Oshkosh Q1 2024 Earnings Call Transcript

Quartr
Provided by Quartr
April 25, 2024

There are 15 speakers on the call.

Operator

Greetings, and welcome to the Oshkosh Corporation First Quarter 2024 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, Pat Davidson, Senior Vice President of Investor Relations for Oshkosh Corporation.

Operator

Thank you, sir. You may begin.

Speaker 1

Good morning, and thanks for joining us. Earlier today, we published our Q1 2024 results. A copy of that release is available on our website atoshkoshcorp.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 the website for approximately 12 months.

Speaker 1

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 ks filed with the SEC this morning and other filings we make with the SEC. We disclaim any obligation to update these forward looking statements, which may not be updated until our next quarterly earnings conference call, if at all.

Speaker 1

Our presenters today include John Pfeiffer, President and Chief Executive Officer and Mike Peck, Executive Vice President and Chief Financial Officer. Please turn to slide 3, and I'll turn it over to you, John.

Speaker 2

Thank you, Pat, and good morning, everyone. I'm pleased to announce another strong quarter with year over year growth in revenue and earnings. This solid start to 2024 is a testament to our innovate, serve, advance strategy and the hard work of our people as we continue to launch new innovative products and technologies while adding capacity for several of our businesses. For the Q1, we achieved an 80% increase in adjusted operating income, leading to an adjusted operating margin of 10.8 percent and adjusted EPS of $2.89 These results were led by outstanding business execution across our segments and supported by the benefit of acquisitions. We continue to focus on execution.

Speaker 2

Importantly, we're driving improvements in our businesses contributing to strong performance in the quarter and supporting our positive outlook for the remainder of the year. We are also focused on becoming a more resilient company throughout the business cycle while driving long term growth and we are confident we're making meaningful progress. Our confidence is fueled by several key factors including significant investments in market leading technologies that we expect will drive demand for the next decade and beyond, robust backlogs that provide strong visibility, the ramp up of several new innovative products including next generation delivery vehicles and the benefits of strategic acquisitions such as AeroTech. Based on our Q1 results, along with solid execution and healthy demand for Oshkosh products, we are raising our full year outlook for adjusted EPS to be in the range of $11.25 per share. Notably, our current expectations place us within the range of our Investor Day target of $11 to $13 per share a year early and demonstrates our ability to continue to drive accelerated growth and shareholder value.

Speaker 2

Please turn to slide 4 and we'll get started on our segment updates. Our team at Access is performing well. For the quarter, Access grew revenue by 3.7% and delivered an adjusted operating margin of 17%. We continue to invest in new products and technologies, including Moments of Autonomy and Clear Sky Smart Fleet, our next generation IoT platform, enabling two way real time communications that we believe will contribute to long term success in the access market. Last quarter, we told you that we expected customer order timing to begin normalizing, leading to lower orders in the first half of 2024 relative to both the prior year and the second half of the year, given that 2024 was largely booked as we entered the year.

Speaker 2

This remains the case, although healthy orders of $940,000,000 in the Q1 exceeded our expectations. We continue to expect that the majority of 2025 orders will be booked in the second half of twenty twenty four, particularly in the Q4, which more closely aligns with historical order timing. Demand for aerial work platforms and telehandlers in North America continues to be solid, supported by infrastructure investments, mega projects and industrial on shoring projects, as well as elevated fleet ages. Moving to operations and supply chain, our team continued to make progress with supplier on time deliveries in the Q1, which were in the 85% range. The combination of improving supply chain deliveries and our continuous improvement initiatives is contributing to increased throughput in our manufacturing facilities.

Speaker 2

We are progressing well with our plans to repurpose the Jefferson City, Tennessee facility for telehandler production. We are transitioning the facility throughout 2024 as defense fabrication work moves back to Oshkosh. We expect a meaningful ramp in telehandler production capacity in the facility for 2025, which will help us capitalize on demand for our equipment. Importantly, we believe there are many opportunities to continue to drive growth and strong performance at Access over time. Please turn to slide 5 and I'll review our Defense segment.

Speaker 2

As we have discussed, 2024 is a significant transition year for our Defense segment as we are winding down production of domestic JLTVs during the year. Simultaneously, we will be ramping up production of the U. S. Postal Services Next Generation Delivery Vehicle or N GDV. This month, the first N GDV units came off the production line in Spartanburg, South Carolina.

Speaker 2

Our team has spent a tremendous amount of time planning and executing this program launch, and I'm pleased with our progress. We look forward to a long and successful partnership with the U. S. Postal Service as we modernize their fleet over the next 10 years. As a reminder, we expect to increase vehicle production throughout 20242025 and exit 2025 at full rate production.

Speaker 2

We continue to support many defense programs, including the FHTV and FMTV programs. We are working on contract extensions for both of these programs with plans to complete the extensions over the next several quarters. We are also the supplier for the Stryker medium caliber weapons system, a program which has contributed to the diversification of our defense business beyond tactical wheeled vehicles. And we are in the midst of the robotic combat vehicle development program, which demonstrates our broad technical capabilities in autonomy, connected vehicle systems, and mobility, among others. Finally, I want to share an outstanding technical achievement that our teams recently accomplished with the United States Army.

Speaker 2

We successfully completed of our low velocity airdrop or LVAD FMTV A2 cargo truck at Fort Liberty in North Carolina. Essentially, the program allows the vehicle to be parachuted from a plane and operational on the ground within 30 minutes. We expect to begin receiving orders for LVAD units in 2025. Let's turn to Slide 6 for a discussion of the Vocational segment. Our Vocational segment delivered strong year over year revenue growth in the Q1 of 37%, including the benefit of $176,000,000 of sales at AeroTech, which we acquired in the Q3 of 2023.

Speaker 2

We continue to invest in electrification programs as well as autonomous functionality to enhance ease of use and productivity for our customers. Given strong demand for fire trucks and our extended backlog, production throughput continues to be a meaningful opportunity for the foreseeable future. Demand remains solid for our McNeilus refuse and recycling collection vehicles. Customers are enthusiastic for our purpose built electric Volterra ZSL 0 emission vehicles and test vehicles are performing well in the field. As you know, we will be ramping up production of these units at our factory in Murfreesboro, Tennessee.

Speaker 2

And earlier this month, we completed our 1st pre production pilot unit in the facility representing an important program milestone. Customers are excited by the opportunity to reduce their carbon footprint while realizing an estimated 14% improvement in total cost of ownership. We look forward to the Waste Expo show in 2 weeks, where we will showcase these game changing vehicles and their key features. Moving to AeroTech, we're pleased with our integration progress to date and the business is performing well. Strong financial performance, robust customer demand and exciting new products like the AMP cart mobile charging station, which supports sustainable operations at airports, all highlight the reasons we are so pleased with this acquisition.

Speaker 2

With that, I'm going to turn it over to Mike to discuss our results in more detail and our updated expectations for 2024.

Speaker 3

Thanks, John. Please turn to slide 7. Consolidated sales for the Q1 were $2,540,000,000 an increase of 270 $6,000,000 or 12.2 percent over the prior year quarter. The increase was driven primarily by the benefit $176,000,000 of AeroTech sales in the vocational segment as well as increased volume in all three segments and the benefits of improved pricing. Adjusted operating income increased $124,000,000 over the prior year quarter to $275,000,000 or 10.8 percent of sales, a 4 10 basis point improvement versus the prior year.

Speaker 3

The improvement in adjusted operating income was largely driven by improved price cost dynamics, favorable mix, increased volume and the benefit of AeroTech results. Adjusted operating income exceeded our most recent expectations, primarily due to higher volume at vocational, favorable customer mix at Access and lower spending. Adjusted earnings per share was $2.89 in the first quarter versus 1.6 $3 in the prior year. During the quarter, we repurchased approximately 130,000 shares of common stock for a total of $15,000,000 Please turn to slide 8 for a review of our updated expectations for 2024. With our strong start to the year, we are revising our full year outlook.

Speaker 3

On a consolidated basis, we are estimating 24 sales and adjusted operating income to be in the range of $10,700,000,000 $1,075,000,000 respectively, which are up from our prior expectations of $10,400,000,000 $990,000,000 respectively. We are estimating adjusted earnings per share will be in the range of $11.25 versus our prior estimate of $10.25 At a segment level, we are estimating excess sales and adjusted operating margin to be in the range of 5 point 15.5 percent respectively, up from our prior expectations of $5,200,000,000 15% due to improved production throughput and improved sales mix. Compared to the Q1, we expect customer mix to moderate new product development spending to increase for the remaining quarters in 20 24. Turning to Defense, we continue to expect sales of We expect vocational sales and adjusted operating margin will be in the range of $3,200,000,000 11.5 percent respectively, up from our prior expectations of $3,100,000,000 11% respectively. Increased chassis availability and improved price cost dynamics are contributing to the improved outlook.

Speaker 3

Our estimate of corporate expenses is of higher incentive and stock based compensation expense versus previous expectations. Our expectation for tax rate is now 24%, modest decrease versus our prior expectations of 24.5%. Our expectation for share count is now 65,800,000 shares. And finally, our expectations for CapEx and free cash flow remain unchanged. Looking to the Q2, we expect adjusted EPS in the range of $3 per share, which is up versus the prior year and the Q1.

Speaker 3

We expect sales to be up approximately 15% versus the prior year, inclusive of the benefit of AeroTech sales. With that, I'll turn it back over to John now for some closing comments.

Speaker 2

We continue to focus on execution, supporting our customers and empowering our people as we grow and strengthen our business. We raised our expectations and now believe we can achieve our Investor Day targets for 2025 revenue and EPS 1 year earlier than we originally expected, which is a testament to our team and our strategy. We are investing in new products and deploying technologies that support our customers and keep our company at the forefront as leaders in our industries. This is an exciting time for Oshkosh and we look forward to continuing to execute our growth strategy to drive shareholder value. All right, Pat, let's get started with the Q and A.

Speaker 2

Thanks, John. I'd like to

Speaker 1

remind everyone to please limit their questions to 1 plus a follow-up, and please stay disciplined on that follow-up question. After the follow-up, we ask that you get back in queue if you'd like to ask additional questions. Operator, please begin the question and answer period of this call.

Operator

Thank you. We will now be conducting a question and answer session. We ask that all callers limit themselves to one question and one follow-up. If you have additional questions, please re queue and those will be addressed time permitting. Thank you.

Operator

Our first question comes from the line of Stanley Elliott with Stifel. Please proceed with your question.

Speaker 4

Hey, good morning everybody. Can you talk, I guess, maybe a little bit of a more of a longer term question for you. I mean, there's a number of kind of EV next gen programs out. As you're moving kind of through this preproduction phase into more of a meaningful revenue generator, it sounds like that will be more into early 2026, just to clarify that. And then how should we think about this from a margin perspective from you all?

Speaker 4

Is it similar gross margins, but higher gross profit dollars? Just trying to get a framework for how this could evolve.

Speaker 3

Sure. Stanley, I can take that one. Just thinking about the ramp of NGDB. So what we talked about this year is we're going to have some startup costs. So it will be about between that and NPD.

Speaker 3

We said last quarter about a $0.35 drag. As we get into next year, there's going to be a pretty significant ramp of volume. So we're going to start getting margins with that will start to follow. And by the time we get to 2026, we'll be at full rate production well north of $1,000,000,000 of revenue from the program. And then you'll see those good solid margins.

Speaker 3

And what we've talked about from a margin perspective really on that program is to be better than our traditional tactical wheeled vehicle margins.

Speaker 2

Yes. And Stanley, Mike just commented on the NGDB for the U. S. Postal Service. That's our biggest electrification program.

Speaker 2

But we have electrification programs in other segments as well. You look at our vocational segment with the electric fire trucks, the electric airport rescue firefighting vehicles, the electric refuse and recycling vehicles and there's others as well. Those are the margins are all healthy margins. These the adoption rate is different based upon the end market. But these will all provide healthy long term growth drivers as over time we see municipal fire stations, we see customers in the refuse and recycling segment upgrade fleets to better, more modern vehicles over time.

Speaker 2

So we look at it as a long term move for us. It's not something that's going to happen overnight in some of these other segments.

Speaker 4

That's great. And then I guess we hear a lot about stimulus for construction and other sorts of things, But there's considerable amount kind of allocated for airports too. Can you talk about kind of within the AeroTech portfolio, how much more product do you need to potentially get refreshed? It sounds like you have some mobile charging stations coming down the line. Just curious kind of how you see that business ramping and evolving now that you have maybe a little more R and D firepower to put behind it?

Speaker 2

Yes. Well, I think on the electrification front, we're kind of in our infancy. A lot of the electrification that's in the airport markets today with ground service equipment is really, lead acid. So kind of the old fashioned electric and we're going to continue to move that to lithium ion, thus the AMP cart because you have to have a way to repower vehicles efficiently on the tarmac of an airport. And that's what the that's kind of what the AMP cart does.

Speaker 2

I think our AeroTech people have been doing a phenomenal job with autonomous functionality for cargo loading and other applications and we're going to continue to accelerate it there as well as in the electrification space. But in electrification for ground service equipment, we're really, really early, early innings for that.

Speaker 3

And Stanley, general and orders, we're seeing really strong order intake in that business and we expect that to continue for the reasons you mentioned.

Speaker 5

Thanks. Appreciate it.

Speaker 1

Thanks, Stanley.

Operator

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

Speaker 6

Hi, good morning. Nice quarter. I guess just One, just the margins for Access Equipment in the Q1 were exceptional at 17%. I think based on the guide, it implies your margins for the remaining 3 quarters would be below, you know what I mean, prior year. And I'm just trying to understand why that would be the case with, it looks like based on your guide, the top line, should be the top line growth should be better than what we saw in the Q1.

Speaker 6

So if you could help me on that. And then John, I guess a question specifically for you with Postal Service starting to ramp more significantly next this year, next year. Can you just talk about conversations you're having with customers around opportunities on last mile delivery? I'm wondering whether we can start thinking about adding more of benefiting from the Postal Service win and expanding your market share and last mile delivery? Thank you.

Speaker 2

Thanks, Jamie. I'll let Mike start with the access question and then I'll go on the postal question.

Speaker 3

Sure. On the access margins, as I'd mentioned in my prepared remarks, we did see a favorable mix in the Q1. That was certainly a driver of the margin. We also did see we talked about on the last call expecting to see higher new product development spending of about $20,000,000 for the year. We also have roughly $10,000,000 of Jefferson City, Tennessee startup costs.

Speaker 3

A lot of those are really going to those costs are going to be largely occurring in the next three quarters that mix moderates. So that's really it's really a mix in the timing of that spending that's driving the margin difference.

Speaker 2

Yes. And with regard to last mile delivery, Jamie, so, first of all, I want to say that we are intensely focused today on executing the NGDV program for the United States Postal Service and modernizing their fleet. We just went into production, started to produce vehicles. And I want to make sure make this clear. I think everyone knows it.

Speaker 2

This is the largest fleet of last mile delivery vehicles in North America, probably in the world. So there's no bigger other service providers in last mile delivery. But we're one step at a time. We're going to make sure we make the NGDB successful. And I think in the future, we may have some other things to talk about.

Speaker 2

But right now, we are really focused on this, making sure the U. S. Postal Service is very successful with this modernization.

Speaker 6

Okay. I appreciate it. Thank you.

Speaker 7

Welcome back, Jamie.

Operator

Our next question comes from the line of Jerry Revich with Goldman Sachs. Please proceed with your question.

Speaker 5

Yes. Hi. Good morning, everyone. I wanted to ask in Fire and Emergency, obviously not a reportable segment anymore, but pre COVID that business ran in the mid teens margins. And I'm wondering if you can comment given the pricing that's in backlog, what's the potential for that business to go into the high teens in the cycle with not only pricing, but also logistics costs normalizing?

Speaker 5

Can you just talk about the opportunity there, please?

Speaker 3

Sure. We're very excited about the progress we're seeing in vocational. We talked about when we combined the segments that it could be a $12 plus 1,000,000,000 segment. Operating margin with over $3,000,000,000 of revenue reiterated that with the AeroTech acquisition and you see the great progress we're making on that with our quarterly results and also our outlook. And we're still we'll continue to benefit from the segment synergies that bring the segment together, AeroTech synergies.

Speaker 3

As you mentioned, we have pricing and backlog. We have a lot of exciting new products coming out that will margin and enhancing. So, we believe we're just at the beginning of our journey to continue to drive enhanced margin opportunity in this segment and see a lot of opportunity there.

Speaker 2

Yes. And Jerry, just in general, I'll tell you, we really have an outstanding outlook for our vocational segment. I say that long term. We've got healthy markets. We've got really good backlog, strong demand.

Speaker 2

We continue to execute on long term opportunities with technology application. We think this is a really healthy, stable business for

Speaker 5

us. Thank you. And John, can I ask on the U? S. Postal truck, you had mentioned in your prepared remarks on track to exit 25 at the full production run rate.

Speaker 5

Can you update us on what the anticipated mix is at full production between EV and ICE as we exit 2025?

Speaker 2

Yes. It's interesting. They've continuously, as I probably said before, they've continuously increased the mix towards battery electric vehicles, which we think is great, and the Postal Service wants. So they're at about so for the first 50,000 units, they're going to do about 75% battery electric and about 25% internal combustion. When we go beyond that, so that will take us the first few years of the program.

Speaker 2

Beyond that, I expect, we don't know for sure, but I expect they'll yet even increase the battery electric even more, maybe even go to 100%. But this is going to be mostly zero emission battery electric vehicles. And reminding you, this is the first time that the postal service or anyone in last mile delivery has had a purpose built vehicle, adding the productivity benefits that we're adding with this vehicle. It's really a big step forward for the entire

Speaker 7

I'm wondering if maybe you can help us think through the cadence in defense. I mean, there's a lot going on here. You have the GLTV program that's winding down. You have NGTV that's ramping up. So as we're thinking about the cadence of revenue through the year and what's implied in the guidance and what kind of carries into 2025, Can you help us understand this dynamic here?

Speaker 7

How we should think about revenue? And then also associated with this, what should happen with margins here as NGV ramps up?

Speaker 2

Yes. So Mig, good morning. It's John. I'll start. Mike may want to add a few things to my comments.

Speaker 2

A lot we talk about defense going through a big transition and defense is going through a big transition. We still have production of JLTVs through 2024. So when we get into 2025 and by the way in 2024, we're in production today with the NGDV, the postal truck. But that's low rate production through 2024 and it starts to really increase in 2025. So as you get into 2025, JLTV for the domestic JLTVs goes out of production, but we're ramping the postal NGDV.

Speaker 2

So we expect that the revenue we create in 2025 through the postal NGDV will exceed what we have gone out of production with on NGDVs in terms of revenue. Giving you a little bit higher perspective of what's happening in the defense world, defense will continue to drive better margins as they get to sole sourced contracts for many of the vehicles that we have today. And that allows us to reset price to the realities of where of what inflation has done to input costs. So that as we can get those sole source contracts over the next 18 months, that's a good thing for the margins in the defense business. We've also won some smaller combat vehicle programs and are vying for other combat vehicle programs.

Speaker 2

These are high priority for the DoD, So the margins are good. And we've got an improving international landscape in terms of lots of countries that are increasing their Department of Defense spending as a percent of their GDP. That's also a bit of a good outlook for improving the defense side of the business. But 2025 is the year where it really changes from JLTVs to NGDVs.

Speaker 7

And just to follow-up on this to be clear, we shouldn't expect some sort of a material drop in revenue or maybe yet another decline in operating income in 2025 in defense?

Speaker 3

No, that's not our expectation. Again, we would expect the revenue there's about $700,000,000 of domestic JLTV revenue we expect this year. We expect NGDB to be greater than that next year. So really we should we'll start returning to growth next year and 2026 should be you'll see a meaningful step up even from there.

Speaker 7

Okay. Thank you for clarifying.

Operator

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

Speaker 2

Great. Good

Speaker 8

morning, everybody. I wonder if we could go back to the access margin. I'm just trying to think about how the year progresses here, starting off as strong as you are, but obviously having to come down to meet your full year guidance. Is that sort of a step down and then sort of flattish for the remaining 3 quarters? Or do we kind of trend down and the exit rate might be significantly lower?

Speaker 8

I'm just trying to think about that cadence.

Speaker 3

No, I think there's a we certainly don't see growth slowing in that business at this time. There's strong demand. I think as we talked about in our last call, just that there's definitely more seasonality to our deliveries as deliveries have normalized. So what I would expect is our strongest quarters will be the 2nd and third quarters and then the 4th quarter I would expect to be lower as you start getting into the winter months. And then again, just returning to that more traditional cadence.

Speaker 3

And you even see that in the Q1. If you were to see within the month, you see more activity as you're approaching the springtime. So, certainly March from a shipment standpoint is more is typically more robust. So it's really just a return of seasonality. And again, I think the big driver is that mix was a big driver, this quarter.

Speaker 3

And then I think the timing of some of those investments I mentioned before factor into it as well.

Speaker 8

Okay. And then maybe just switching briefly back to vocational. I know you gave the revenue impact of but can you say anything about the margin there and how that impacted the segment?

Speaker 3

Yes. We're certainly benefiting from it. We certainly have some integration costs upfront and you'll see the drivers. But it we're at near double digit margins. I think that will certainly improve as we have some DT or information technology integration costs and so on early in the year, but view that solidly going to be a good double digit margin performer for us over time.

Speaker 5

All right. Thank you, guys.

Speaker 1

Thanks, Steve.

Operator

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

Speaker 9

Thanks. Good morning. So you are clear that the customer mix was an upside surprise for Q1 in Access. So I guess I'm just wondering what are the variables that you see out there for Q2 in Access that you don't have clear visibility on at the moment? I mean, I know you seem to be pretty well sold out, and I would think you'd have a good view on the costs.

Speaker 9

So is it how does that customer mix kind of take shape within a quarter? And what other variables

Speaker 4

might be a

Speaker 9

factor for Q2 at this point?

Speaker 3

Yes, I would say on the mix, it's really just the timing of shipments. So you go back to the beginning of the quarter, we were booked, we have a production plan, but you can always have timing of deliveries. So again, going back to the comment I just made a minute ago, with sort of this return of seasonality, our finished goods are up a bit. In fact, one of the things we really were pleased with is the throughput we saw at Access. We had about, call it, $75,000,000 to $80,000,000 of additional finished goods that are ready to be shipped that will be going out early in the second quarter.

Speaker 3

So it's really just a timing matter that it wasn't, so I guess as I look to the rest of the year, you could have some nuance gives and takes that, I don't again, we're booked for the year. So it's really going to shake out over the course of the year because again that those products and the customers are going to our known at this point.

Speaker 2

Well, and Steve, you have mix of aftermarket in there too, right? Aftermarket is a spot order, spot by business. And sometimes it can go up or down a little bit versus expectations in a quarter and that's a very strong margin business, so it does affect the margins. Okay.

Speaker 9

And then just as a follow-up, to what extent are there any cancellations that you're seeing in the Access business or changing in timing or push outs or anything like that coming from customers?

Speaker 2

I'll tell you, Steve, that we're really pleased with the market in Access. We see continued demand drivers going forward. We talked about the Q4 order book was really strong. The $940,000,000 that we just booked was better than our expectations. So we're booked well through 2024 right now.

Speaker 2

And I'm telling you that because when I give you the health in terms of the marketplace, we don't have any unusual cancellation activity going on. It's just the opposite. Customers are focused on when can I get the equipment and when are you going to slot it for me in your production schedule?

Speaker 9

Terrific. Thank you.

Operator

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

Speaker 10

Hi, this is Brendan on for Angel. I just want to talk about your Cat telehandler supply partnership. That should be ending, I believe, at the end of this year. So can you talk to your expectations for renewal of that relationship beyond 2025? And then just any potential implications from a price or profitability perspective?

Speaker 10

Thanks.

Speaker 2

Sure. Yes. Good to hear from you, Angel. So I want to first say, hey, Cat's been a long term partner of ours and they've been a great partner. I mean, there's hard to find a better partner than CAT to work within an industry.

Speaker 2

I'm not going to comment on the contract specifically. What I will say is that JLG is the premier provider of telehandlers in the industry. And if we had more capacity, we would be shipping a lot more telehandlers today. We are really paced by the capacity that we have. So that's why we're increasing capacity.

Speaker 2

We see new markets opening up. We talk about ag all the time. That's one of them. That is a real opportunity today and will continue to grow over time. So we expect no matter what happens that we will continue to grow our share and our revenue in the telehandler marketplace for the foreseeable future.

Speaker 2

That's what I can tell you about that market and it's a we see it as a good healthy growth area for us.

Speaker 10

Okay. Thank you. And then, just touching on the free cash flow guide. So new guidance is a little bit earnings are higher than you previously thought. You mentioned on a call that CapEx is the same.

Speaker 10

So just kind of curious what the puts and takes are for why the overall free cash flow hasn't gone up as well?

Speaker 3

Thanks. I would say right now it's early in the year and I think exiting we have a little bit more working capital exiting the Q1. So that's something we're going to continue to monitor throughout the year. But it is something that certainly we expect to be a good strong free cash flow generator. And so really it comes down to timing in a lot of cases with working capital.

Speaker 3

But I think bottom line is we talked about it, we expect to be a strong free cash flow generator over time.

Speaker 11

Okay. Thank you.

Speaker 1

Thanks, Brandon.

Operator

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

Speaker 12

Hi, good morning team, Oscar. How are you?

Operator

Good. How are you?

Speaker 12

Great. So I have 2 quick questions. One is the strength in vocational excluding AeroTech, can you comment on the price versus volume growth you saw in the quarter?

Speaker 3

Yes. We're certainly seeing the benefits of improved price cost dynamics. You'll see in the queue that it is it's really the biggest driver in the quarter about $30,000,000 of our operating income year over year benefit was really price cost, which is what we expected and that's going to continue to be a nice strong driver as we look into the future.

Speaker 12

Got it. That's very helpful. And then on Access Equipment, I think orders were down, but still better than what you initially expected. But could you provide some color on orders in North America versus Europe for other regions?

Speaker 2

Yes, Tammy. Access has been running at a really healthy clip and we expect that to continue due to all the demand drivers that we talk about regularly. With regard to the global outlook, U. S. Is our biggest market, of course, and the U.

Speaker 2

S. Is really healthy. When you look at our guide, you see that we're going to increase our revenues for the year in the high single digits, I think it's 8%, 9% in terms of the revenue growth. The orders across the globe are and the revenue creation that we're seeing for the most part is positive and healthy. The only area that has turned not so good is Europe.

Speaker 2

Our European business this year is down and Europe's we'll continue to invest in Europe for the long term future, but Europe is the one outlier for us today when you look at the global market. Asia is doing well. South America, Latin America is doing well. That's kind of the global outlook.

Speaker 12

Great. Thank you.

Speaker 11

Thanks.

Operator

Our next question comes from the line of Nicole DeBlase with Deutsche Bank. Please proceed with your question.

Speaker 6

Yes, thanks. Good morning, guys.

Speaker 3

Good morning. Good morning, Nicole.

Speaker 6

Maybe just on vocational, you talked about price cost being a big factor there. I guess you've guided to 11.5% margin for the full year. I know that's up versus prior guidance, but it does imply like a step down versus what you achieved in the Q1. So can we just talk about the puts and takes there going from like 1Q to the rest of the year?

Speaker 3

Sure. I would say very similar, Nicole to Access. The timing of some of the investments we're making in the business are occurring more Q2 or Q2 through Q4. So Murfreesboro, Tennessee, some of the other new product development spending, some of our integration costs, we had a bit in Q1. So we talked about that a minute ago, but there's some more of the rest of the year.

Speaker 3

So it's really that. Again, we expect price cost to be continue to be a driver throughout the year when we look at it on a year over year basis.

Speaker 6

Okay, got it. That's clear. And then sticking with the price cost topic then, can we also talk about that how that's impacting access? So is the expectation that part of the margin part of the explanation for margin through the year is perhaps the price cost tailwind was biggest in the Q1 and that starts to moderate through the rest of the year. Do I have that right?

Speaker 3

I guess, ultimately, from a price cost perspective, I think you'd we're our pricing is essentially fixed for that or is set for the year. So I think that the price and cost dynamics are largely there. I would say the bigger drivers just as we go through the year is just again some of that customer mix

Speaker 2

nuance. Nicole, it's really an access Q1 to the rest of the year. It's mix and it's R and D investment in the second half of the year that it's not price cost. Correct.

Speaker 6

Okay, got it. Thank you.

Operator

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

Speaker 11

Hi, good morning guys. Good morning. So my question is on order cadence and recognizing that you've already booked out 24. Like how should we think about orders over the next couple of quarters? Is it more typical seasonality?

Speaker 11

Are you going to see more of the 25 orders in the Q4? Just trying to think through that.

Speaker 2

So right now when customers place orders, Chad, they're primarily placing orders for units they're going to receive in 20 at some point in 2025. And so it makes it very difficult on our customers when we have such a in the access equipment market, when we have such big backlogs and such, therefore longer lead times. So that's why we're saying and we talk with our customers all the time about this and when's the best time for them to be placing orders for the future. And right now, we're as we're booked out through in 'twenty four and into 'twenty five, they're focused on finishing up their 2024 and then starting to order for 20 25 a little bit later in the year. So we think that will start probably in the second half Q3, let's say, and build into Q4.

Speaker 2

That's our expectation. Now having said that, in Q1, our orders were better than what we thought they were going to be. So we still have a lot of customers that are willing to place orders for 25 even though we're so far from 25 still at this point in the year. That's what I can say

Speaker 11

about it. Great. That's helpful. And then just shifting over to defense. I think you mentioned that you have some combat vehicle programs that you're potentially vying for.

Speaker 11

Could you give a little bit more color What are the programs? When should we expect the down select with the products?

Speaker 2

So the most notable one is the robotic combat vehicle. It's an autonomous vehicle with a lot of technology on it. We won the prototype contract. So they will select the production. They'll award the production contracts in 2025, probably early 2025.

Speaker 2

It's a $1,000,000,000 type business, maybe a $1,000,000,000 plus type contract. But right in the crosshairs of where the DoD priorities are, because it's a high-tech vehicle, there's good margins on that vehicle. That's a prime example of where we can make a difference with our capabilities in the combat world.

Speaker 1

Rogue Fires though too, like you mentioned in the prepared remarks, solid, right?

Speaker 2

Yes. Rogue Fires is a program that we're selling today and we'll continue to sell.

Speaker 11

Great. Thank you.

Operator

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

Speaker 13

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

Speaker 2

Thanks, Christian.

Speaker 4

Given 1Q's

Speaker 13

strong operational beat, if you were to see upside in the back half of the year to guidance, any thoughts on what segment that would come from?

Speaker 3

No. We just I guess what I'd say is we had a strong Q1, a solid increase to our revenue expectations and EPS and you certainly see that our businesses are performing well and that will continue to be the focus for the year. So certainly we see strength right now in vocational and access.

Speaker 2

Yes. And Christian, I like the question. We feel really good about all of our businesses and we feel good about them because they all have good opportunities. Vocational has got great opportunities to continue to outperform in manufacturing and delivery with big backlogs and really good programs. But defense, I could say the same thing about.

Speaker 2

I can say certainly access is always that way. The team is always going to try to strive and continue to drive improvement in the business. So we look at the world as half full, the glass is half full. As we look forward, we've got opportunities in our businesses.

Speaker 13

Great. And then looks like you're already going to hit the bottom end of your $11 to 13.2 $5 targets by the end of this year. Not looking for guidance, but is the high end of that range what you're thinking about for $25 and any thoughts on what comes after that given the order and backlog visibility really into 2025 already? Thank you.

Speaker 2

Well, I mean, thanks for the question, Christian, because we are delighted that we are hitting our 2025 long range guidance a year early, which is you just said is exactly what we're doing. Now that doesn't surprise us. This type of performance, we always knew we'll get to this level of performance. We're just doing it a little bit faster than what we had forecast to the world we would do it at. That's all really, really good.

Speaker 2

We're not providing guidance today for 2025. We will provide guidance for 2025 when the timing is right. But we look at the health of the access market, we look at the strong position that we have in the vocational market and in 2025, we'll start to see some positive change in the defense business. That's what I'll say about it.

Speaker 11

Great. Thanks.

Speaker 2

Thanks.

Operator

Our next question comes from the line of David Raso with Evercore ISI. Please proceed with your question.

Speaker 14

Hi. Thank you for the time. As you get closer to volume ramp on the postal truck and you've gone obviously a little more familiar with the bev production process. And obviously, it sounds like the large majority from the get go is going to be bev. Can you give us an update where you're comfortable thinking about profitability for that program?

Speaker 14

I know you're not going to give us an exact number, but just give some update of your thoughts now that obviously we kind of started to think to be a little more ice to start, but obviously now it's clear it's going to be bad from the get go. So I'm just curious.

Speaker 3

Yes. I would say, David, our view hasn't changed. I think ultimately, we said by 2026, we'll be at full rate production. We would expect as we've said all along stronger margins in our traditional tactical oil vehicle margins. This year, we'll have some start up costs, so it's not and volumes relatively low.

Speaker 3

So next year, we see a really strong ramp, so it's going to be between that. And I think that's about what we're going to but all we'll say at this point in time that we're pleased with the progress and the outlook.

Speaker 7

Thank you.

Operator

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

Speaker 1

Thanks, Christine, and thanks to everybody for joining us today. We're pleased with our strong start to 2024. We look forward to speaking with you at a conference or at one of the trade shows where we will be showcasing our technology and mobility. Our Volterra ZSL will be on display at Waste Expo from May 7 through 9. It will also be shown at the Advanced Clean Transportation Expo in Las Vegas on May 21 through 23 along with the U.

Speaker 1

S. Postal Vehicle U. S. Postal Services next generation delivery vehicle. Please reach out to us if you have any follow-up questions and have a great day.

Operator

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.

Powered by Quartr
Earnings Conference Call
Oshkosh Q1 2024
00:00 / 00:00