Terex Corporation (TEX) Q3 2026 Earnings Report, Transcript and Summary

Greetings. And welcome to the Terex Third Quarter 2026 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. If you would like to ask a question, please press *1 to raise your hand. To withdraw your question, press *1 again. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Drew Konop, vice president of investor relations. Drew, please go ahead.

Good morning, and welcome to the Terex Third Quarter 2026 Earnings Conference Call. A copy of the press release and presentation slides is posted on our Investor website at investors.terex.com. In addition, the replay and slide presentation will be available on our website. We are joined today by Simon A. Meester, president and chief executive officer and Jennifer Kong-Picarello, senior vice president and chief financial officer. Their prepared remarks will be followed by Q&A. Please turn to Slide 2 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. These risks are described in greater detail in our earnings material and in reports filed with the SEC. On this call, we will be discussing non-GAAP financial information, including adjusted figures that we believe are useful in evaluating the company's operating performance. Reconciliations of these non-GAAP measures can be found in the conference call materials. Please turn to slide 3, and I will hand it over to Simon.

Thanks, Drew. Good morning, and thank you for joining us. Today, I will cover our third quarter performance the demand environment across our businesses and our updated full year outlook. I also discussed the process around the separation of the aerial segment before Jennifer takes you through the financial results in more detail. At a consolidated level, Terex delivered higher sales adjusted EBITDA and cash flow in the third quarter versus prior year. While expanding margins and further strengthening the balance sheet. Sales of $2.2 billion increased approximately 12% year-over-year and adjusted EBITDA of $286 million rose approximately 14% on a pro forma basis. Materials processing and specialty vehicles, delivered strong performance, aerials improved again sequentially, and environmental solutions continued investing in utilities capacity to support rapidly growing customer demand. Consolidated earnings also increased sequentially despite slightly lower sales demonstrating improving execution and earnings conversion. Order activity improved significantly during the quarter with pro forma orders up 53% year-over-year. And backlog reaching $7 billion Bookings were higher in all 4 segments, and orders exceeded sales in materials processing specialty vehicles and environmental solutions. Consolidated book to bill was approximately 103%, which is greater than our typical seasonality. Providing an optimistic forward outlook across the portfolio. Specialty Vehicles continues to provide particularly good forward visibility materials processing backlog reached a 2-year high, and environmental solutions backlog increased from the second quarter. Jennifer will cover the segment level bookings and backlog trends in more detail later. Turning to Slide 4. The underlying demand drivers remain attractive across infrastructure utilities, power, and data centers. While municipal replacement demand supports fire and emergency equipment in the United States. Refuse collection vehicle demand is improving sequentially. US commercial and residential construction remained below historical levels but have largely stabilized while Europe is mixed. Turning to execution on slide 5. We are making progress integrating the expanded portfolio. With foundational work across all workstreams now completed more of our attention is shifting towards value capture. The launch of our centralized procurement organization was an important next step. By coordinating sourcing across the enterprise, we can better leverage our scale, simplify the supply base, and reduce product complexity. These actions should support our synergy commitments and enhance earnings power over time. We are also applying a more consistent discipline across the company. As integration activities mature, our focus is increasingly shifting towards operational improvement opportunities. We are deploying proven operating practices digital manufacturing tools, and standardized operating routines to improve throughput productivity, and quality. Early results are encouraging, and we see a growing synergy pipeline. As reflected in the results I outlined earlier, that operating discipline supported growth and margin expansion in materials processing, and specialty vehicles, as well as sequential improvement in aerials. In environmental solutions, demand remains healthy and we are expanding utilities production capacity to support secular growth. As expected, the expansion created temporary ramp up inefficiencies that affected near term profitability. The team, however, is making progress improving production flow, throughput and cost absorption and we remain confident in the long term opportunity to accelerate earnings. Alongside these operating initiatives, we continue to invest in our strongest businesses and brands through product development and innovation, ILE recently introduced its next generation automated site loader for residential refuse collection, It was designed to improve safety, efficiency, and productivity while establishing a foundation for fully autonomous operation when paired with our Third Eye digital offering. Finlay also introduced Electro, a new range of hybrid crushing equipment designed to reduce fuel consumption and operating costs while supporting more sustainable customer operations. Our commitment to product development is also receiving external recognition. Earlier this month, Genie's next generation slab scissor lifts were named product of the year in the scissor lift and vertical mass category. Reflecting our continued focus on quality, productivity and total cost of ownership for customers. The third quarter also marked significant for several of our brands, including the 60th anniversaries for PowerScreen and Genie, and the 50th anniversary of road rescue ambulances. These milestones reflect decades of customer relationships large installed bases and application expertise that support repeat purchases, aftermarket growth, and enduring brand value. At the same time, we continue to simplify the portfolio and direct investment where we see the greatest long term opportunity. The exits from capacity and Lay-Mor further reduce our cyclicality, and allow us to concentrate resources on businesses with stronger market positions and more attractive long term returns. Combined with our cash generation, these actions preserve our capacity to return capital to shareholders. With that strategic and operating context, let me turn to our updated full year outlook. Based on our third quarter results and updated expectations, we are refining our full year outlook. We now expect sales in the range of $8 billion to $8.2 billion and adjusted pro forma EBITDA of $930 million to $960 million reflecting typical fourth quarter seasonality. The updated outlook reflects our current assumptions for fourth quarter demand, production and costs. Looking beyond the near term, integration savings, operating improvements, and portfolio mix provide a foundation for sustainable earnings growth. Before turning it over to Jennifer, I want to update you on the aerial separation process. Since our last update, we have made good progress advanced the carve out work and moved from evaluating inbound interest to active engagement with multiple strategic counterparties. While the process continues, the team remains focused on serving customers, growing the business, and improving performance. Our priority is to achieve an outcome that reflects Genie's strong brand, global footprint and differentiated products, and maximizes value for Terex shareholders. And given the active nature of the discussions, we will not comment on individual counterparties or establish a specific timeline. Across Terex, our focus remains straightforward advanced operating performance, realize the synergies of the transformed portfolio and translate the strength of our brands and end markets into higher earnings and cash flow. With that, I will turn it over to Jennifer to walk through the financials and our updated outlook. In more detail.

Thank you, Simon. Good morning, everyone. Let's review our third quarter results, starting with consolidated performance on Slide 6. Consolidated sales, including specialty vehicles, were $2.2 billion up $810 million. Or 58% as reported. On a pro forma basis, excluding the sale of the Queens and Midwest businesses, sales grew $229 million. Or 11.6% as growth in aerials materials processing, and specialty vehicles more than offset lower sales in environmental solutions. Adjusted EBITDA margin was 13% compared with 12.8% on a pro forma basis in the prior year. Adjusted EBITDA rose $35 million to $286 million supported by higher sales, operational execution and realized synergies. Which more than offset year-over-year tariff and inflation headwinds. Adjusted diluted EPS was $1.50. Higher volume synergies, and operational execution drove improved earnings. While working capital efficiency supported stronger cash generation. As a percentage of sales, net working capital was 15%. Compared to 18.1% a year ago on a pro forma basis. Primarily driven by lower inventory and the merger with REV Group. We generated $241 million of operating cash flow and $209 million of free cash flow during the quarter, Capital expenditures of $32 million included maintenance and growth investments, aimed at increasing production at select sites, efficiency, and safety. Net debt at quarter end was $2.2 billion including $407 million of cash on hand. And net leverage was 2.3x. Net debt to 12-month adjusted EBITDA. On a pro forma basis. During the quarter, we returned $91 million to shareholders including $72 million of share repurchases and $19 million of regular cash dividends. In addition, we paid down $113 million of debt. Finally, the board approved a new $500 million share repurchase authorization. Adding to the $111 million remaining under our prior authorizations as we exited the third quarter. For a total of $611 million capacity. The new program provides management flexibility to remain opportunistic within a balanced capital allocation framework. Turning to segment performance. Starting with environmental solutions on slide 7. Environmental Solutions sales decreased $35 million. Or 8% from the prior year to $400 million. The decline was driven by industry channel adjustments in refuse collection vehicles. Partially offset by healthy demand and higher shipments in Terex utilities. Utility sales benefited from the expansion at the Birmingham facility. Where Waukesha is transitioning from a service center to a full installation facility. The segment reported an adjusted EBITDA margin of 15.3%. Down 390 basis points year-over-year. The decline was primarily due to the unfavorable mix from higher utility sales, inefficiencies related to the Waukesha production ramp, and lower volume absorption in ESG. Moving to materials processing on slide 8. Materials Processing sales grew 11.3%. or $44 million to $434 million driven by healthy equipment utilization and demand. Particularly for mobile crushers and screeners in the U.S. Supported by infrastructure data center, and other construction projects. Adjusted EBITDA margin expanded 530 basis points to 19.3%. Driven by higher shipment volume favorable mix, price cost discipline, and improved absorption related to higher production volumes. Turning to Specialty Vehicles on Slide 9. Specialty Vehicles sales rose $49 million or 8.1% to $657 million driven by increased sales of fire apparatus and to a lesser degree, recreation vehicles. Specialty Vehicles adjusted EBITDA margin improved 300 basis points to 16% compared with last year. Supported by favorable mix. Operating efficiencies, and price cost discipline. Partially offset by inflationary pressures. Turning to Aerials on Slide 10. Aerials sales grew 32% year-over-year to $709 million driven largely by national account demand in the U.S. associated with large infrastructure projects. Adjusted EBITDA margin was 8.7% in the quarter, down 180 basis points from the prior year when tariff impacts were lower. But 300 basis points higher versus the second quarter due to higher production volumes and cost reduction actions. Mitigation actions were partially offset by unfavorable customer mix tariffs, and other inflationary pressures. Turning to bookings on slide 11. Consolidated third quarter bookings were $2.3 billion up $781 million or 53% year-over-year on a pro forma basis with growth across all 4 segments. In addition, the bookings for all segments are trending up providing us with an optimistic outlook for future demand. In environmental solutions, the timing of the bookings explain the modest sequential sales increase outlook for the fourth quarter. Segment bookings increased 14% year-over-year. to $445 million led by 36% growth in ESG where bookings reached a 7-quarter high. As refuse collection vehicles orders improved for a second consecutive quarter. Utilities demand remains healthy. Although production ramp-up inefficiencies continue to limit near term shipments. We now see our full year sales outlook for the segment to be approximately flat year-over-year. In materials processing, broad based demand and a 2-year high backlog support our existing full year forecast. Third quarter bookings grew 41% on a pro forma basis to $511 million with gains across each vertical and notable increase in concrete equipment orders. Backlog nearly doubled to $676 million. Its highest level in 2 years. Providing approximately 5 months of coverage. We continue to expect low double digit sales growth for the year. In Specialty Vehicles, demand remains healthy while normal fourth quarter seasonality impact sequential sales. Third quarter bookings rose 30% year-over-year, to $665 million. With growth across all end markets. Notably, backlog grew even as throughput and sales increased approximately 8%. Versus the prior year. Reflecting continued strong demand. To further shorten lead times and reduce backlog, we are expanding capacity in a measured way With the first units from the newly expanded Brendon facility expected to ship in the fourth quarter. Fourth quarter sales are typically lower because of fewer inspections and delivery days around the holidays. And we expect the typical approximately 15% sequential decline. Our high single digit full year sales growth outlook remains unchanged. Despite the impact of Capacity and Lay-Mor divestiture. Finally, in aerials, large project orders and higher backlog support our full year sales outlook. Third quarter bookings rose 194% year-over-year to $646 million primarily attributable to national customers serving large infrastructure projects. Backlog increased $455 million from the prior year. to $852 million supporting confidence in future demand. Based on year to date results and current bookings and backlog, we are maintaining our prior outlook for low double digit revenue growth. Which we approximate as mid teens. Now turn to Slide 12 for our updated 2026 consolidated outlook. Our outlook incorporates the current portfolio. Normal fourth quarter seasonality, the environmental solutions production ramp, tariffs, and overall inflationary environment. It excludes cost to achieve synergies, purchase accounting adjustments, and other nonrecurring items. Today, we are refining our full year outlook. We now expect 2026 pro forma sales growth of approximately 8% at the midpoint. With sales ranging from $8 billion to 8.2 billion Stronger year to date performance in materials processing and specialty vehicles, together with realized synergies. Is partially offset by lower near term expectations in environmental solutions and fourth quarter seasonality in areas. Pro form a EBITDA is expected to grow approximately 10% year-over-year. To a range between 930 million and 960 million excluding Capacity and Lay-Mor. Representing an 11.7% EBITDA margin at the midpoint. Our EBITDA outlook includes approximately $28 million of realized synergies in line with our commitment at the beginning of the year. We anticipate interest and other expenses to be approximately $180 million based on average debt outstanding of $2.6 billion. The effective tax rate for the full year is now 19%, benefiting from effective tax planning. This results in expected 2026 adjusted EPS of $4.80 to $5.00 including the typical seasonal step down in the fourth quarter. Finally, we are raising our free cash flow outlook to $360 million to $400 million for 2026. Reflecting net working capital efficiency. And an updated capital expenditure outlook of $145 million for the full year. With that, I will turn it back to Simon for his closing remarks.

Thanks, Jennifer. The economic environment remains dynamic with tariffs and inflation creating meaningful pressure across the industrial sector. Even so, we delivered on our third quarter commitments. Materials processing paired growth and margin expansion with a 2-year high backlog and specialty vehicles executed strongly against healthy demand and backlog while tactically increasing capacity to reduce lead times. In environmental solutions, increasing bookings and the utilities capacity expansion create a path to better shipments, margins and cash generation. Our operational priorities are straightforward. Execute our improvement plans, capture the benefits of integration and convert strong demand into higher earnings and cash flow. Delivering on those priorities will create meaningful value for our shareholders. I want to thank our team members for their work, our customers, dealers and suppliers for their partnerships, and our shareholders for their continued engagement. And with that, we will turn the call over to the operator for questions.

We will now begin the question-and-answer session. Please limit yourself to 1 question and 1 follow-up. If you would like to ask a question, please press *1 to raise your hand. To withdraw the question, press *1 again. We ask that you pick up your handset when asking to allow for optimum sound quality. If you are muted locally, remember to unmute your device. Please stand by now while we compile the Q&A roster. Your first question comes from the line of Angel Castillo Malpica with Morgan Stanley. Your line is open. Please go ahead.

Good morning. Thanks for taking my question. I just wanted to unpack a little bit more of the margin progression here. Just if you could help us understand, I guess, margin expectations by segment in the fourth quarter. I guess, a normal environment, for legacy Terex, I would have said sequential move in EBITDA makes sense. But I think just when I look at the current backdrop, I think most of us maybe outside of seasonality expected a little bit more improvement in the fourth quarter. So just a bridge by segment there would be helpful and just any color as to the specific factors perhaps in quantifying those. Like, what persists into 2027? is more near term and perhaps abates a little bit? And just how should we be thinking about, what to kind of underwrite in terms of the run rate or the exit rate of this year for 2027?

Hey, Angel. This is good morning. This is Jennifer. So to your questions, yes, typically, we see a Q3 to Q4 seasonal step-downs, and our EBITDA margins. 2 of our segments are the 4 have last shipments, so it is all shipment-related driven by, you know, seasonality, like aerials and SV because of the holidays. The factory shutdowns and also the nationals demand. In terms of when they ship. Then in the MP and the ES segment, we expect that there is going to be higher revenue in Q4 versus Q3. That will drive additional margins. However, for MP the unique 1 for Q4 is that is going to be unfavorable product mix, little bit more material handling in concrete. So the. that you are going to do a little bit more step down from Q3 to Q4 from material processing. And now our full year outlook here also includes the additional freight inflation that we saw in Q3, and then we will bring that into Q3. Q4. Your second question is how much of that will be discrete and how much of that will be carried forward? What we see here is that the inflation, it is a timing issue. Whereby we are taking proactive actions either from cost mitigation standpoint or from a price flow-down to the customers as a surchage So that generally will have a 3 to 9 month lag across depending on the different business dynamics. And the other ones in the Q4, we also do expect that the ramp up inefficiencies in our Waukesha facility that Simon mentioned in the prepared remarks to continue from Q3 into Q4 and that will ease out and we will come up from that in 2027 or early part of 27.

Yeah. I would just add if you just look at--if you look at Q3, you know, I think all 4 segments are really well positioned for continued margin expansion going forward in 2027. We are obviously not guiding today for 2027. But I would just add that maybe MP and SV had a little bit of a few 1-timers in the quarter, so I would not quite baseline it on the. On their Q3 margins. But other than that, all 4 segments, I think, are well positioned, especially ES to continue to expand margins going to 2027 because obviously, we have a very healthy backlog and strong bookings, so volumes will be a nice tailwind for us in 2027.

Thank you, Simon. And, actually, just, that is a nice dovetail into my follow-up, which was just related to ES. I guess, I am a little bit confused there. It sounds like the lower volume, maybe there was a little bit of shipment move from Q3 to Q4 in the refuse side of the business. But utilities, it sounds like that is maybe what is driving a little bit of the inefficiencies or lowered top line guide. Just how do we reconcile that with the bookings that was the strongest we have seen in, I think, like, over 3 years? Just help us understand, you know, the cadence into next year. It sounds like, again, some of that is just inefficiencies and timing, but if Refuse is also seeing kind of good uplift in demand just like what is that telling you in terms of the ability for that to grow or the magnitude of that growth?

Into 2027? Yeah. You said it. Inefficiency, and inefficiencies in utilities and timing of bookings in ESG You may remember that we had initially assumed a start of the quarter. At the start of the year, sorry, that there would be some tailwinds coming in terms of pre buys because of the change in engine regulations in 2027. Lot of that is now grandfathered well into 2027, so some of those pre buys kind of dropped out of our bookings forecast. So we do see sequential sequentially strong pickup in ESG bookings coming out of the channel adjustments that kinda drove some of the corrections at the beginning of the year So I would just correct. Characterize it as in, we initially anticipated a V-shaped recovery, and now it is going to be more of a U-shaped recovery. So that is why we feel good about ESG and utilities, for that matter, going into 2027 but it is just going to be pushed out by another quarter, and that is what it is driving the guide.

Understood. Thank you.

Your next question comes from the line of Mircea Dobre with Baird. Your line is open. Please go ahead.

Yes. Good morning, everyone. I gotta admit I am a little bit confused with the guidance relative to your commentary here. It does sound like Q3 was maybe not all that different from what you were expecting, if anything, maybe MP, for instance, did a little better in specialty vehicles too. But we have taken 30 to $40 million out of the EBITDA guide so that is all coming from the fourth quarter. Can you be a little more specific in terms of okay, all these EBITDA dollars are coming from, which segments are they really coming from? Are there is it more evenly spread, or are there a couple of segments that are really bearing the brunt of this?

Hey, Mircea. Good morning. This is Jen. So, yes, our Q3 performance came in largely in line with our expectations. Very strong performance. 3 of our 4 segments securing double digit EBITDA. What you mentioned here in terms of the revised guide on the EBITDA that is largely, I would call it, 50% of that is driven by the change in the mix of our segment. Like I mentioned in the prepared remarks, we are reducing the top line for ES from low single digit to flat. And we are increasing a little bit in aerials to mid teens. That explains for about 50% of the volume changes from the segment mix. And then another 25%, that is driven by higher freight, like I mentioned earlier to Angel, that we have incurred in Q3, and we expect that to continue into Q4. that is the big change versus the last guidance, the prior guidance. And then the remaining 25% is driven by the TEU ramp up inefficiencies and as capacity and labor from our Q4 guidance. Just because of the divestiture announcement that we made on in the earlier part of the month. That was my last week. Yeah. Yeah. So those are the 3 big drivers.

That was really helpful. Thank you for that. Then I wanted to ask a little bit about your free cash flow as well. it is a little unusual for me to sort of see the free cash flow guide go up while having to trim EBITDA. So maybe talk a little bit about that. And in terms of working capital management, maybe a general framework for how we should be thinking about Parex is we think about 2027, 2028? What do you see as the natural working capital level for the company?

Yeah. So. And thank you, Minh, for asking the question. You know, I am very pleased with the operational and the free cash flow performance that we have done in Q3. Which allow us to deploy the share repurchase opportunistically. We are driving the low cap. Capital intensity that we think we will through all our strategic portfolio transformation that started with the ESG acquisitions then the Rev merger pruning our business, the Queen's Divestiture That We Did Late Last Year And Now with Capacity and Lay-Mor. So in terms of our 2026 priority, I have been always very clear that, you know, we want to do it on a very staged approach. First half of the year is always about making sure that we have a very strong balance sheet. And then the second half of the year is that to make sure that we return the value to the shareholders, which is what we are exactly doing. While we are not providing the guidance into 2027 and 2028, I expect that we continue to drive working capital to be lower We continue to make sure that we optimize our CapEx and then continue to return shareholders value. Through either dividends, share repurchase, or organic investments.

Alright. Appreciate it. Thank you. Thanks, Mircea.

Your next question comes from the line of Jamie Cook with Truist Securities. Your line is open. Please go ahead.

Hi. Good morning. I guess my first question is just within specialty. Can you speak to what you are seeing, within that in terms of the, you know, fire business, I guess, specifically where some of your peers have been. I think, you know, your growth has been much better than some of your peers, and also your margin performance was pretty good. So any color you give on what you are seeing there and your confidence that Fire can grow in 2027 and anything you are seeing on market share. Then I guess my second question again set up for 2027. You know, Simon, you sound fairly positive, but I am just trying to understand you know, where pricing as we look at the backlog, what is pricing effectively versus sort of underwater as we look into 2027? It sounds like aerials is the biggest issue, but I am just wondering if you know, price cost should start to improve more in 2027 with the pricing actions we have taken in recent bookings. Thank you.

Yes. Thanks for the question, Jamie. So on SV, I am very pleased with the bookings. Bookings coming in strong. You know, backlog actually going up again a little bit sequentially in SV. it is still very much all about trying to bring lead times down for us, so that is why we are tactically expanding capacity in 2 locations in Brandon South Dakota and in Ocala, Florida. Basically, we are trying to address specific categories with higher than average lead times with those with those investments, and we expect that the first units to be built in this quarter in Brandon and then in the second quarter of 27 in Ocala, in both places we expect that capacity to be at mature rates by the end of 27. So it is still very much for us a story about trying to bring the backlog down. We think a sustainable lead time for this industry is about 12 months, and we are well over 24. So pleased with the bookings. We see strong underlying demand. We still see a lot of municipalities that, you know, are replacing aged units. And we do have a couple of offerings in our portfolio like our semi configured pumper that is a low lead time item that is just picking up in popularity because it is a unit that we can deliver in 8 months as opposed to the average 24 months. So we are pleased with how things are evolving in SV, but it is still very much just a matter of us trying to get our lead times down from 24 months to 12. Then in terms of inflation, obviously, it is top of mind for us. For 2027. And, Jennifer, keep me honest here, but we are not expecting. We are not operating under the assumption that inflation is all of a sudden magically going to get much better in 2027. So we are preparing ourselves for at least kind of a flat year-over-year in terms of percentage continuation of inflation going into 2027. Now again, we are not guiding for 2027, but we have always said and we continue to say, is that our aim is to be price cost neutral. That is our that is our starting point. And we will try to offset as much as we can ourselves and mitigate as much as we can ourselves. But at some point, we will have to be disciplined and pull the pricing lever as well in order to get to that ambition of price cost neutrality. So still, an active process as we continue, you know, in the quarter, and we expect to provide some more clarity on that when we start guiding 2027 in February.

Thank you. I appreciate the color. Thanks, Jamie.

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

Hi. Thank you very much. I appreciate you do not wanna call out any potential buyers on Aerials. But if you can just indulge us in a bigger picture view of what is developing. The carve out work, is there really anything left to do there? And then is the holdup on the sale more regarding buyers, what they are asking for regarding the structure of the deal, or is it just simply a debate on price? And then also the share repo authorization, you have a total now $611 million. The authorization timing and also the size of it I am just trying to think through the use of the proceeds eventually from the sale of Genie. The authorization struck me as a little low. And I am just trying to figure out, is that a signal a little bit of on the use of the net proceeds? I mean, this kind of number feels like it is almost $50.50 debt versus repo. And I would argue investors are probably leaning a little more wanting repo. Just wanna make sure we are reading into what you are what you are describing today, appropriately.

So I will take the first. Jen, you want to take the second question on the share repurchases? So yes, on the on the Genie. On the aerials process, Yeah. As I as I said, we made good progress in the last couple of months in terms of advancing our carve out work You know, aerials has been part of Terex for 25 years, so there is obviously a lot of structure, a lot of tax laws, legal entities associated to this segment that required quite substantial carve out work. And we have been making good progress on those. In terms of process, David, I am not gonna comment on you know, who the multiple strategic counterparties are. I am not gonna comment on what kind of the nature of the discussions are. I do not think that serves the best interest of our shareholders. I am going to pass on that particular question.

Yeah. And, David, I think your 2 follow-up questions is on the carve out work. I am very pleased to say that we have done a lot of the work upfront in the, I will call it, the last 9 months. As you know, the Aries business has been with. As part of Terex for a while, and the legal entities that we are were untangling. We have done a lot of that work and very with where we are in the process right now. Your question on share repurchase, I think it is too premature to say anything. The 500 million of share repurchase authorization there is just on our normal cost of business. We have exercised. We have deployed $72 million to share repurchase in Q3. We expect that we will remain share repurchase will remain part of our disciplined capital allocation framework, and we will continue to opportunistically repurchase shares, that is with or without the Aerials sale. So I would say. I would not say you wanna read too much into it. Alright.

that is helpful. Thank you very much. You are welcome. Thanks, David.

Your next question comes from the line of Mike Shlisky with D.A. Davidson. Your line is open. Please go ahead.

Hi, good morning. I was under the impression that you were not gonna be doing much divestitures until you got the aerials deal done, but, you know, you did just divest capacity and lay more in the last couple of days just. I am kind of curious if. Are there any other areas you might look to divest? RVs or other small businesses that you currently still own? Between now and when aerials may get addressed?

Hey, Mircea. Good morning. Thanks for the question. Yeah. We are at the tail end of the integration of our new SV segment, which you know, required a lot of work. We are obviously also in active discussions around our aerial segment, we have kind of a full slate at the moment. Now the Capacity and Lay-Mor was a relatively small transaction. But, you know, I would just leave it today as in, we will continuously assess the effectiveness of our portfolio, and some of that will be opportunistic in nature. But at the moment we are focused on those 2 main large workstreams that I that I called out just now. But, yeah, we will always look for opportunities to continue to optimize and we are we are committed to our strategic objective of building a high highly synergistic you know, high mix, low volume portfolio and we will always be looking for opportunities to further improve.

Okay. Great. And then my then my follow-up was. So then you called out those 2 businesses, Capacity and Lay-Mor, as part of the reason for the EBITDA reduction for the full year, mostly in the fourth quarter, of course. I never thought those were that big of businesses that did not generate that much. So can you just help us figure out for our modeling between 2027 whether there is a pretty decent sized number or halfway you know, important number we should be taking out of our models for 2027 for those businesses and whatever cash you received, you know, will just be plowed right back into the share buyback here in the fourth quarter.

Yeah. Hey, Mike, you know, I think you are familiar with the capacity and Lay-Mor businesses. Overall, you know, in an annualized basis through cycles anywhere between $125 million to $150 million of top line revenue And we have always said that it is in the mid single digit to high single digit EBITDA, so you could use that to adjust out your model. I think your second question is on the sale proceeds and how we are going to deploy that cash. Again, we will make sure that we exercise a very disciplined capital allocation framework. In fact, we have received the cash already, so we absolutely is looking into that right now.

Thanks so much. You are welcome.

Your next question comes from the line of Kyle Menges with Citigroup. Your line is open. Please go ahead.

Thank you. In your presentation and in the prepared remarks, you mentioned the fire and emergency fleet sounds like it is still aging, good replacement demand from municipalities. Would just love to hear your just a little, I guess, a little bit more color on what you are seeing in that market and in that fleet if it is really aged and you would, I guess, just did not really see too much pull forward. Related to COVID stimulus or perhaps we did. We would just love to hear some more color there.

Hey, Kyle. Did you say SV, specialty vehicles? Yeah. I guess fire and emergency. Yep. Yeah. Okay. Thank you. I was not sure. Because we cover municipalities with multiple segments, so I just wanted to make sure I heard you clearly. Yeah. As I said earlier, we are very pleased with bookings. How the bookings continue to come in. We are very focused on just building as many trucks at the highest possible quality as we can just basically at this point to keep up with the backlog and with the bookings trend. Until we have additional capacity coming online. We are also very surgical with our capacity because obviously, we do not want to all of a sudden have idle capacity in our network either. So that is why we are addressing specifically the categories with higher than average lead times. But, yeah, to your point on the bookings, I do not think there is a particular silver bullet here other than we just continue to see municipalities that are coming in with replacement demand that have been running their fleets a little longer than they initially expected. And then you know, I do not wanna make any comments on market share, but we do get some good pull from the market on our lower lead time solutions that we are offering As I mentioned earlier, with our semi configured pumper. So it is probably a mixed bag of those of those variables.

Got it. And then just a follow-up on the aerials. Sale process and that carve out work. I am curious how much more carve out work there is to be done. And are you confident in getting that raw up by year end?

Yeah. I am I am not gonna put any timing You know, we. We are we are running a disciplined, you know, process here. We are committed to the process. We are focused on value. We are focused on execution. We are focused on certainty. Yeah. A lot of that carve out work is behind us, but I do not wanna start getting into any kind of timing or deadline commitments The focus for us is on discipline and making sure that we maximize value for our shareholders.

Got it. Thank you. Thanks, Kyle.

Your next question comes from the line of Jerry Revich with Wells Fargo. Your line is open. Please go ahead.

The margin execution and MP and the orders have both been well ahead of plan. This year. And when you folks made the acquisition based on the pipeline you spoke about multiyear margin improvement opportunity in the business. And so obviously, we will hear more about 2027 about 3 months. But any changes to how you are thinking about the margin upside relative to what you laid out at the time of the acquisition given the outperformance today?.

I mean, thanks for the question, Jerry. I need to give the team a lot of a lot of credit here because legacy Rev laid out their EBITDA commitments in their Investor Day for 2027, and not only did they achieve that goal a year early, they also achieved the high end of their 2027 guide, which was 14 to 16% EBITDA. Now having said that, there is a few 1-offs in their Q3 that Jennifer spoke about that you should not anchor to necessarily. But we are very, very pleased with the way the team is executing. And we mentioned this when we announced the merger that the leadership team that was running that particular segment is still running that segment today, and they are doing a great job in terms of execution. We do expect you know, knowing there is a $4.4 billion backlog, to continue to drive productivity, to continue to drive down hours per truck. So we definitely do see opportunity for sequential improvement. And by the time we get to our guide, we will we will be able to be a little bit more specific on what that means for 2027.

Okay. Super. And then can I ask in environmental solutions, obviously, transition year for utilities and a lumpy production in Heil? As we think about the margin opportunity, 2027-plus, are we thinking about the 19% or so margins that we were able to hit in 2025 doable in the medium term. It just wondering to what extent are some of the transition issues we have spoken about, this year, Potentially lingering into next year?

Yes. So if you look at the Q3 EBITDA margin of 15%, even with ESG, being at, let's just call it a bottom, they were still at the higher end of that number. And so utilities was below the average because of the inefficiencies in the ramp up. The reason we feel really good about that segment is for 2 reasons. First of all, bookings are picking up. In the higher highest EBITDA margin of that particular segment, which is ESG And secondly, you know, we know that these headwinds, when you ramp up a new facility, it is basically a completely new facility in a couple of states over from our Watertown facility and we have added already 25% more units in 12 months alone. We are building 250 trucks more in that facility in just 12 months. And then we wanna go for another 250 trucks next year, So just picture you know, the startup costs associated with increasing your capacity. You know, by 25% in just 12 months. So we feel very good, by the way, We have kind of set ourselves up for future growth. And, yeah, it comes at a little bit of a you know, speed bump in Q3, but a business that does high teens EBITDA margin and then calling that a speed bump, I will take that any day of the week. So I think both utilities and ESG are very well positioned for 2027. Thank you, Simon.

Your next question comes from the line of Steve Volkmann with Jefferies. Your line is open. Please go ahead.

Hi. Good morning, guys. Just a couple quick follow ups from me. Simon, on that last point, how do we think about the sort of quarterly cadence of the utilities ramp up I am sorry if I missed this, but I am trying to think about when exactly these headwinds to margin go away.

Do you want to take that, Jennifer? Yeah. Hey, Steve. This is Jennifer. So right now, based on our revised guidance, we expect that the ramp up inefficiencies in Waukesha facility to continue into Q4 And then when we exit into out of Q4 into 2027, we expect that to normalize. And, again, like what Ramon mentioned earlier, you know, the ramp up and the units in a new facility that historically has been a service facility, and we are converting that to an in stock facility that is actually creating some of those headwinds.

Yeah. And I just wanna add, and I did not mention this so far, is that we are now also starting to build utility trucks in our Fort Payne facility in Alabama. So that gives us another kind of tailwind in terms of how we can manage absorption in our probably most competitive plant in our network, which is the ESG facility, the Heil facility in Fort Payne. So we are now building utility trucks in Fort Payne as well so we can flex between refuse demand and utility demand in our Fort Payne facility, which has a very competitive facility for us.

Great. Thanks. that is helpful. And then you had mentioned earlier, I think, that you had expected some prebuy because of the emission change, and then that sort of did not happen. But what we are hearing sort of broadly across the truck space is that most suppliers are gonna provide the 2026 technology with the noncompliance penalty, and that adds some revenue but with no margin, as we move into 2027. And I am curious if you think that will impact you as well.

So we do not see a major impact because first of all, most of that is just passed on. We do not carry, we do not take the title on those chassis. it is passed They are purchased by our customers and directly invoiced to our customers. For us, it is more of a timing issue. And as I initially said was, you know, in Q2, we were assuming that there were going to be some pre buys in the second half, and we do not see those pre buys now happening. We see more of a back to kind of a normal demand pattern, We see most of the channel adjustments are behind us. We see sequential improvements in bookings. Combined with what we see in fleet utilization. Fleet utilization is fleets have been rationalized and are back up at normal utilization. So we now see the path cleared for more normal sequential growth in ESG. it is still an essential service, so America has not started producing less waste. I mean, it is still that is still a very consistent growth pattern. it is more like how the fleet has been flexing based on supply demand purely on vehicle manufacturing. But yeah, back to the engine regulations, the engines have been some of the engines that we pushed out to April, they need to be built by April, serialized by July, and some of that will take effect on the timing of bookings. But other than that, financially, it is just passed on to our customers.

Great. Appreciate it. Thank you.

Your next question comes from the line of Tami Zakaria with JPMorgan. Your line is open. Please go ahead.

Hi, good morning. Thank you so much. I wanted to follow-up on Steve's question earlier. Given there will be noncompliance penalties on truck engines next year, Are you preparing to reprice the backlog Or was some level of penalties and high engine cost inflation already embedded when those orders were placed? Or is it that your customers buy the trucks directly from the OEMs and then you just upfit it for them. So the penalty will entirely bypass you. So if you could provide some clarity there.

Yeah. Hey. Good morning, Tami. Thanks for the question. Yeah. it is the latter Of what you said. Chassis are bought by our customers. Understood. that is very helpful.

And then, I wanted to clarify, given all the comments on freight inflation, which of your segments would need to increase prices more than others? to remain margin-neutral? Or does freight impact all segments relatively equally?

Yeah. Hey, Tami. You know, freight impacts all segments across the board. But I also do wanna mention that the. We actually pass through a portion of the outbound freight to our customers. So like I mentioned, there is gonna be a timing effect of when we incur it to when we flow it down to the customers as well. At the same time, we are taking very proactive actions as part of our sourcing synergy work stream to actually optimize and reduce our inbound freight cost either by scaling and renegotiating those contracts, identifying new carriers, and also providing a single pane of glass through more digitization so that we can optimize the lanes and those ocean freights internationally. But I would say that is across the board.

Understood. Thank you. You are welcome.

We have reached the end of the Q&A session.

Thank you, operator. I would now like to turn the call back to Simon A. Meester for closing remarks. If you have any additional questions, please follow-up with Jennifer or Drew. Thank you for your interest in Terex today. Operator, please disconnect the call.

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