronger mix in North America, which helps. We also actually had a stronger mix of independents than this time last year, even though clearly, we swing into nationals for this quarter relative to last quarter, but on a year-over-year basis, we did see a stronger mix of independents holding up as they support some of the larger projects. And then within that, there was obviously some mix among units.

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

I have just one question. I think I heard you say you want to steadily increase the buyback through the course of the year. So I just wanted to frame what the opportunity could be. Is there a way to think about the repo as a percentage of the free cash flow, you guided $400 million to $500 million. Is there a target that XYZ amount of that could be deployed for repo this year?

Year-to-date, we've seen about $70 million share repurchase with about $40 million of that in the second quarter. As you correctly noted, we did mention that we would step that up. Last year, we bought about $120 million. I would expect that to roughly double, maybe a little bit more than that. So I don't look at it necessarily as a percentage of free cash flow more as just how we're executing this year and our comfort level with our execution level.

[Operator Instructions] Our next question comes from the line of Chard Dillard with Bernstein.

We talk a little bit more about your expectations for orders in the second half. More specifically, how are you thinking about the contribution from national accounts versus independent -- and then maybe you can talk about just what is in the backlog mix on those terms.

Yes. Thanks, Chard. I'm not going to get into what's in the backlog right now. Our backlog is healthy. It's normal. As I've talked about a little bit earlier. When you look at the marketplace, you see really strong healthy demand in big, big projects, big infrastructure, data centers, that kind of thing. And the nationals tend to get a lot of that business because they've got the huge fleets that can support it, and it takes a huge fleet of equipment to support that kind of activity. So I think you can assume it's a little bit heavier weighted towards nationals for the short term. And we'll see how some of the private nonresidential construction shapes up. Again, there's nothing being canceled. It's just kind of a lot of stuff on hold. So that's a little bit of a clarification for you on that.

That's helpful. And can you also talk through your 3Q and 4Q expectations for Access revenues and margins. So just based on what's in backlog, is typical seasonality the right way to think about it? Or should we be thinking about something else?

Chard, so yes, you should really think about Access as returning to normal seasonality. We saw that in the first quarter. We're certainly seeing that in the second. I would expect third quarter to be a good strong quarter on a relative basis and then fourth quarter did dip down again. So that's really what we've seen historically, kind of pre-COVID and that's certainly our outlook for the year as well.

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

I think the Vocational margin guide for this year now, it already gets you to the low end of your 2028 target already. So would seem already coming in a bit ahead of the expectation laid out at the Investor Day a couple of months ago. So maybe if we could just take a step back and if you could talk a little bit about what you've seen in Vocational, what's come through the backlog and execution that has got you to this point to margins now guided to 16% for the year. And just based on what you see in the backlog and in the plan from an execution standpoint, what could incremental margins look like over the next 1 to 3 years for Vocational?

Well, we -- I mean, we really love our -- we love all of our businesses, but Vocational is a business that really is shaping up to continue to be healthy for a long time. These are not cyclical markets. They're fairly stable markets. And the other thing that's great about them is that there's -- their technology is in demand in these markets, whether it's a fire truck or an environmental vehicle in refuse and recycling or an airport ground service equipment, our customers want advanced technology in the form of autonomous functionality, sometimes full autonomous. You saw it at Consumer Electronics Show. We showcased a lot of this autonomous capability and our -- and using AI to deliver insights and features on products that nobody ever dreamed possible before. These are the types of things that our customers want us to do, and we are able to do it. And we believe that this is helping drive demand for vehicles like our new fully integrated refuse and recycling vehicle. It's Just got all sorts of productivity benefits all over it. That helps our customers be better. And that's why we think these are good markets where we're continuing to execute and grow. And we think that the health is going to continue for a long time.

Helpful color. And then a question for Matt. Just I guess how he's thinking about capital allocation. I thought it was noteworthy increasing the expectation for share buybacks. I guess that's driven by increase in the free cash flow expectation. But I mean the stock is also trading at 52-week highs. So I would love to hear just how Matt, you're thinking about capital allocation and share buybacks going forward.

Sure, Kyle. So I really -- I think we outlined a good framework at our Investor Day. And so our priorities are unchanged from that, which is really, first and foremost, maintaining a strong investment-grade balance sheet. We're in great shape there. Two, it's some of the activities we talked about, which is organic growth. So all of the capacity additions we're talking about Vocational, the opportunities there. That's our second priority. After that would come, even though we're at a 52-week high, we're still, we believe, a discounted multiple. So share repurchases would be a priority following that. And then lastly would be M&A opportunities as they arise, and we had a good discussion in our Investor Day deck about how we think about M&A. But -- so those priorities really don't change even if we're at a 52-week high, we still do believe our multiples would be higher if we were rated as we would expect.

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

He might be on mute. Steve, are you there?

Sorry, I was muted. John, with all the focus on near-term Access trends, I'm just going to ask one about the longer-term targets. To get to the 2028 midpoint requires about an 8% CAGR. And sitting here today, does that feel like a heavy lift? And you -- can you break out how much you think comes from overall market growth, how much from share gains or new product introduction? Do you expect M&A to be part of that growth? Just holistically, how are you thinking about getting from here to there?

Yes. Well, when we do those -- the 8% CAGR you're talking about, you're exactly right. We never include any M&A that might be on the horizon. That's all organically driven. And we think it's a reasonable, achievable growth rate based upon what's going on in our business and our markets and how we're investing, not only in new products in the core of our market, where you'll see us continue to come out with innovations in kind of that core AWP market, but also in some of the places that we've invested with some of the acquisitions we've already made. And then you look at some of the more futuristic investment that we're making in our ability to create the job site of the future, which we showcased at CES. And our ability to drive connectivity, drive insights through that connectivity and analytics and even getting into some machine learning and AI for our customers, that really drives a healthy kind of life cycle business for us that we think is going to continue to be the future of where our end markets want us to support them. And when you combine all that together, we think that an 8% growth rate is very, very reasonable and very achievable. Look at some of the tailwinds in the market, too, Steve. You see -- which I've already talked about on this call, you see all these big trends around data centers and infrastructure that's going to go on for a long time. Those are also strong long-term underpinnings to help demand move along over time.

So is this really more about the pie growing and you maintaining or growing share? Or do you expect a lot of proliferation of applications to go along with that?

We expect both to happen.

Got it. And if I can just squeeze one more in. Sorry if I missed this, but for the Transport revenue cadence in the back half, is 3Q more like the front half in terms of revenue or with a really sizable step-up in 4Q? Or will the quarters be more level loaded in terms of both revenue and margin?

So again, we would expect it to be progressively growing over the quarters. Again, as a reminder, think about us building up our production of NGDVs. And so we're steadily ramping throughout the year. So that should give increase sequentially by quarter in terms of revenues in the Transport segment. And then as we shift on to new contracts, so think of it as FHTV production this year under the new contract, that would also be a driver for higher revenue sequentially.

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

All right. Christine, thank you. Thanks, everybody, for joining us today. We reported a very strong beat and raise. Please consider that when you're looking at Oshkosh. If you have any follow-up questions, please reach out to me or get back with us. We look forward to seeing you in the next quarter at conferences and have a great rest of the day and a great weekend.

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.