Greetings and welcome to the Terex Corporation First Quarter 2021 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 As a reminder this conference is being recorded. It is now my pleasure to introduce your host Randy Wilson, Director of Investor Relations for Terex Corporation. Thank you, sir. You may begin.

Good morning, and welcome to the Terex first quarter 2021 earnings conference call. A copy of the press release and presentation slides are posted on our Investor Relations website at investors.terex.com. In addition, the replay and slide presentation will be available on our website. I'm joined by John Garrison, Chairman and Chief Executive Officer; and John Duffy Sheehan, Senior Vice President and Chief Financial Officer. Their prepared remarks will be followed by Q&A. Please turn to slide two of the presentation, which reflects our Safe Harbor statement. Today's conference call contains forward-looking statements, which are subject to risks that could cause actual results to be materially different from those expressed or implied. In addition, we will be discussing non-GAAP information that we believe is useful in evaluating the company's operating performance. Reconciliations for these non-GAAP measures can be found in the conference call materials. Please turn to slide three, and I'll turn it over to John Garrison.

Good morning and thank you for joining us and for your interest in Terex. Most importantly, I hope you and your families are remaining safe and healthy. Throughout these challenging times, we are proud of all Terex team members who are keeping themselves and others safe, meeting the needs of customers and helping our communities. I would like to recognize and thank our team members around the world for their continued commitment towards Zero Harm Safety Culture and Terex Way Values. Safety remains a top priority in the company, driven by Think Safe, Work Safe, Home Safe. All Terex team members have contributed to our effort to continue to produce for our customers, while following the protocols and maintaining a safe working environment. Please turn to slide four. Before I discuss our Q1 results, I would like to review our commitment to ESG. Environment, social and governance is not a new concept at Terex. It has been front and center for many years through our Zero Harm safety program and our commitment to maintaining a vibrant and supportive working environment. ESG is foundational to the Terex culture. Our company purpose is to help improve people's lives. Through our Terex Way Values, we are focused on strong governance, a commitment to diversity, equity, and inclusion at every level and supporting the communities where we live and work, including being responsible, environmental stewards. First, strong governance and leadership. Our independent and engaged board with diverse backgrounds, perspectives and experience adds value for all stakeholders. Second, we've enhanced our DE&I governance and we are energized by the engagement of our team members. And third, electrification, by interview using sustainable products, such as our new Genie electric drive scissors. We've made good progress in our sustainability program, including publishing our first annual ESG report,…

Thanks, John. Turning to slide eight. Looking at the first quarter, we achieved net sales higher than our expectations. Throughout the quarter, we saw our end markets continue to strengthen. Overall, revenues of $864 million were up 4% year-over-year. Notably, our Materials Processing segment's revenues were up almost 20% year-over-year. For the quarter, we recorded an operating profit of $62 million compared to an operating loss of $7 million in the first quarter of last year. We achieved an operating margin of over 7% through disciplined cost control and meeting strengthening customer demand. The first quarter operating profit includes severance and charges associated with the closure of our Oklahoma City manufacturing facility, which were offset by the gain on the sale of our TFS on book financing portfolio. Improved gross margins and lower SG&A as a percent of sales allow Terex to expand operating margin by 800 basis points year-over-year. Interest and other expense was approximately $4 million lower than Q1 of last year, because of several factors, including lower interest expense and a $3 million mark-to-market gain recognized in other income. Our first quarter 2021 global effective tax rate was approximately 16%, driven by two favorable discrete items in the quarter. Our tax rates estimate for the remainder of the year remains 19%, consistent with our previous outlook. Finally, our reported EPS of $0.56 per share includes the nearly offsetting operating impact and the favorable benefits in other income that I just discussed Turning to slide nine, and our AWP segment financial results. AWP sales of $477 million were down 7% compared to last year, driven by a decline in North America, offset by improvement in Europe and Asia-Pacific. The utilities market improved significantly evidenced by strong customer bookings. AWP delivered significantly improved operating margins in the quarter, driven…

Thanks, Duffy. Turning to slide 14, to wrap up our remarks. Terex team members around the world are focused on the right things, safety, health, customers, and improve productivity. End markets are strong, and the team is managing the increasing supply chain headwinds. We're driving positive free cash flow. We're continuing to invest in innovative products to meet increased customer demand. We are focused on both organic and inorganic growth. As a result of these actions, Terex is well-positioned to deliver strong 2021 results. And with that, let me turn it back to Randy.

Thanks, John. As a reminder, during the question-and-answer session, we ask you to limit your questions to one and a follow-up to ensure we answer as many questions as possible this morning. With that, I'd like to open it up for questions. Operator?

Thank you. [Operator Instructions] Your first question comes from Steven Volkmann with Jefferies. Your line is open.

Great. Good morning, everybody.

Good morning, Steven.

Gosh, at the risk of sounding ungrateful, I wanted to just look into your kind of guidance in AWP a little bit. So, your revised revenue guidance still on the up almost 20% year-over-year, if my math is right, and it just seems like the demand side of the equation is much stronger than that. So, I guess, maybe the difference is concerns around supply chain. Maybe the question is to sort of dig a little bit deeper into that topic -- and I guess I'm just trying to figure out what's holding those revenues back relative to some of the CapEx budgets we're seeing from your customers.

Thanks, Steven. And first let me say, we did significantly increase our bookings and backlog literally around the world in AWP. So, we were pleased with that. If you look at our outlook for the rest of the year Q2 to Q4, you're talking about a 30% year-over-year growth in our AWP segment. So, we are seeing substantial growth in this segment. The team continues to work. We -- as we like many manufacturers are seeing supply chain constraints. So, we're working through those supply chain constraints. But right now, we are seeing strong growth around the world for the remainder of the year. And we're executing on our supply chain, but we are seeing disruptions in the supply chain that's impacting our production levels. But overall really pleased with the back -- the backlog, the bookings and what we're seeing -- the strength that we're seeing in that marketplace.

Okay. Right. Yeah. Demand doesn't seem to be the factor here, the gating factor. Maybe a little bit longer term or broader term, and then I'll pass it on. How are you feeling about margins in that business? I know that's kind of been your focus over the past several quarters, couple of years and 7% is not bad, but it's obviously still a ways to go to get back to kind of where you were a couple of years ago. So, what does that trajectory look like in your mind?

Well, thanks, Steve. Well, first of all, we've got a great management team at Genie and in our utilities business, and they are intensely focused on driving margin improvement. As you saw, we draw -- a 680 basis point improvement on a year-over-year basis on lower sales in the first quarter, we anticipate as with indicated sales fit to be improving. So, the team is focused on driving margin improvement. We are seeing headwinds like most manufacturers on material costs. We're offsetting that action with pricing. We're continuing to be resolute in our SG&A costs. The team's done a great job managing our SG&A and we're continuing to address our global cost competitiveness, with the announcement like we made in our Oklahoma City plants. So, the team understands that we need to be globally cost competitive. We've made great progress, but unequivocally there's more progress to be made there, Steve.

But your conviction that you can get back to those double-digit levels is unchanged, I assume.

The team is focused on getting us back to those double-digits levels, absolutely. It will take time, but unequivocally we believe that that is absolutely an achievable target for us and the team.

Super. Thank you.

Thank you.

Thank you.

Your next question comes from the line of Mig Dobre with Baird. Your line is open.

Thank you. Good morning. Maybe I'm just going to pick up on this line of questioning here, as well. If I'm looking at your guidance, a little over $2 billion of revenue in AWP. Just a couple of years ago, this business was -- or generating more than $2.7 billion of revenue. So, I guess, I'm wondering how you sort of see the path going forward in terms of the recovery, getting back to those kinds of revenue levels, is that feasible? Do you think you can actually do better than this in this upcoming cycle? And to ask the question once more, given that you're already guidance margin, it's 7%, which is basically where you are in 2019 on a much higher revenue base. If we were to get back to those kinds of prior peak levels, what would be the right sort of margin framework for us to kind of consider?

Thanks. Thanks, Mig. So, let me just take a step back. We -- we're encouraged by the AWP business. I mean, if you take a step back and if you look at just -- as I said in my opening comments, the secular trends in the rental industry is definitely going to be a tailwind. We think the replacement cycle is definitely starting and coming up for the next couple of years. So, from a volume standpoint, we're encouraged by what we're seeing, and we think we can significantly increase the volumes over time, as that replacement cycle and growth continues. As we see that growth in volumes, then we need to convert that at more historical levels of operating margin. And that's what the team is focused on is driving that margin improvement. So, as the volume returns, as we've taken the aggressive cost actions that we've taken, we should expect to see over time continued margin improvement in that business, as we move forward. So, that's what the team's focused on, every single day. And we're going to continue to drive execution and improvement. No doubt in the current environment Mig, we are seeing a significant material cost increases. We've had to offset some of those material cost increases with pricing activity, so that -- that's obviously a factor, but we're going to continue to work with our customers and offset material increases with pricing. Right now, in this environment, as you saw on our outlook, we weren't able to do that. Longer term, we're going to strive to offset material cost increases, with pricing. So, that will also help as we go forward. So, again, we -- the Genie business has historically been a great business. It's got an incredibly strong brand. Management team is absolutely focused on meeting the needs of the customer and driving margin improvement. And I can assure you every single day, that's the focus of the team.

Mig, if I was just to add to John's comment and to build on the second part of your question, right? As you pointed out in 2018, our AWP business, our AWP segment was about $2.9 billion of revenue and double-digit margins. And our guidance here today is $2.1 billion, 7% margin. If you just look at that additional $800 million of revenue, and that we target a 25% incremental margin, I think you would find that to get to a double-digit margin again, wouldn't require the 25% incremental margin on that $800 million of revenue. So, we definitely see that the Genie brand, the Genie business, the AWP segment is a double-digit margin business.

That's great color. Thank you for that. And then, my follow-up is, it's on MP and I'm going to -- want to talk about margin there as well. The implied incremental margin here is a little bit lower. I think, it's something like 20% in the guidance this year. I'm just looking for a little more context on this. Does this particular segment see more pressure on a cost side, or is this a factor makes pricing? What are all the moving pieces here? Thank you.

So, on the MP side, I think we take a step back and you look at just continued strong execution with the margin generation, with the top line sales growth. And they aggressively managed costs throughout their business through the multiple businesses that we have. And again, we target the 25% incremental margins. The team's done a good job of delivering on that as we go forward. They also are seeing a material cost headwinds that we're having to offset with pricing as well. And again, not necessarily setting off -- offsetting all material costs headwinds associated with the pricing. But over time they will be able to do that as well. So, again, if I just take a step back and look at the MP business and the execution across the businesses, across the globe, they've done a fantastic job, delivering margin improvement on the growth. And I'm absolutely confident and the team will deliver on the volume that's there in the marketplace.

Thanks, Mig.

Thank you.

Your next question comes from the line of Steven Fisher with UBS. Your line is open.

Thanks. Good morning.

Good morning.

Good morning.

Just in -- good morning. Just in terms of execution, Q1 looked very good. I guess, looking out to the next couple of years, John, you mentioned you're going to drive execution. If you are revenues in the AWP segment were to get back to that prior peak, what would you need to do to handle that kind of revenue? Is your business peak ready today? Just kind of trying to make sure we don't run into any execution challenges.

Thanks. Yes. I mean, we have the global footprint around the globe for the Genie business in China, in North America, in Europe. Our capacity actually will expand. We did close our Oklahoma City facility where -- let me say that we will be closing it in the first quarter of 2022, and moving that operation to Monterrey, Mexico. That will also give us incremental capacity, but we'll produce in both locations over the transition period of time. So, the Genie team -- in their history, if you look at their ability to ramp up and to ramp down, they've been quite successful in doing that. And so, we have the capacity to meet the needs of a growing market. And again, that's a -- it's a great opportunity for us, as we move forward. And frankly, we're excited about that opportunity to meet the higher demand, as the market improves.

Great. And so, you mentioned the inorganic growth plans. Can you just talk about what you're thinking about on M&A, anything inorganic these days?

Yeah. Thank you. Well, first, it starts with the ability of our discipline capital allocation and strategy, and the team's done a really nice job driving free cash flow improvement. As Duffy indicated in our opening comments, really done a great job, strengthening our balance sheet. So, now we believe we have the opportunity to look at inorganic growth. And our principal focus really is in and around our MP businesses. Specialized equipment markets, we have leadership positions in those markets, and it still remains a relatively fragmented in the segments that we compete within MP. And so, our initial focus is we're building. Our M&A pipeline is in and around our MP business and our lifecycle businesses. And we're building that pipeline, and we do believe that inorganic growth can now be part of our overall growth strategy for Terex. So, the team is working on that, and we're excited about the potential and the opportunities that we're seeing for M&A activities. But again, we'll be very disciplined in our approach to M&A, but we absolutely are looking at M&A opportunities for us going forward.

Thank you.

Thanks.

Your next question comes from the line of Ann Duignan with JPMorgan. Your line is open.

Yeah. Thank you and good morning.

Good morning, Ann.

Good morning. When we were sitting here at the end of Q4, you had talked about hedging program that was in place for almost all of Genie's North America still needs. And so, what's happened there? Has demand come in stronger than expected, and any incremental demand is not hedged and subject to higher costs, or a little bit more color. And actually what's happened in the quarter in terms of input costs or/and is it just raw materials, or is it other things too? Just little more quantification of actually what's happened during the quarter?

Sure. Maybe John, I'll start on the steel side and then you can add. So, as you pointed out and we did talk about our steel hedging program and that we had hedged the predominant amount of our steel hot-rolled coil needs for the North American market for 2021. We have not entered into additional hedges for steel for 2021 during the course of the first quarter. As you certainly know steel prices including in the futures market has increased significantly and therefore, utilizing our hedging program would not have financially beneficial transaction for us. So, the additional volume over and above, I would say our initial guidance this year, we procure that as part of our normal steel purchasing program with our -- from our steel suppliers. John -- in terms of input costs, I'll just say, obviously, not just simply steel, but other materials such as resin logistics costs, et cetera, have definitely increased over the course of the quarter. And those cost increases are built into the updated guidance -- updated outlook that we're providing here today.

Okay. Thank you. I appreciate the color on that. That's what I suspected. And then on MP, can you give us a little bit more color in terms of the regional demand? I know you said, demand improved through the quarter across all regions and all segments. But any favorable product mix this quarter, or in the outlook and any favorable regional or not favorable. But I think last quarter, again, you talked about favorable product mix, as well as favorable regional mix. So, an update there will be great. Thank you. I'll leave it there.

Thanks, Ann. And again, very encouraged about the broad-based demand picture that we're seeing across our businesses and really across multiple regions. If we look at our crushing and screening business, we saw end market strengths in Europe, North America, in the APAC across our product line. If we look at concrete or mixture, truck business, specific in North America, we saw substantial growth in orders in that business really -- and we think that's associated as much with the residential construction market, but again, substantial increases in Terex Advance. We were just talking about materials. If there's one positive of high steel costs, it's scrap metal prices are going up, and that is really helping our material handling business, our Fuchs business. And again, Ann, we're seeing that really around the globe, Europe, North America, substantially up for our Fuchs business. Our environmental business is relatively new business with MP. So, we're seeing good market demand, but it's also a great example of product line extensions growing that business for us. And again, a similar story, we're seeing that growth both in North America and in Europe and beginning to see some growth in that area in APAC. One business that we don't talk a lot about is our pick and carry business, down in Australia. Australia weathered the pandemic reasonably well. And we're seeing strength in orders in that business, both from the mining sector, as well as infrastructure down there. So, that business, we saw some good year-over-year growth and strength as well. And Ann, we did see some improvement, not to the same level that we've seen in the other parts of the business, but we actually saw some recovery in our tower cranes and our key business. And finally, India, we were seeing -- we saw order strength in India. Obviously, we're all concerned about the current COVID situation in India. Our team members are doing a great job, navigating that, following the protocols and keeping production running safely in India. But again, just encouraged by the broad level of demand across the globe, across our product offerings, within our MP segment. Again, the team continues to do a great job in a challenging market, executing on that demand.

Thanks, Ann.

Your next question comes from the line of David Raso with Evercore ISI. Your line is open.

Hi, good morning. Thank you for the time. I was …

Good morning, David.

I was kind of looking the relationship of your AWP backlog at the end of the first quarter to the full year. I mean, historically that backlog is 30% to 40% of the full year rev. More recently what's called closer to 40%. If that relationship held, I mean, it would imply revenues should be north of $3 billion this year and AWP not 2.1 and change. So, can you help us bucket why the weaker conversion of backlog to revenue at that magnitude? I mean, it's not even close. I mean, is it -- the backlog is starting to have orders extending into the following year more than normal, is that -- your customers ordered that much earlier. So then naturally we'll see a little less sequential order -- orders than normal. How much is it the logistical shipping issues? And I guess for the question would be, is it also just -- how conservative is that guide just given the starting point with that backlog?

So, thanks, David. And again, encouraged by the increase in customer demand after last year. So, there were a lot of orders placed up early this year from -- early -- obviously in Q1, as you see the backlog go up significantly. And again, we saw that, David, around the globe. In terms of the ability to increase production, we are limited right now by the supply chain. We're working with our supply chain to ensure that we can meet the customer demand, but the limiting factor in the near term to call that Q2, Q3, is the supply base and the supply basis ability to ramp to the levels that we're at. So that -- the supply base is unequivocally a limiting factor in the demand that we can deliver for our AWP segment. And to some extent, not to the same extent, but there's some extent, the same thing in MP. So, in the current environment, David, ramping up the supply chain is the limiting factor and our ability to meet the increased demand. The good news is the demand is there and the team's working hard to secure the materials to be able to achieve the higher production rate. So, that's basically what's driving this year thus far, is material supply -- material constraints, and the team's doing a heck of a job overcoming that, so we can meet the needs of our customers.

So, there is no …

And David, I would just say that when you think about the guide, when we thought about the guidance, we took that into consideration and to the extent that we -- it's early in the year right now, and as we work through the supply chain and the opportunity to increase production, we would factor that into our guidance also.

And David, the second part of your question was in terms of -- is the backlog for -- beyond 2020, a very small percentage of the backlog is for 2022 deliveries. And that's really more in our utilities business and the custom truck side. And so, some of that backlog has moved into 2022, but there's not a significant portion of our 2021 backlog that we're showing that's for delivery in 22. There is some, but it's not a significant portion, David.

I appreciate that. I mean to say it's a positive that had that much backlog. I'm just trying to level set. If the gatekeeper is the ability to ramp up the orders that would normally show up in 2Q, 3Q because of the early ordering, maybe the inability to serve new demand. I suspect that would suggest the orders, sequentially drop a little more than normal. And I'm curious, given the seasonality of taking iron and usually right -- you want it before September, August, even earlier, how do we -- I'm just trying to level set the idea of the orders could look a little weak going forward? Or do you think your customers, given the supply constraints, might start putting orders in for 2022 earlier, meaning not worrying about, hey, if you can't get it to me this year, I know I'm going to need it in the spring. So, I'm just trying to level set how we interpret the orders going forward.

I think David …

… had conversations on 2022 already saying, well, we'll start putting orders in for 2022 earlier.

I will say this, David, there's an awareness that, in general, the supply chain is tight. And obviously, not just for us and not just for the Aerial equipment for rental companies. So, they're cognizant that the supply environment is tight. We're having conversations, but I can't tell you at this time, David, this early in the year that it's going to fundamentally alter how they think about order and order placement as we go forward. So, I think we're going to have to be responsive and react to the situation. I can't tell you right now at this point in time of the year, though, that we're going to see a significant change in terms of order pattern and order flow. Although, backlogs are up across the industry and that may lead to behavior change, and we'll be prepared for that.

Thanks, David.

Your next question comes from Jamie Cook with Credit Suisse. Your line is open.

Hi, good morning. Nice quarter. I guess, two questions. The first one, can you just help us understand your approach to pricing when you put in incremental price increases? I think your peers talked about putting in a 3% in March. And just wondering if yours just comparable and is it a surcharge or an actual list price increase, and have orders change since that price increase. And then my second question, Duffy, everyone's sort of asking questions around this, but is there any way for 2021 holistically, we can think about the incremental costs associated with whether it's supply chain inefficiencies, COVID, that cost. I'm just trying to understand what costs could be sort of incremental on 2021 that aren't necessarily there in 2022 and set Terex up for a potentially good incremental margin in 2022. If the volumes are still there. Thanks.

I'll take the first part, Duffy. And if you'll take the second part. So, on the pricing and price costs strategy, what we're doing is being very transparent with our customers and being very clear in terms of the cost increases that we're seeing. Our normal pattern is that we have a price increase for the upcoming year. So that would have been in Q4 of last year for 2021 deliveries. When we saw the substantial increase in material costs, especially around steel, we did implement an incremental price increase in March, that went into effect for orders that were placed after -- for the most part, it very bad business, but for the most part orders placed after the end of March. That incurred the higher price that we're seeing. The range of price that you indicated is relevant. It was in that ballpark, low single digits. It does vary across businesses. The level of increase that we're asking for, again, being transparent with customers on the cost increases that we're seeing. In terms of the price cost relationship, as you saw in our outlook guide, this year, because we had so much in backlog, we chose not to -- in general, we chose not to reprice the backlog. There are some specific situations where we had to. And so, the price cost is a negative this year as a result of that backlog, but the pricing did go into effect, or right at the end of the first quarter and the orders and equipment that we deliver, that's not in backlog. Going forward, we'll be at the higher price level, and we'll continue to monitor this and continued to address adjust price based on the material cost inputs that we're seeing. And again, being very transparent with the customer. Duffy, you want to follow up on the second piece of the question?

Yeah. So, Jamie, we look -- we included the EPS walk from our previous guide to our updated outlook in the earnings presentation today. And where you see there is, is that we included a line for $0.55 EPS reduction from the previous guide as a result of cost pressure. And I think that's probably a good marker for you of what the impact has been from our -- from the start of the year in terms of the impact to us, in terms of the increases, whether it be, field, residents, logistics, et cetera, and that we -- with the reason why we increased prices. And we are only partially offsetting it as John -- offsetting those costs increases as John said. But I think $0.55 would be a good number to think off.

Thank you.

Thanks, Jamie.

Thanks, Jamie.

Your next question comes from the line of Tim Thein with Citigroup. Your line is open.

Great. Thanks. Just -- I wanted to circle back on the earlier theme on order timing, but the specifically on MP and if -- obviously very strong bookings for the segment as a whole. But I'm just curious within that on crushing and screening, typically the order growth tends to start out the year strong based on -- ahead of the construction season and dealers and customers want to have delivery ahead of that. But I'm curious if you think that there may have been within that 1Q bookings number, there may have been some kind of preordering given concerns about longer lead times. So, effectively some pull ahead of orders that may have come -- subsequent orders that may have come later in the year. Did they get potentially pulled into the first quarter?

Well, thanks. And again, on the MP side, Tim, we actually saw order activity begin to improve really in the fourth quarter of last year. So, this is the continued momentum on orders within the MP segment. Again, across all the businesses within MP, we have seen significant order activity increase. We've got a very rigorous process of looking at the dealer orders. Is there some ordering activity as a result of seeing lead times expand? Yes. That's a natural reaction that a distribution channel would have, about 70% of the business in MP goes through a distribution channel. So, there may be some of that. But I think the biggest driver in the order activity is what our dealers are seeing in their end markets. Based on our telematics data, we're seeing increased utilization. We've seen significant conversion from rent to own. There's a lot of that in that channel, that's enabled the dealers to order back. So, when we look at our dealer inventory levels, even with the increased sales, dealer inventory levels are down. So, all-in-all, we feel very strong about where we are in that business. And yes, there may be some preordering, because they want to get slots, but they're only doing it because they see the demand in front of them. And we're seeing, especially in the -- all of our businesses, but this whole concept of infrastructure that's driving demand around the world and it's not even in place yet, but it's the attitude. It's the expectation. And globally, we have seen infrastructure investment, and that clearly has helped our MP business around the world. So, there may be some, but the market demand -- the underlying fundamentals are strong. And frankly, we believe they're going to continue to be strong and frankly increase as we go around the world. So, MP team has done a great job and that business is performing. It performed in a down cycle, and I guess it's going to perform incredibly well in the up cycle.

Okay. Got it. Thank you.

Thanks Tim.

Your next question comes from the line of Ross Gilardi with Bank of America. Your line is open.

Thanks. Good morning, guys.

Good morning.

Hey, Ross.

Could you guys just talk about some of the things you did and are still doing with your global sourcing strategy and how those -- how some of the critical elements of -- those things just sort of enabled Terex, or should enable Terex to cope better in this environment where we've got widespread shortages and more localization and just everything that's going on right now with supply chain tightness. What have you done to better equip the company for the next cycle?

Great. Well, one of the major initiatives that we've had over the last couple of years, and I'm very thankful that we did with our strategic sourcing initiative. And what that able -- enabled us to do is really strengthen our relationships with our supply base. And when things get challenged, those relationships become very important. And there's much more engagement at senior executive levels. We're more and more important customer to our suppliers. And so, the hard work that the team has put in place on our strategic sourcing initiative has really positioned us well with our primary suppliers, also setting up secondary and alternate suppliers is helped overcome the challenges that we've had. So, the strategic sourcing initiative, the discipline, the process that we put in place is really helping in this environment. And I think it will continue to assist us, as we go forward. And I do want to hats off to our -- all of our operations team, but especially our strategic sourcing teams and our logistics teams. It has been a challenging environment, like all industrial companies right now, and they're doing a great job managing our supply chain, focusing on continuity and the strategic sourcing initiatives that we've implemented over the last couple of years, have really served us well in this challenging environment and are going to serve as well as we move forward.

John, just a quick one to follow-up on that.

Yeah.

So, would you say that you've -- have you moved to more towards single sourcing of critical components to enhance those relationships, or have you moved more towards dual triple, quadruple sourcing, in general.

Yeah. So, it's hard to say in general, because it really depends on which specific commodity of that you're looking at. From a general statement, we look to reduce our single source, if it made economic sense to do that. So, we have increased the number of alternative sources. We have absolutely had to go to those alternative sources in this environment. And so, I don't want to make a general statement, because it truly does matter and what type of component, what type of commodity that we're dealing with. But I will say it's a strategic decision by commodity what is our strategy for that respective commodity as we go forward.

Got it. Thanks so much.

Thanks, Rob.

Your next question comes from the line of Brett Linzey with Vertical Research Partners. Your line is open.

Hi. Good morning, everyone.

Good morning, Brett.

Hey. Wanted to come back to some of the cost initiatives and really thinking outside SG&A, you had pointed to the manufacturing example in Telehandlers, localization of production in China. Are you able to quantify what the savings you think those actions are yielding outside some of the SG&A stuff. And then, have you identified additional repositioning opportunities on the footprint?

Thank you. A lot of the activity was in our AWP segment, specifically Genie. The team's done a great job, as we mentioned on the SG&A side as you acknowledged. And that focus and discipline will continue. On the manufacturing footprint, we've taken action. We closed our Rock Hill facility. We're moving our Telehandler production from Oklahoma City to Mexico, which is going to give us a cost advantage as well. And then also within our manufacturing facilities, our teams have done a great job, really driving productivity and leverage within direct manufacturing spend. And as we -- as the volumes come back, we would anticipate that that leverage on the indirect side of the manufacturing spend will also be helpful to drive margin improvement as volumes return. So, it's been a multi-pronged approach by the team, looking at every element of the cost structure, and ensuring that we're globally cost competitive in every activity. And I might also add that every activity within the company. So, it's also functional activities, work in that be done in the most cost effective area around the world. So, the team has a comprehensive plan. We're implementing the comprehensive plan to drive the margin improvement. And over time, we are going to drive the Genie business back to double-digit historical levels of margin activity, and the team is committed to doing that.

And Brett, while I don't think we can put a specific dollar number on the cost savings and what they contributed. When you look at just some metrics, right, is the AWP segment Q1 improved 680 basis points year-over-year, the incremental margin for the full year 44% on the outlook we provided today and a 7% operating margin. So, I think, those are some of the metrics that demonstrate the cost -- the hard work on cost improvement that the AWP team has executed on.

No doubt. Very strong start. Want to come back to the order book, is the uptake you're seeing driven by existing customers replacing equipment, or are you seeing new customer engagements driven by products or some of the front end commercial processes? Thanks.

It's a combination -- new customer acquisition, but also the replacement cycle, especially in the AWP segment. There was a deep reading last year, utilizations improving. They're beginning to build back their fleets. And we think -- if you just look at the replacement cycle for the Genie business for what's coming forward, there's a strong run ahead for that business.

We're going to have to end it at this time. So, we can stop right at the top of the hour. We know you all have other calls this afternoon. So, I would just want to say thank you for your interest in Terex. And a public announcement, COVID-19 safety remains a priority for us here at Terex. We're continuing to follow the safety protocols. And I would strongly encourage all of us to be vaccinated when the opportunity presents itself. We no longer have a supply issue. We have a demand issue with the vaccine. So, we're working hard to convince our team members to receive the vaccine, so we can move to the other side of this pandemic Operator, please end the call.

This concludes today's conference call. Thank you for participating. You may now disconnect.