Terex Corporation Aktie

Greetings, and welcome to the Terex Third Quarter 2026 Results Conference Call. [Operator Instructions] 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 Relations website at investors.terex.com. In addition, the replay and slide presentation will be available on our website. We are joined today by Simon Meester, President and Chief Executive Officer; and Jennifer Kong, 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'll hand it over to Simon.

Thanks, Drew. Good morning, and thank you for joining us. Today, I'll cover our third quarter performance, the demand environment across our businesses and our updated full year outlook.

I'll also discuss the process around the separation of the Aerial segment before Jen 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. Jen 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. U.S. commercial and residential construction remain below historical levels, but have largely stabilized, while Europe is mixed.

Turning to execution on Slide 5. We're making progress integrating the expanded portfolio with foundational work across all work streams 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're also applying a more consistent execution 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. Heil recently introduced its next-generation automated side 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 Elektro, 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 Scissors Lifts and Vertical Masts category, reflecting our continued focus on quality, productivity and total cost of ownership for customers.

The third quarter also marked significant milestones for several of our brands, including the 60th anniversaries of 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 investments where we see the greatest long-term opportunity. The exits from Capacity and LayMor further reduce complexity and 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 Jen, I want to update you on the Aerial separation process. Since our last update, we've 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 a successful outcome that reflects Genie's strong brands, 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 time line. Across Terex, our focus remains straightforward: advance operating performance, realize the synergies of the transform portfolio and translate the strength of our brands and end markets into higher earnings and cash flow.

With that, I'll turn it over to Jen to walk through the financials and our updated outlook in more detail.

Thank you, Simon, and 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 Cranes 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 tariffs 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 months 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 utilities.

Utility sales benefited from the expansion at the Birmingham facility, while Waukesha is transitioning from a service center to a full installation facility. The segment reported an adjusted EBITDA margin of 13.3%, down 390 basis points year-over-year. The decline was primarily due to the unfavorable mix from high 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 Vehicle 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 explains 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 seventh 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're now seeing 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 impacts 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're expanding capacity in a measured way with the first units from the newly expanded Brandon 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 a typical approximately 13% sequential decline. Our high single-digit full year sales growth outlook remains unchanged despite the impact of Capacity, LayMor 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're maintaining our prior outlook for low double-digit revenue growth, which we approximate at 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 Aerials. Pro forma EBITDA is expected to grow approximately 10% year-over-year to a range between $930 million and $960 million, excluding Capacity, LayMor, representing an 11.7% EBITDA margin at the midpoint.

Our EBITDA outlook includes approximately $28 million of realized synergies in line with our commitments 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 EPS of $4.80 to $5, including the typical seasonal step down in the fourth quarter. Finally, we're 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'll turn it back to Simon for his closing remarks.

Thanks, Jen. 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 execute 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'll turn the call over to the operator for questions.

[Operator Instructions] Your first question comes from the line of Angel Castillo with Morgan Stanley.

Just wanted to unpack a little bit more of kind of the margin progression here. Just if you could help us understand, I guess, margin expectations by segment in the fourth quarter. I guess, in a normal environment for legacy Terex, I would have said sequential kind of 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? What is more kind of near term and perhaps abates a little bit? And just how should we be thinking about like what to kind of underwrite in terms of the run rate or the exit rate of this year for 2027?

This is Jen. So to your question, yes, typically, we see a Q3 to Q4 seasonal step down in our EBITDA margins. Two of our segments out of the 4 is less shipments. So it's all shipment related driven by seasonality like Aerials and SV because of the holidays and the factory shutdown and also the national demand in terms of when they ship.

Then in the MP and the ES segment, we expect that there's going to be higher revenue in Q4 versus Q3 that will drive additional margins. However, for MP, the unique one for Q4 is that there's going to be unfavorable product mix, a little bit more material handling and concrete. So the -- that we're going to do a little bit more step down from Q3 to Q4 for material processing. And now our full year outlook here also includes the additional freight inflation that we saw in Q3, and then we'll bring that into 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 is a timing issue, whereby we're taking proactive actions either from a cost mitigation standpoint or from a price flow-down to the customers as a surcharge. So that generally will have a 3- to 9-month lag across depending on the different business dynamics. And the other one 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 will come up from that in 2027, early part of 2027.

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

And actually, just that's kind of a nice dovetail into my follow-up, which was just related to ES. I guess I'm a little bit confused there. It sounds like the lower volume, maybe there was a little bit of shipment move from 3Q to 4Q in the refuse side of the business. But utilities, it sounds like that's maybe what's 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've seen in, I think, like over 3 years. Just help us understand 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?

Yes. You said inefficiencies in utilities and timing of bookings in ESG. You may remember that we had initially assumed at the start of the quarter -- at the start of the year, sorry, that there would be some tailwinds coming in terms of prebuys because of the change in engine regulations in 2027.

A lot of that is now grandfathered well into 2027. So some of those prebuys kind of dropped out of our bookings forecast. So we do see sequentially strong pickup in ESG bookings coming out of the channel adjustments that kind of drove some of the corrections at the beginning of the year. So I would just characterize it as we initially anticipated a V-shaped kind of recovery and now it's going to be more of a U-shaped recovery. So that's why we feel good about ESG and utilities for that matter, going into 2027, but it's just going to be pushed out by another quarter, and that's what is driving the guide.

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

I got to admit I'm 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 and Specialty Vehicles, too.

But we've taken $30 million to $40 million out of the EBITDA guide. So that's all coming from the fourth quarter. Can you be a little more specific in terms of, okay, all these EBITDA dollars, 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?

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's 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're increasing a little bit in Aerials to mid-teens. So that explains for about 50% of the volume changes from the segment mix. And then another 25% that's 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's a big change versus the last guidance, the prior guidance. And then the remaining 25% is driven by the TU ramp-up inefficiencies and us excluding Capacity and LayMor from our Q4 guidance just because of the divestiture announcement that we made in the latter part...

Last week.

Yes.

So those are the 3 big drivers.

That was really helpful. Then I wanted to ask a little bit about your free cash flow as well. It's 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 Terex as we think about 2027, 2028, what do you see as the natural working capital level for the company?

Yes. So -- and thank you, Mig, for asking the question. I'm very pleased with the operational and free cash flow performance that we have done in Q3, which allow us to deploy the share repurchase opportunistically. We are driving the low capital intensity that we think we will through all our strategic portfolio transformation that started with the ESG acquisition and then the REV merger, pruning our business, including the Crane divestiture that we did late last year and now with Capacity and LayMor.

So in terms of our 2026 priority, I've been always very clear that we want to do it on a very staged approach. First half of the year is always making sure that we have a very strong balance sheet. And then the second half of the year is 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.

Your next question comes from the line of Jamie Cook with Truist Securities.

I guess my first question is just within Specialty. Can you speak to what you're seeing within that business in terms of the fire business, I guess, specifically where some of your peers have been -- I think your growth has been much better than some of your peers and also your margin performance was pretty good.

So any color you can give on what you're seeing there and your confidence that fire can grow into 2027 and anything you're seeing on market share? And then I guess my second question, again, set up for 2027. Simon, you sound fairly positive, but I'm just trying to understand where price -- as we look at the backlog, what's priced effectively versus sort of underwater as we look into 2027. It sounds like Aerials is the biggest issue, but I'm just wondering if price cost should start to improve more in 2027 with pricing actions we've taken in recent bookings.

Yes. Thanks for the question, Jamie. So on SV, very pleased with the bookings, bookings coming in strong. Backlog actually going up again a little bit sequentially in SV. It's still very much all about trying to bring lead times down for us. So that's why we're tactically expanding capacity in 2 locations in Brandon, South Dakota and in Ocala, Florida.

Basically, we're trying to address specific categories with higher-than-average lead times with those investments, and we expect that the first units to be built this quarter in Brandon and then in the second quarter of 2027 in Ocala. And in both places, we expect that capacity to be at mature rates by the end of 2027. So it's 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're well over 24.

So pleased with the bookings. We see strong underlying demand. We still see a lot of municipalities that are replacing aged units. And we do have a couple of offerings in our portfolio like our semiconfigured pumper that is a low lead time item that is just picking up in popularity because it's a unit that we can deliver in 8 months as opposed to the average 24 months. So we're pleased with how things are evolving in SV, but it's 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's top of mind for us for 2027. And Jen, keep me honest here, but we are not expecting -- we're 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're not guiding for 2027, but we've always said and we continue to say is that our aim is to be price/cost neutral. 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'll 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 in the quarter, and we expect to provide some more clarity on that when we start guiding for 2027 in February.

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

I appreciate you don't want to call out any potential buyers on Aerials. But if you can just indulge us in a bigger picture view of what's 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're 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 of $611 million. The authorization timing and also the size of it, I'm 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'm just trying to figure out, is that a signal a little bit of use of the net proceeds. I mean this kind of number feels like it's almost 50-50 debt versus repo. And I'd argue investors are probably leaning a little more wanting repo. And I just want to make sure we're reading into what you're describing today appropriately.

So I'll 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, yes, as I said, we made good progress in the last couple of months in terms of advancing our carve-out work. Aerials has been part of Terex for 25 years.

So there's obviously a lot of structure, a lot of tax, lot of legal entities associated to this segment that required quite substantial carve-out work, and we've been making good progress on those. In terms of process, David, I'm not going to comment on who the multiple strategic counterparties are. I'm not going to comment on what kind of the nature of the discussions are. I don't think that serves the best interest of our shareholders. I'm going to pass on that particular question.

Yes. And David, I think your 2 follow-up questions is on the carve-out work. I'm very pleased to say that we have done a lot of the work upfront in the, I would call it, the last 9 months. As you know, the Aerials business has been with us as part of Terex for a while, and the legal entity that we are untangling, we have done a lot of the work, and we're very comfortable with where we are in the process right now.

Your question on share repurchase, I think it's too premature to say anything. The $500 million of share repurchase authorization there is just on our normal course 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 with or without the Aerials sale. So I wouldn't say you want to read too much into it.

Your next question comes from the line of Mike Shlisky with D.A. Davidson.

I was under the impression that you weren't going to be doing much divestitures until you got the Aerials deal done, but you did just divest Capacity and LayMor in the last couple of days. I'm just kind of curious, 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?

Mike, thanks for the question. Yes, we are at the tail end of the integration of our new SV segment, which required a lot of work. We're obviously also in active discussions around our Aerials segment. So we have kind of a full slate at the moment. Now the Capacity and LayMor was a relatively small transaction. But 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're focused on those 2 main large work streams that I called out just now. But yes, we will always look for opportunities to continue to optimize, and we are committed to our strategic objective of building a highly synergistic, high mix, low-volume portfolio. And so we'll always be looking for opportunities to further improve.

Okay. Great. And then my follow-up was, Jen, you called out those 2 businesses, Capacity and LayMor, as part of the reason for the EBITDA reduction for the full year, mostly in the fourth quarter, of course. I never thought of those as that big of businesses that didn't generate that much. So can you maybe just help us figure out for our modeling for 2027, whether there's a pretty decent sized number or halfway important number we should be taking out of our models for '27 for those businesses? And whatever cash you received, will this be plowed right back into the share buyback here in the fourth quarter?

Yes. Mike, I think you're familiar with the Capacity and LayMor businesses. Overall, in an annualized basis, through cycles, anywhere between $125 million to $150 million of top-line revenue. And we have always said that it's 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 sales proceeds, and how we're 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.

Your next question comes from the line of Kyle Menges with Citigroup.

In your presentation and in the prepared remarks, you mentioned the F&E fleet. It sounds like it's still aging, good replacement demand from municipalities. Would just love to hear your -- just, I guess, a little bit more color on what you're seeing in that market and in that fleet, if it is really aged and I guess, just didn't really see too much pull forward related to COVID stimulus or perhaps we did. Would just love to hear some more color there.

Kyle, did you say SV, Specialty Vehicles?

I guess, fire and emergency.

Yes. Okay. I wasn't sure. Because we cover municipalities with multiple segments, so I just wanted to make sure I heard you clearly. Yes, as I said earlier, we're very pleased with the 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're also very surgical with our capacity because, obviously, we don't want to all of a sudden have idle capacity in our network either. So that's why we are addressing specifically the categories with higher-than-average lead times. But yes, to your point on the bookings, I don't 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 fleet a little longer than they initially expected. And then I don't want to make any comments on market share, but we do get some good pull from the market on our lower lead time solutions that we're offering, as I mentioned earlier, with our semi-configured pumper. So it's probably a mixed bag of those variables.

Got it. And then just to follow-up on the Aerials sale process and that carve-out work. I'm curious how much more carve-out work there is to be done? And are you confident in getting that wrapped up by year-end?

Yes. I'm not going to put any timing. We're running a disciplined process here. We're committed to the process. We're focused on value. We're focused on execution. We're focusing on certainty. Yes, a lot of that carve-out work is behind us, but I don't want to 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.

Your next question comes from the line of Jerry Revich with Wells Fargo.

The margin execution and the orders have both been, I think, 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'll hear more about '27 in about 3 months, but any changes to how you're thinking about the margin upside relative to what you laid out at the time of the acquisition given the performance to date?

Yes. I mean, thanks for the question, Jerry. I need to give the team 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 one-offs in their Q3 that Jen spoke about that you shouldn't anchor to necessarily. But we're 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 leadership that segment today, and they're doing a great job in terms of execution.

We do expect 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'll 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, a transition year for Utilities and a lumpy production in Heil. As we think about the margin opportunity, '27 plus, are we thinking about the 19% or so margins that we were able to hit in '25 as doable in the medium term? Just wondering to what extent are some of the transition issues we've 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 a -- 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, we know that these headwinds when you ramp up a new facility, it's basically a completely new facility in a couple of states over from our Watertown facility. And we have added already 25% more unit capacity in 12 months alone. We're building 250 trucks more in that facility in just 12 months. And then we want to go for another 250 trucks next year.

So just picture the start-up costs associated with increasing your capacity 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 yes, it comes at a little bit of a speed bump in Q3, but a business that does high teens EBITDA margin and then calling that a speed bump, I'll take that any day of the week. So I think both utilities and ESG are very well-positioned for 2027.

Your next question comes from the line of Stephen Volkmann with Jefferies.

Just a couple of 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'm sorry if I missed this, but I'm trying to think about when these -- when exactly these headwinds to margin go away?

Do you want to take that, Jen?

Yes. Steve, this is Jen. 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 out of Q4 into 2027, we expect that to normalize. And again, like what Simon mentioned earlier, the ramp-up and the units in a new facility that historically has been a service facility, and we repurposed that to an install facility that's actually creating some of those headwinds.

Yes. I just want to add, and I didn't 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 -- the Heil facility in Fort Payne. So we're 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 is a very competitive facility for us.

Great. That's helpful. And then you had mentioned earlier, I think, that you expected some prebuy because of the emission change and then that sort of didn't happen. But what we're hearing sort of broadly across the truck space is that most suppliers are going to provide the 2026 technology with the noncompliance penalty, and that adds some revenue but with no margin as we move into '27. And I'm curious whether you think that will impact you as well.

So we don't see a major impact because, first of all, most of that is just passed on. We don't carry -- we don't take the title on those chassis. It's -- they're purchased by our customers and directly invoiced to our customers. For us, it's more of a timing issue. And as I initially said, was in Q2, we were assuming that there were going to be some prebuys in the second half, and we don't see those prebuys 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 utilizations, the fleets have kind of been rationalized and are back up at normal utilization.

So we now see the path clear for more normal sequential growth in ESG. It's still an essential service. So America hasn't started producing less waste. I mean it's still -- that's still a very consistent growth pattern. It's more like how the fleet has been flexing based on supply/demand purely on vehicle manufacturing. But yes, 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's just passed on to our customers.

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

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.

Tami, thanks for the question. Yes, it's the latter of what you said. The chassis are bought by our customers.

Understood. That's 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?

Yes. Tami, freight impacts all segments across the board. But I also do want to mention that the -- we actually pass through a portion of the outbound freight to our customers. So like I mentioned, there's going to 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're taking very proactive actions as part of our sourcing synergy work stream to actually optimize and reduce our inbound freight costs 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 fleets internationally. But I would say that that's across the board.

We have reached the end of the Q&A session. I would now like to turn the call back to Simon Meester for closing remarks.

Thank you, operator. Thank you for the questions. If you have any additional questions, please follow up with Jen 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.

Greetings, and welcome to the Terex Second Quarter 2026 Results Conference Call. [Operator Instructions] As a reminder, this conference is being recorded.

It is now my pleasure to introduce your host, Drew Konop, Vice President of Investor Relations.

Good morning, and welcome to the Terex Second Quarter 2026 Earnings Conference Call. A copy of the press release and presentation slides are posted on our Investor Relations website at investors.terex.com. In addition, the replay and slide presentation will be available on our website.

We are joined today by Simon Meester, President and Chief Executive Officer; and Jennifer Kong, 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 materials 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 for these non-GAAP measures can be found in the conference call materials.

Please turn to Slide 3, and I'll hand it over to Simon.

Thanks, Drew. Good morning, and thank you for joining us today. Terex delivered a strong second quarter with revenue of $2.2 billion, increasing 8.5% compared to last year on a pro forma basis. The quarter's performance reflects revenue growth in all segments, improved earnings conversion and progress against the strategic priorities we've laid out in the past 2 years.

Today, I'll begin with our consolidated performance and the demand backdrop we are seeing across the portfolio. I'll then discuss how each segment is executing against those market conditions before providing an update to our full year guidance, and Jen will then take you through the detailed financials. At the consolidated level, second quarter performance was supported by revenue growth and improved earnings conversion, both sequentially and year-over-year. Adjusted EBITDA of $269 million increased $26 million or 10.7% versus last year on a pro forma basis, driven by meaningful improvements, especially in the Materials Processing and Specialty Vehicle segments.

Bookings increased 25% year-over-year on a pro forma basis. Our backlog of $6.9 billion provides solid coverage and supports our confidence in the second half and today's updated full year outlook. From a macro perspective, the demand environment for our business is positive and improving in many of our verticals. U.S. nonresidential construction is benefiting from the ongoing transition of planned projects to new starts, supporting demand across multiple segments.

Year-to-date, U.S. nonresidential construction starts rose 18% to $368 billion, driven by momentum in data centers, energy investments and civil projects such as bridge, water and sewage infrastructure. Mega project starts totaled approximately $80 billion year-to-date through May, creating increased opportunities for many of our businesses. Across our end markets, we're seeing higher utilization rates for our products, increasing capital expenditures by our customers and positive sentiment from channel partners. These indicators and our bookings trends support our view that demand is growing in many of our verticals.

Looking ahead, policy and infrastructure activity in Washington also provides a promising backdrop, including enactment of the 21st Century Road to Housing Act and introduction of the Build America 250 Act. The timing and implementation of these programs may vary, but the direction of public and private investment is supportive. Healthy municipal budgets and replacement needs support demand for fire apparatus, ambulances, refuse collection vehicles and related equipment.

Within specialty vehicles, during the quarter, the city of Chicago approved the purchase of 80 fire trucks and 40 ambulances as part of its fleet replacement plan. The breadth of our specialty vehicle portfolio allows us to serve communities of all sizes and because these are essential assets that municipalities replace on a regular cycle, they provide a recurring source of replacement demand.

In Environmental Solutions, long-term demand is supported by a large installed base of refuse collection vehicles, digital and aftermarket activity and robust transmission demand in utilities. While the segment is navigating a temporary softness in refuse collection vehicles, ESG's second quarter bookings increased versus the prior year, the first year-over-year increase since the first quarter of 2025, indicating that the momentum could be building going into 2027.

Long-term demand for refuse collection vehicles is intact, including a regular replacement cycle and customer interest in technologies such as automated site loaders, third eye camera systems and back-office software that can improve productivity and safety for our customers and their operators. Terex Utilities is benefiting from demand tied to grid modernization, renewable energy investments, data center-related power needs and storm hardening activities, which we expect to support the business over the next several years.

In Materials Processing, the U.S. mobile crushing and screening market is showing growth in fleet utilization and rent to purchase conversions. We also saw increased bookings for material handling and concrete mixers, which supports our view that the segment's overall demand is broadening. In aerials, customer demand is supported by nonresidential construction activity with customer mix in the quarter skewed toward national accounts that have greater exposure to mega projects.

Turning to execution. I believe it is important to point out that after we completed the two largest transactions in our history in just the last 2 years, both the ESG acquisition and the merger with REV are trending above their respective business cases to date. Across our new and bigger portfolio, our focus is to convert backlog more profitably, improve throughput, realize synergies and continue to bring exciting new products to market for our customers. The second quarter demonstrated our progress in all those areas.

Starting with Specialty Vehicles, the REV Group integration is proceeding well, and the segment delivered record earnings performance. The teams are executing against the integration plan and synergy realization is progressing as expected. Our near-term priorities for the segment are to improve throughput, reduce lead times and expand capacity in targeted product categories. During the quarter, we made significant progress with the expansion of our ladder truck plant in Ocala, Florida, and we're nearing completion of the expansion in Brandon, South Dakota.

The Brandon investment is intended to increase capacity of the S-180 semi-custom pumper and further reduce lead times directly supporting our longer-term growth objectives. We expect the first deliveries from our Brandon expansion within the fourth quarter.

In Environmental Solutions, ESG is making progress with its ongoing manufacturing efficiency improvements in an already world-class facility. In utilities, we are aggressively ramping up shipments to keep up with the accelerating demand and are executing our planned capacity expansion. Utilities also introduced the TRX product line, including 4 different models with different working heights, eliminating the need for a commercial driver's license, giving our customers more flexibility to operate their fleet. The product line is an industry first with a production unit of a 50-foot aerial on a Class 6 chassis.

In aerials, the team continued to navigate tariff headwinds and execute mitigation efforts in their supply chain and improve operational efficiency. As expected, our price/cost position improved in the second quarter, and we believe the full year will be price/cost neutral based on the visibility we have within our backlog and our ongoing cost-out actions.

Before turning to our 2026 guidance, let me provide an update on our strategic review of the Aerials segment. We are pleased with the progress we are making. We have interest from multiple parties and are working towards an outcome that maximizes value for our shareholders. We do not have any specific details to share at this time, but we will update you as the process unfolds.

Based on our second quarter performance, our backlog coverage and synergy pipeline, we are raising our full year guidance. The increase reflects strong first half execution overall, increased volume in Aerials and improved performance in Materials Processing. We now expect sales of $7.9 billion to $8.2 billion, adjusted EBITDA of $960 million to $1 billion, adjusted EPS of $4.70 to $5.10.

And with that, I'll turn it over to Jen to walk through the financials in more detail.

Thank you, Simon, and good morning, everyone. Let's review our second quarter results, starting with consolidated performance on Slide 4. Consolidated sales, including the results of Specialty Vehicles were $2.24 billion, up $751 million or 51% as reported. On a pro forma basis, excluding the sale of the Cranes and Amicoest businesses, sales increased $175 million or 8.5% with growth across each of our segments. Adjusted EBITDA margin was 12% compared to 11.8% on a pro forma basis in the prior year.

Adjusted EBITDA increased by $26 million, driven by healthy demand for our products, operational execution and realized synergies in spite of significantly higher tariffs compared to this time last year. Adjusted earnings per share was $1.37, including a net benefit of $8 million from IPA tariff refunds plus a onetime unfavorable customs-related accrual. Working capital continues to improve. Net working capital declined to 13.2% of sales compared to 16.7% in the first quarter and 22.8% a year ago, primarily driven by the merger with REV Group. We generated $128 million of operating cash flow and $101 million of free cash flow within the quarter. Net debt ended the quarter with $2.28 billion, including $407 million of cash on hand and net leverage improved to 2.3x net debt of 12-month adjusted EBITDA. We also returned $20 million to shareholders through dividends in the quarter.

Turning to segment performance, starting with Environmental Solutions on Slide 5. Environmental Solutions sales increased by $26 million or 5.9% versus the prior year to $456 million. Growth was driven by strong demand and increased shipments in tariff utilities, which more than offset temporary softness in demand for ESG. Despite the temporary unfavorable mix, the segment reported an adjusted EBITDA margin of 17.5%, down 250 basis points year-over-year due to the aforementioned unfavorable mix, coupled with production ramp-up inefficiencies and lower adoption in ESG.

Moving to Material Processing on Slide 6. Materials Processing sales increased 11.1% or $47 million to $464 million, driven by healthy demand, possibly for mobile crushers in the U.S., supported by infrastructure, data centers and other industrial projects. Adjusted EBITDA margin expanded 440 basis points to 18.8%, reflecting a favorable product mix and price cost discipline. Onetime benefits contributed approximately 180 basis points to the margin performance within the quarter.

Turning to Specialty Vehicles on Slide 7. Specialty Vehicles sales increased $38 million or 6.2% to [ $615 ] million, driven by improved throughput and fire. the adjusted EBITDA margin improved 210 basis points to 14.5% compared to last year, reflecting favorable mix, operational efficiencies and price realization, partially offset by cost inflation.

Turning to Aon on Slide 8. Aerials sales increased 10.9% year-over-year to $673 million, driven by demand from national accounts as supported by mega projects. Adjusted EBITDA margin was 5.7% in the quarter, down 340 basis points from last year, which had significantly less tariff impact. As expected, Aerials improved margin sequentially in the second quarter by 560 basis points, reflecting improving price cost dynamics and higher production volume. We are on track to be price cost neutral for the year. The IEA refunds we received in the quarter were offset by a onetime unfavorable customs accrual. Please note, Terex is not accruing for future refunds not yet received.

Turning to bookings on Slide 9. As Simon mentioned, consolidated second quarter bookings were $2 billion, up $400 million or 25% year-over-year on a pro forma basis. In Environmental Solutions, bookings were $417 million, an increase of 18% versus last year's quarter, mostly driven by utilities. We expect bookings in utilities to be solid for years to come, and our focus is to ramp throughput to meet the accelerating demand. In ESG, bookings were up year-over-year, which could indicate momentum building going into 2027.

Having said that, given the conversations with our customers and suppliers, we no longer expect a material second half prebuy of RPVs ahead of 2027 EPA regulations. As a result, we're updating our second half year segment revenue outlook to low single-digit growth. Materials Processing second quarter bookings of $469 million increased 18% on a pro forma basis. While aggregates demand was the main driver, bookings also increased meaningfully in Material Handling. MP ended the quarter with $599 million of backlog, up $232 million or 63% year-over-year, supporting an updated full year outlook of low double-digit sales growth. This implies high single-digit year-over-year growth in the second half.

Specialty Vehicles bookings were $588 million in the quarter, up 9% versus the prior year, led by the previously announced City of Chicago order. Increased throughput drove higher sales and lowered the segment's backlog as intended. We expect this segment will execute against this backlog and our outlook remains high single-digit revenue growth for the year.

Finally, ARRIS second quarter bookings of $530 million reflects 71% growth versus last year, possibly from national customers tied to large funded projects and infrastructure and nonresidential construction. ARRIS ended the quarter with $914 million in backlog, an increase of $200 million or 28% versus the prior year. Given ARRIS first half performance, healthy bookings and backlog visibility, we are updating the full year outlook to low double-digit sales growth.

Now turn to Slide 10 for our update to the consolidated 2026 outlook. We're operating in a complex environment with many macroeconomic variables and geopolitical uncertainties, and results could change negatively or positively. The outlook we are providing today reflects our current portfolio and does not account for any cost to achieve the synergies, purchase accounting adjustments or other nonrecurring items.

Today, we are increasing our outlook for the year with 2026 sales expected to grow approximately 7.4% at the midpoint on a pro forma basis to a range of $7.9 billion to $8.2 billion. We now expect pro forma EBITDA to grow by approximately $124 million or 14.5% year-over-year to between $960 million and $1 billion or 12.2% EBITDA margin at the midpoint. Included in our EBITDA outlook is approximately $28 million of synergies that we're well on our way to realizing.

Updated guidance reflects 22% incremental adjusted EBITDA margin conversion at the midpoint pro forma despite a dynamic tariff environment. We anticipate interest and other expenses to approximately $185 million based on average debt outstanding of $2.7 billion. The effective tax rate for the full year is still expected to be 21% despite favorability in the first half of the year. We now expect 2026 EPS between $4.70 and $5.10 with slightly more earnings per share in the third quarter and a typical seasonal step down expected in the fourth quarter. Please note, the share count for the second half will be approximately [ 114 ] million. Finally, we expect to deliver $300 million to $350 million of free cash flow in 2026.

With that, I'll turn it back to Simon for his closing remarks.

Thanks, Jen. I would like to thank everyone again for joining today's call just to quickly summarize what we shared today. We see strong demand from most of the markets we compete in, and we see clear momentum from the execution of our strategy. The REV integration is progressing as planned. Our synergy pipeline is building and the new Specialty Vehicle segment is improving throughput quarter after quarter.

Environmental Solutions is well positioned with its manufacturing know-how, digital offering and multiyear demand in utilities. Materials Processing is executing effectively and together with Aerials benefiting from investments in infrastructure, data centers, manufacturing and overall power generation. We are raising our full year guidance because of the performance we delivered in the first half and the visibility we have in the backlog and the momentum we're building.

Taken together, these results demonstrate the strength of the new Terex, a more diversified, more resilient and higher-performing company with clear opportunities to grow, improve margins, generate cash and create value. I want to thank our global team members for their dedication, our customers and dealers for their partnership and our shareholders for their confidence in Terex.

And with that, we'll turn the call over to the operator for questions.

[Operator Instructions] Your first question is from the line of Mig Dobre from Baird.

Maybe I would like to start with double-clicking a little bit on Environmental Solutions here. Can you give us a little perspective as to what's embedded in that low single-digit revenue outlook -- revenue growth outlook, I should say, how you think about the refuse business versus utility?

And I guess the second part here, just the guidance seems to imply compression -- revenue compression in the second half. How should we think about the effect that would have on margins for this segment?

Yes. Nick, I'll take the first one, and I'll let Jen weigh in on your second question. So yes, from a top line perspective, for the segment overall, obviously, strong bookings, 18% year-over-year, sequential also growth in bookings, 20% versus prior quarter. I know you asked about refuse, but part of Environmental Solutions is obviously also utilities. We see a lot of accelerating demand in utilities, and we're expanding capacity to keep up.

In ESG, which is the refuse collection vehicle business within Environmental Solutions, we actually saw bookings were up as well year-over-year and sequentially. And we do see momentum building for 2027. And when we look at -- when we look at that business, we look at bookings trends, we look at fleet utilization, we look at telematics, we look at what customers are telling us. And we clearly see that in the first half, maybe even starting late last year, there was probably a little bit too much fleet in the system. It's not that America is producing less waste or that there are less garbage trucks on the road.

But clearly, there was a little bit of rethinking that needed to happen between supply and demand. And we think that, that happened in the first half and is now mostly behind us as we see bookings coming back up. That's the first piece.

The second piece in our initial guide, we assumed there was going to be some prebuy activity in the second half of 2026 going into 2027 when the new engine emission regulations come out. We now think that, that will actually spill over in 2027 as some of those changes are grandfathered and delayed by a couple of months. So we don't see as much of an uptick in pre-buys in the second half as originally assumed. We still think that bookings will sequentially recover. We still think that 2027 is most likely a growth year for refuse. We just see it being delayed by a couple of months because of the delayed in prebuys.

Jen, do you want to weigh in on the margins?

So from a margin perspective, we expect, I would say, for Q3 to be very similar based on Q2 given that it's going to be driven the top line growth is going to be -- continue to be driven by the utilities, and they have a very different margin profile. But we do expect that from Q3 to Q4 to be a step-up in the margins at the segment level, driven by favorable product mix favorable customer mix and then the inefficiencies that I mentioned in my prepared remarks, especially in utilities to be behind us. So those are the big three drivers in terms of the step-up in the margin.

I appreciate that. That's helpful. And my follow-up, maybe on Specialty Vehicles, and this is kind of a bigger picture question. As you're starting to operate this asset and working with the REV team, I'm curious as to what you're discovering in terms of opportunities for either manufacturing efficiencies or being able to use some of the scale that Terex has that could bring to this business on a go-forward basis.

And I do understand that you have communicated on the synergies near term and also the capacity additions that you have. So my question, I guess, extends beyond that, if possible.

Yes. I'll let Jen talk about the synergies. But yes, very pleased with how the integration is going. It's been 5 months now. We're very pleased that they booked a record quarter in terms of EBITDA performance. And Mig, you know this business. You know the momentum that, that team was building and has been building over the last 2 to 3 years before we merged with REV.

So we were obviously very keen and very focused on making sure we would maintain that momentum, that continuous improvement momentum, if you will. And that's exactly what has been happening so far in the first 5 months. It's the exact same leadership team operationally that runs SV today that was running before the merger. And we continue to improve. We continue to improve throughput. We were up again in units produced in the second quarter.

But then to your point, with the acquisition of ESG, we think we acquired one of the best specialty vehicle manufacturers in the industry. And so what we see -- what our game plan is and has been and will be is we see that manufacturing excellence in high mix, low volume of ESG now helping Terex Utilities. So you see Terex Utilities margins coming up. And we expect that same manufacturing know-how to help SV going forward.

At the end of the day, it's all about continuous improvement and continue to try to reduce the number of hours per truck. But the most immediate focus is on just making sure we keep that momentum that we have in SV, and we're very pleased with how the integration is going and how the synergy pipeline is building. Jen, any context?

Yes. So Mig, from a financial standpoint, we committed that $28 million of synergies for the 11 months post merger. We have -- and they are largely corporate, and that's what I said in my previous call. We have realized about 20% of that in Q2 with a very good visibility of converting the remaining 80% in the second half of the year with a sequential step-up quarter-over-quarter. So like what Simon said, we're very confident of the integration that now translates to synergies that drops to the bottom line.

Your next question comes from the line of Jamie Cook at Truist Securities.

I guess two questions. First one on Specialty. Could you just sort of elaborate what you're seeing in the fire truck business? I think backlog for total specialty was down about 1%. Your peers are experiencing declines. Just your growth has been better. So if you could elaborate there in terms of backlog orders and the outlook for fire truck.

And then my second question is on Aerials. Just trying to understand where the margins in the quarter were relative to your expectations. And given we're raising the outlook for Aerials, how are you thinking about the setup for margins in the back half of the year?

All right. I'll talk about the fire truck backlog and then Jen can talk about Aerials margins. Yes. So quite honestly, Jamie, we want that backlog to come down because, obviously, our customers are waiting for a very long time for their truck, and we are focusing on ramping up -- continue to ramp up our throughput, which is what we're doing.

And we're making another step in Q4 when our capacity in Ocala comes online for ladder trucks and our capacity for S-180 pumpers, which is a low lead time product, if you will, a semi-custom product when that capacity comes online in Brandon, South Dakota. So we're pleased with our bookings. We -- as I mentioned, we secured a large order from the City of Chicago. Our bookings continue to grow.

But quite frankly, what's more important for us and what you should be expecting if the backlog is to come down is that actually our book-to-bill should stay below 100% in SV just by the virtue of lead times improving. And that's -- that's the mission is to get our lead times down. And we think a more sustainable number for us and for the industry is to get lead times back to about a year or so. And that's the mission, and we think that that's what the trend will be over the next 24 months or so where you will see a consistent below 100% book-to-bill just because lead times are improving.

Jamie, on [ Aerials' ] question, from a margin perspective for Q2, they came in better than expected. As I mentioned in my prepared remarks, the -- in Q2, we had -- we took in on favorable customer accruals in Aerial. Without that accrual, we would have achieved 8.3% of adjusted EBITDA.

Overall, it's going to be from a year-over-year perspective, still a relatively tough comp because last year was the liberation day was actually April, but we didn't really see the P&L impact hitting us until June last year. So it was 1 month of tariff impact last year versus 3 months of tariff impact this quarter.

What we believe that it's important that we show from a like-for-like basis with the same kind of tariff impact is a sequential improvement that I mentioned in my prepared remarks of 560 basis points quarter-over-quarter sequential improvement, and that is despite an unfavorable mix. Like what Simon mentioned, we saw more nationals coming in, in terms of our shipments as well for Q2.

For the second half of the year, we do expect that we continue to see a quarter-over-quarter improvement in our margin expansion from Q2 to Q3 and a seasonal step down from Q3 to Q4 driven by less [ scheduled ] deliveries. We expect that the -- that we will be able to continue to drive the improved price/cost dynamics such that we are full year price/cost neutral for the [ ARRIS ] business. And year-over-year, that taking into consideration that with a higher tariff because this year, we will have 12 months versus last year, 7 months, plus the onetime customer accrual, that's actually a $70 million tailwind that we're actually absorbing and driving the cost actions and also price cost neutrality throughout the rest of the year.

Yes. We just see -- we see a lot of positive momentum in Aerials purely from a top line perspective, and we see that continuing into 2027. And so our focus is just on sequential improvement and that's what the team is delivering at the moment.

Your next call is from the line of Angel Castillo from Morgan Stanley.

Aerials string here. Just you talked about some of the incremental bookings largely being from nationals. So just I guess a couple of things. One, what are you hearing from the independents timing or just general kind of demand underlying those customers and the implications that might have to your margins here in the second half?

And then separately, are you seeing anything as we think about the nationals in particular, as this demand starts to pick up from their CapEx, any ability to take market share or just general shifts in market share there?

Yes. So on the independents, and we said we saw the first signs in the first quarter, and we continue to see those in the second quarter where independents bookings sequentially continue to improve. And as you know, Angel, they're a little bit more tied to private construction and commercial jobs, which tend to be more interest rates and input cost sensitive.

And so we'll have to see kind of what the long-term impact is going to be on inflation and so on. And we, quite frankly, think that Europe is probably in a little bit more of a vulnerable spot where we see some markets kind of hinting with stagflation. We think the -- we see the U.S. market as being a lot more resilient. And as such, we think that, that independent bookings pattern will continue to improve. So that's encouraging.

But as Jen said, the nationals just grew faster than we had originally assumed in the first half, and that's where the revised top line guide is coming from. And with that, obviously, comes a little bit of unfavorable mix. Yes, in terms of market share, we typically don't talk about market share on public calls. I do believe in the Genie value prop, and I know I sound biased, but I do believe the team has made tremendous progress with their value proposition, the customer-centric approach. And I do believe they are on a great run commercially. So I'll just leave it there for now.

That's helpful. And then [ 2027 ] dynamics that you mentioned essentially led to the push out of that prebuy on the refuse. Very good color there. But just curious on a broader perspective, just do those changes, including the penalties or phased kind of rollout of those engines from the OEMs, does that have any implications on, one, your ability to kind of standardize certain equipment or certain vehicles on the fire side?

I think one of the strategies was to be able to kind of create a more standardized vehicle around some of these new engines. I don't know if it's the X10. But just curious if any implications on the ability to actually deliver on those -- on the kind of standardization. And then separately, just as we think about any potential penalties or implications of cost of those engines, does that have any material impact on your financials? Or is that just all a pass-through and any ability to kind of get that across?

So you cut out at the beginning of your question, I assume you're talking about SV?

Yes. I'm talking just generally about the EPA27 and the engine implications there to particularly your SV standardization of equipment.

Yes, yes. So yes. So as I said earlier is that we think that, that's all kind of pushed out a little bit. It's not canceled. So we still very much think and it's confirmed by multiple sources that the engine switchover will take place in 2027. It will be probably more of a phased approach. Some engines, to your point, like the X10 or some of the other engines might go sooner or later. It really depends on what engine platform.

Yes, we knew that this was coming for quite some time, and I need to give the legacy REV team a lot of credit that they kind of started designing on where the puck was going. And so as those engines are being introduced, it will actually allow us to further optimize kind of our bill of material and our designs and our commonality. So that will be an efficiency gain for us. I think that was the first part of your question. And then, Jen, you...

And Angel, from a financial standpoint, there's no material impact to tariffs as what Simon mentioned. And as the -- those benefits will be in 2027 when the EPA regulation gets affected, the -- you're right that the cost is passed through from OEMs, so we don't bear them.

In ES, if and when that EPA gets affected, there's some potential benefit again with regards to the suppliers having additional flexibility. No impact from a financial standpoint for [ ARRIS ] and MP on this EPA regulation just because they are largely also proposals on. So hopefully, that helps.

Your next question is from the line of Tim Thein at Raymond James.

The first question is just on the MP segment. If we think about kind of the margin progression for the year, I believe the expectation coming into the year was to have sequential margin improvement as we go through the year. But obviously, you've got a bit of a bump here in the second quarter.

If we exclude the 180 basis point benefit that you called out, is that still a reasonable assumption? Or are there some factors that may have pulled some of the performance into the second quarter? Just how are we thinking about the shape for the balance of the year, [indiscernible] of the question.

Yes, we're very pleased with the MP, I would call it not just Q2, but first half of the year performance. As you rightfully said, our Q2 year-over-year margin expansion for MP was 450 basis points. Excluding the onetimer, it's still a very strong 270 basis point year-over-year improvement better than Q1 as well.

And that's driven by two factors, mainly on the favorable mix and also geography mix as well and price cost discipline. As we look into the second half of the year, that would say a normalized EBITDA of like that 17%, excluding the Q2 one-timers. I would only see potentially a little bit of marginal step down just because we have seen an uptick in the material handling orders, like what Simon mentioned, and that's from a margin perspective, a little bit lower.

So -- but overall, still a very healthy margin expansion. We expect that the full year from an incremental perspective without the onetimers for MP to be above our normalized incremental margin.

It's mainly just been a very strong year for MP in terms of execution. They're really executing in a very disciplined manner on price cost, and that's really helping the segment benefiting from the uptick that they're seeing in bookings.

Okay. Makes sense. And I get it, Simon, you want to keep the comments tight. But just on the review of aerials, I mean just as investors think about the potential timing of a potential movement on that, is it any sense for -- I mean, is this a '26 event in terms of an announcement or potentially it slips into next year? I'm sure there are a number of factors at play here, but just any sense for the time line that folks should be thinking about?

Yes. No, I appreciate the question, Tim. There is no predetermined time line. We're focused on making the right decision and properly go through this review. As I said in my prepared remarks, we're pleased with the progress we're making. We have interest from multiple parties, and we're just laser-focused on working towards what is the best outcome for our shareholders.

Your next question comes from the line of David Raso at Evercore ISI.

Just a quick clarification on the EPS cadence. Is the thought there sort of just flat sequentially 2Q, 3Q and then that step down in 4Q? Just want to make sure I understand the framing and then I'll ask my question.

David, yes, based on our revised guidance and outlook, we have really achieved 48% of our EPS in the first half of the year from a quarterly phasing perspective, if you back out the onetime batch customer accrual that we have, it's 12.8% of adjusted EBITDA at the Terex level. So it's fair to say that maybe Q3, very similar kind of profile and then with a seasonal step down in Q4.

When it comes to the guide raise, because we don't have the exact margin guide by segment, -- when we think of the revenue guide going up $250 million, but EBITDA only up $15 million in the guide, is that solely a function of the mix? Obviously, aerial margins below the other businesses. But just trying to understand if there are other things that change in your view on margins related to a few months ago?

Yes. And David, you're exactly right. The change -- the top line growth that you see there is primarily driven by our areas coming up from flat to low double digit and Ohio's most profitable segment coming down from mid-single digit to low single digit. That mix change is entirely explaining for that drop-through in the margin profile.

But I would say that even with the revised guide on a year-over-year perspective at the Terex level, we are seeing 22% of incremental margin year-over-year on a pro forma basis when -- and all our 3 of our 4 segments are operating at mid- to high double digit of EBITDA, while on a year-over-year absorbing close to about signizantly higher tariffs and also the customs accrual in total, that number is about $19 million. So I would say that that's a very strong performance, 22% incremental full year despite the higher tariffs.

In summary, though, nothing changed negatively in your view. It was truly a mix issue that drove a fairly modest EBITDA bump up for the revenue. Is that a fair characterization?

Exactly. You're right, David.

Your next question comes from the line of Kyle Menges at Citigroup.

I wanted to dig into MP a little bit more and specifically international markets, which are more important for the MP segment than others. And just curious what you're seeing in international markets within MP and any impacts from the Iran conflict?

And maybe just broadly, where would you characterize those markets being at in the cycle? And then assuming North America is your most profitable market, is it fair to say that as international markets rebound, it could be somewhat of an unfavorable mix impact?

Kyle, thanks for the question. Yes. So Terex obviously has changed quite a bit. So 80-plus percent of our revenue now is in North America. But to your point, two businesses that have European or overseas exposure is MP and aerials. But even within MP, North America is the largest market followed by Europe and then Asia.

So the story in MP overseas is Europe started promising in Q1 and then started to cool off a little bit in Q2. It's a little bit of a touch and go. Our take on it is that the European economies are just a little bit more sensitive to the current kind of dynamic environment that we're operating in. It's more of an export economy versus the U.S. being more of a consumer economy.

And so an export economy, more sensitive to input costs and rising cost of fuel and inflation and so on. And so we see a little bit of softening, still growth, but a little bit of softening in Europe, but that's baked into the guide that we are -- that we shared for MP's top line. India and Australia are the other two large markets. Both of those are actually strong, Australia driven by mining activity and India driven by infrastructure investments.

And we have a big presence with MP in India, as you know but we also have a reasonable presence in Australia. So Australia and India are accretive. Europe is a little soft. And then I would say, in terms of margin impact, it's a little bit of a wash. I wouldn't give it a blanket summary that all overseas markets are dilutive. That's not necessarily the case.

Okay. That's helpful. And then on Aerials, now that it's gaining momentum, returning to growth, just curious if that might change at all how you're thinking about the strategic fit of that business at all and maybe if that's helping demand from potential buyers as well.

Not really. This is a strategic review. This has obviously long-term implications. We're not going to let how one quarter evolves versus another, let us guide on how we strategically look at this. Having said that, it's obviously encouraging to see that aerials is cycling up, and it's definitely a good problem to have. But no, it doesn't really impact our long-term strategic view on how we perform one quarter versus the next.

Your next question is from the line of Steve Volkmann from Jefferies.

I just wanted to circle back to the capacity additions that you're doing in fire, I guess, in utility. I don't know if there's others happening as well. But when do we sort of expect those to come online and kind of get up to their normal run rates?

I would say 2027 for normal run rates, I would say in utilities, we still have a little bit of unfavorable absorption because we're ramping up. But by the end of the year in Q4 and certainly going into 2027, we should get into that in a favorable sweet spot in terms of favorably absorbing the assets that we're putting in place. similar story for Ocala and Brandon, mostly coming online in Q4, getting to their run rates in 2027.

Okay. That's helpful. So is it conceivable then sort of by the end of '27 that we'll be back down to kind of the -- I think you mentioned a 1-year sort of backlog or lead times for these businesses. Is that possible?

Not in fire. No, we won't be there in just 1 year, but I think that will probably take 2 years for us to bring the backlog down by a full year will probably take us 2 years. But yes, I think that's really only the, I think, a sustainable model is where we take lead times down to about a year in fire, and that's what we're aiming for.

Your next question is from the line of Steve Barger at KeyBanc Capital Markets.

As the quarter progressed, I was hearing some more investor concerns about municipal spending. What is the muni-facing sales force telling you about funding and demand visibility for the back half and into next year?

Yes. Great question. Yes, we don't see those concerns. We see consistent patterns just like it has been pretty much for the last 10 years or so. So we don't see any concerns, any slowing, just a consistent pattern and cadence and sequential growth.

Got it. That's good to hear. And do you track inquiry to order conversion rates? And can you tell me just how that's trending across fire trucks and refuse trucks?

Yes. Yes, we do. We actually track that in all of our businesses, not just in fire trucks. Typically, it's a pretty fixed ratio. And we don't see that ratio going up or down. If anything, it might be a tad up, but I wouldn't call it material.

But the center of gravity on our focus in fire is really on throughput and making sure that we build the trucks that we have in our backlog. That's really where the center of gravity is for this business. It's very much a supply business, if you will. And the center of gravity naturally moves more to kind of demand focus when you get your lead times back in check.

Understood. In the meantime, maybe I missed this, but did you talk about trends in standards or semi-custom versus custom?

I did in my prepared remarks that we have been introducing the S-180 semi-custom pumper that is being very well received. It's basically a lower lead time, more custom kind of solution for our customers, and that seems to be adopting really well. If your first question is kind of tied to the second question, in that particular category, we definitely see an inquiry to booking ratio going up.

Your next question is from the line of Jerry Revich from Wells Fargo.

In Environmental Solutions, the margin performance is pretty good this year, considering the moving pieces on the production cut and capacity adds in utilities. I'm wondering if you can talk about, as you think about the business in '27, can we approach 20% margins as the under-absorption normalizes and as you folks get the returns from the utility capacity adds, how are you thinking about the path to the 20% plus margin targets in this line of business?

Yes. Jerry, thanks for the question. Obviously, a strong performing segment. And as we've mentioned earlier on today is that we see sequential improvement in ESG, and we see definitely accelerating demand in utilities. And I also mentioned the second data point that there's been quite some good synergies between the two businesses, and ESG has been a great manufacturer of high mix, low-volume products, and that expertise is actually helping utilities to ramp up.

And Jerry, you've followed us for a long time, and you kind of know where we were with our utility margins and where we are now. So that's really encouraging. Now obviously, we're not guiding for 2027. We're not ready yet to guide. but we're very pleased with the sequential progress that we're making in both of those businesses.

And Simon, are you willing to comment on the 20% plus margin target and how much progress you think you'll make towards that in '27?

I think it's a little premature, Jerry. I would prefer to wait for our -- when we are ready for our guidance for 2027.

There are no further questions at this time. We have reached the end of the Q&A session. I will now turn the call back to Simon Meester for closing remarks.

Thank you, operator. If you have any additional questions, please follow up with Jen or Drew. Thank you for your interest in Terex. Operator, please disconnect the call.

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

Greetings, and welcome to the Terex's First Quarter 2026 Results Conference Call. [Operator Instructions] As a reminder, this conference call is being recorded. It is now my pleasure to introduce your host, Derek Everitt, Vice President, Investor Relations. Derek, please go ahead.

Good morning, and welcome to the Terex First Quarter 2026 Earnings Conference Call.

A copy of the press release and presentation slides are posted on our Investor Relations website at investors.terex.com. In addition, the replay and slide presentation will be available on our website.

We are joined today by Simon Meester, President and Chief Executive Officer; and Jennifer Kong, Senior Vice President and Chief Financial Officer. Their prepared remarks will be followed by a 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 the earnings material and in our 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 for these non-GAAP measures can be found in the conference commentaries.

Please turn to Slide 3, and I'll hand it over to Simon Meester.

Thanks, Derek, and good morning. I would like to welcome everyone to our earnings call and appreciate your interest in Terex. We're off to a good start for the year, including our new Specialty Vehicle segment, which was in the portfolio for 2 months of the period and already making a meaningful contribution to the group.

We grew sales by 11% on a pro forma basis, including growth in all 4 segments, led by Specialty Vehicles, which grew 20% compared to the same period last year. Terex Utilities was our fastest-growing business this quarter. The Utilities team is doing an excellent job ramping up production in a very bullish market. And EPS increased 18% year-over-year to $0.98 or 6% improvement with a normalized tax rate. Quarter ending backlog increased to $7.1 billion, which includes strong bookings trends, particularly in Materials Processing, Aerials and Terex Utilities, providing good forward visibility and consistent with our expectations for the year.

As a result, we are reiterating our full year outlook. And with the recent additions to our portfolio, remain laser focused on execution and integration, which brings me to Slide 4.

The REV integration is progressing as planned. We are executing the same playbook we used for the ESG integration, which we completed ahead of schedule and within budget with synergies above target. For the synergies with REV, we are on track to realize approximately $28 million in 2026 by eliminating duplicate overhead and have line of sight to achieving a $75 million run rate within our 24-month target.

With regards to the integration effort, all work streams are at or ahead of schedule. In addition, I'm particularly encouraged by the way the legacy Terex and legacy REV teams are working together and the two cultures are meshing really well.

Last week, the Specialty Vehicles team showcased our Third I digital solution at the Fire & Emergency Trade Show in Indianapolis, and we're very pleased with the level of interest it created. Third I is an AI-based solution that our Environmental Solutions segment developed for their customers to provide situational awareness around the vehicle and add tangible commercial and operational benefits. It's an integral part of what is now referred to as smart truck technology in the waste collection sector.

Our digital team has already developed applications that leverage this technology for utility vehicles, cement mixers and have now added fire and emergency vehicles to their scope. So good progress on the REV integration and the synergies front.

We're also pleased with the progress we are making with the strategic review of our Aerials business. We continue to engage with multiple interested parties and are working towards an outcome that maximizes value for our shareholders. We do not have any specific details to share at this time but we will continue to update you as the process unfolds.

Moving to Page 5. Over the past 2 years, we deliberately shifted our portfolio's end market exposure to more U.S.-based resilient and predictable sectors with attractive growth profiles. As a result, Terex is far less exposed to global macro dynamics and trade policy than in the past. Based on pro forma 2025 results, about 80% of our revenue was generated in North America of which roughly 85% was manufactured in the United States.

Our end markets are more stable and our supply chain is more durable. Touching briefly on our primary verticals. Demand for fire and emergency vehicles continues to be strong. We are making strategic investments to improve production efficiency and increased capacity in key areas such as ladder trucks, where we are increasing capacity by 35% at our Ocala, Florida plant. And in South Dakota, we're increasing capacity for the pre-engineered to S-180 pumpers. Both investments will help to reduce lead times and with the S-180 pumper provide our customers with a lower cost alternative that we can deliver in about 9 months.

In waste and recycling, our customers are indicating that 2026 demand will be more skewed towards the second half, including anticipated prebuys ahead of the 2027 EPA changes, IL is well positioned to outperform the market again this year due to its product portfolio, production quality and its lead times. We continue to anticipate growth in aftermarket retrofits and digital sales this year and of course, the long-term fundamental growth drivers for the segment remain intact.

Utilities is poised for strong growth for 2026 and beyond as demand on the U.S. grid continues to increase, particularly from data center expansion and AI use cases. Industry forecast call for 8% to 15% annual CapEx growth through 2030, and we're making good progress with our phased investment to bring 30% more capacity online by the end of next year.

And finally, in construction, we see robust infrastructure activity supported by government funding. The pipeline of mega projects provides a tailwind through 2030. MP continues to grow its business in India, and we are starting to see improvements in Europe and Australia, although oil prices can potentially hamper some of that growth, given the more vulnerable state both of those markets are currently in.

In summary, in the past 2 years, we have built a highly resilient portfolio of businesses that enable us to navigate short-term macro and market-specific dynamics and deliver on our financial objectives predictably and consistently going forward.

And with that, I'll turn it over to Jen.

Thank you, Simon, and good morning, everyone. Let's look at our Q1 results on Slide 6.

Our operational performance was in line with our expectations. We grew sales to $1.7 billion, an increase of $505 million, or 41% compared with the prior year on a reported basis. The growth was due to the merger with REV that closed on February 2 and growth in each of our legacy segments.

On a pro forma basis, we grew 10.8%, led by strong growth in Specialty Vehicles, Material Processing and Terex Utilities. Excluding the impact of the merger and the sale of our Crane and businesses, organic revenue increased 8.1%, with increased sales across all legacy segments. Q1 EBITDA margin was 9.9%, down 50 basis points versus the prior year, primarily driven by tariffs, which were not in effect in the prior year period, partially offset by improved performance in MP and SV.

Interest and other expenses of $44 million was $1 million lower than Q1 last year. And the first quarter effective tax rate was 11%, driven by favorable onetime tax attributes.

EPS for the quarter was $0.98 which included approximately $0.10 of onetime tax benefit when the Q1 tax rate is compared to our 2026 full year expected tax rate of 21%. Our operational EPS improvement was $0.05 compared to last year despite the tariff headwinds. Notably, our current Q1 EPS is based on 96.1 million shares outstanding, up from 66.9 million in the first quarter of 2025.

Free cash outflow in the quarter was $57 million, consistent with Q1 last year. Terex's historical cash generation is seasonally weighted towards the back half of the year with first quarter cash outflows reversing as volume increases and working capital unwinds through the remaining of the year. Importantly, our newer businesses, tactically Specialty Vehicles, have a more favorable working capital profile with significantly less seasonality. As a result, our Q1 net working capital as a percentage of sales improved to 16.7% compared to 26% in the same period last year.

We also reduced our net leverage ratio to 2.4x and remain disciplined with our capital structure, focused on maximizing value for our shareholders.

Please turn to Slide 7 to review our segment results, starting with Environmental Solutions. As expected, sales growth of 3.3% in ES was driven by Terex Utilities as they begin to ramp up to meet strong demand for bucket trucks, digadarics and parts and services. Q1 EBITDA margin of 18% was lower than the prior year due to a higher mix of utilities volume, where margins continue to improve. Coupled with lower ESG volume, partially offset by higher synergy realization.

Turning to Slide 8. MP had a very good first quarter, growing bookings and sales and expanding operating margin. Sales of $419 million were 18.3% higher than prior year on a pro forma basis or 12% higher, excluding the impact of foreign exchange rates. Growth in Aggregates was the primary driver as sales grew in every region. The handling and environmental verticals also grew in the quarter. MP EBITDA margin continued to improve, reaching 15% in the quarter as higher volume, efficiency improvements and pricing actions drove a 310 basis point increase over the prior year. The margin actions and increasing bookings of backlog sets MP up well for the balance of 2026.

Moving to Slide 9. Our new Specialty Vehicle segment got off to a great start, generating $436 million of revenue in February and March, representing growth of 20% compared with the same period last year. The growth was a combination of price realization and higher unit deliveries across all product lines, partially due to weather-related delivery timing. EBITDA margin increased by 160 basis points to 14.2%, driven by higher throughput, price realization and improved operational efficiency.

Turning to Page 10. Aerials had another strong bookings quarter with 132% book-to-bill, generating a $1 billion backlog, giving us forward visibility as we and to the annual sales season. Sales in the quarter were $469 million, up 4.2% year-over-year largely due to cost and foreign exchange rates. As expected, Aerials EBITDA was breakeven because Q1 is typically a seasonally low volume quarter and due to tariffs in which the business did not incur this time last year. In addition, the business faced some temporary unfavorable mix but expects favorable price cost dynamics for the remaining of the year.

Turning to bookings on Slide 11. Before going into each segment, for tariffs overall, Q1 pro forma bookings of $2.1 billion represented 109% book-to-bill ratio and led to modestly higher backlog on a sequential and year-over-year basis. In Environmental Solutions, Q1 bookings were $347 million, slightly lower than prior quarters due to the timing of several large utilities bookings that were recorded in Q4. We expect booking loose level and utilities to remain strong, and our focus remains on ramping up throughput to meet demand.

On the ESG side, we expect orders to be more heavily weighted to the second half of the year. including additional orders for delivery in advance of the new 2027 EPA regulations. MP bookings of $623 million reflects 38% year-over-year growth on a pro forma basis. While was the main driver, bookings also increased in concrete, mature handling and environmental. MP ended the quarter with $594 million in backlog, up $205 million or 53% versus the prior year setting it up for a strong performance through 2026.

SV bookings came in at $501 million. As you can see on the chart, orders can be lumpy in the segment, but overall, the backlog remains elevated, and the team is focusing on bringing lead times down with calculated investments.

Finally, Aerials bookings of $620 million in Q1 combined with $971 million in Q4 is 21% higher than the same 6-month period a year ago. While growth was strongest in North America, we also saw modest growth in EMEA, providing good visibility for the balance of 2026.

Now turn to Slide 12 for our 2026 outlook. We're operating in a complex environment with many macroeconomic variables and political uncertainties and results could change negatively or positively. The outlook we are providing today reflects our current portfolio and does not account for any cost to achieve the synergies purchase accounting adjustments nor other nonrecurring items.

Our first quarter performance booking trends and backlog of $7.1 billion, supports reconfirming the full year 2026 outlook that we provided in February. Overall, we continue to expect 2026 sales to grow approximately 5% on a pro forma basis to $7.5 billion to $8.1 billion. We further expect pro forma EBITDA to grow by approximately $100 million, up 12% year-over-year to between $930 million and $1 billion or 12.4% EBITDA margin at the midpoint. Included in our EBITDA outlook is approximately $28 million of synergies that we're well on our way to realizing. This is in line with our goal to achieve $75 million of run rate synergies within 2 years of closing the merger.

We continue to anticipate interest and other expenses to be approximately $190 million, consistent with pro forma 2025 based on average debt outstanding of about $2.7 billion. The effective tax rate for the full year is still expected to be 21%. We expect 2026 EPS between $4.50 and $5. Please note, the share count for quarters 2 to 4 will be approximately 115 million.

For modeling purposes, approximately 25% of our full year EPS is anticipated in the second quarter as we expect profitability in Aerials and Environmental Solutions to improve in the second half. We expect 2026 free cash conversion of between 80% and 90% of our net income. Our net leverage is expected to improve over the course of the year.

Looking at our segments. We expect Environmental Solutions to grow mid-single digits in 2026, led by Utilities, where we continue to ramp up production to meet strong demand. We expect margin to improve in the second half due to higher volume, including digital and aftermarket, productivity improvements and improved customer mix. We do not foresee a material impact from the recent tariff changes on ES performance.

Turning to MP, the strong start to the year and growth in bookings and backlog gives us confidence in our high single-digit pro forma growth outlook for the segment, largely driven by Aggregates. We also expect margins to improve through 2026 due to higher volume, productivity and favorable price cost. It's important to understand that mobile crushing and screening equipment, the primary products in the Aggregate vertical that we import from the U.K. are not subject to 232 tariffs.

Our new Specialty Vehicle segment got off to a great start, and with roughly 2 years of backlog, provides very good visibility for the balance of the year. We continue to expect sales growth of high single digits from an 11-month pro forma prior year total of $2.2 billion. We also continue to expect meaningful margin improvement, compared to the prior year EBITDA margin of approximately 12.5% due to higher throughput, price realization and ongoing operational improvements.

From a modeling perspective, we expect run rate revenue margins in Q2 and Q3 to be similar to Q1 with a modest seasonal step down in Q4 due to fewer working days. We do not foresee a material impact from recent tariff changes on SV performance.

Finally, in Aerials, we continue to anticipate 2026 sales and margin to be similar to 2025. We have good visibility with over $1 billion backlog following back-to-back quarters with strong bookings. Margins are expected to improve sequentially in the second and third quarters with higher volume, price realization, favorable customer mix and disciplined cost management. Even with a higher impact of tariffs versus last year, we expect Aerials to be largely price cost neutral for the full year.

With Q1 behind us, healthy backlog and fleet utilization, we expect the business to have bottomed and start this path to cyclical recovery.

In summary, given that we are only 1 quarter into the year, and there are macro variables that we do not control, we believe it is prudent to hold our 2026 outlook at this point in time. We will obviously refine our outlook as the year unfolds.

Please turn to Slide 14, and I'll turn it back to Simon.

Thanks, Jen. We delivered a solid start to 2026 with strength in Materials Processing and Utilities and a strong initial contribution from our new Specialty Vehicle segment. Integration execution is progressing as planned, and we are on track to deliver our synergy commitments. Our portfolio is more resilient and predictable with greater North America exposure and less sensitive to macro volatility and tariff changes than in prior years.

Our teams are focused on disciplined execution against our strategy and our annual plan as we build on the progress that we've made to date. And with that, I would like to open it up for questions. Operator?

[Operator Instructions] Your first question comes from the line of Angel Castillo with Morgan Stanley.

Just wanted to start, I guess, you delivered a very solid Q1 here and EPS. You had very strong bookings and improving margins in all the segments. And yet, I guess, you chose to hold the full year guidance constant. So Jennifer, I know that you kind of qualified it as prudent. But curious, I guess, is this primarily a function of macro, tariff uncertainty or just more about conservatism? And then curious if you could add to the extent that there is conservatism in the guide, I guess, where are you seeing most areas of kind of uncertainty within the business? Or where do you see the most kind of room for upside risk in terms of the segments or the products?

Angel, thanks for the question. Yes, the short answer is, as Jen said in her prepared remarks that it's much more about discipline and timing than any change in how we feel about the fundamentals of the business. We're very pleased with how the year started. Q1 execution, strong bookings and backlog improved, and we are seeing good momentum across the board. That said, we are only 1 quarter into the year. We're operating in an environment that still has a fair amount of uncertainty around macro conditions and tariffs. And so we believe that at this point, it's most prudent to confirm the outlook that we said in February, which already contemplated solid growth and margin expansion and synergy realization.

And we feel like it reflects our confidence in delivering those commitments while also basically allowing us to see a bit more conversion and volume flow through the system. Importantly, I think is, nothing that we've seen year-to-date has changed our confidence in the underlying trajectory of the business. And as the year progresses, we'll gain additional visibility and we'll continue to evaluate the outlook based on how we execute and how things evolve at the macro level. But for now, we think reaffirming is the right and responsible approach.

That's totally fair. And I guess as a follow-up to that, Simon, I was hoping you could unpack the backlog and bookings trends a little bit more. I guess, first, just curious how orders have progressed through your segments in March and April. I think you just noted that there's maybe -- you haven't seen anything change so far, but just a little bit more color on that. And also, if you could expand on the MP bookings and backlog. I think that's the strongest we've seen in a couple of years here. So just can you talk about what you're seeing in terms of demand there and whether that was maybe more of a onetime step-up? Or if it's just kind of a continuation that you anticipate in terms of demand?

No. I mean, we're very encouraged by the bookings in MP. We think there's strong momentum. MP, as you know, is mostly a dealer model. We see fleets at a healthy level. We see utilization at a healthy level. We see RPOs coming back in, which were being a little delayed in the last couple of quarters, but we're seeing the RPOs picking back up. So we're very pleased with the momentum that we see building in MP, and we expect that to carry forward in the remainder of the year. Pleased with the bookings in Aerials. We've got about 6 of the 9 months covered. And with some of that price cost coming our way for the remainder of the quarters, we feel good about where that's going.

And then on ES, very strong -- Environmental Solutions, very strong bookings, continued bookings in Utilities. Although when the slide that we show, shows a little bit of a dip in Q1, that's mostly because we had bookings that we thought would drop in Q1, dropped in Q4 with Utilities, so they were a bit lumpy. And secondly, we see the center of gravity for ESG bookings more in the second half tied to new product introductions, fleet replacements and potential prebuys. So that explains a little bit the booking pattern in ES.

And then last, SV continues to be moving strong on bookings, although as lead times gradually and slowly start to improve, we expect bookings to start to come down at some point because as you can see from our appendix in the earnings deck, the backlog basically in that business has been going up consistently for the last 3 years. And as an industry, we've been very focused on bringing that down, hence, the investments that I spoke about in my prepared remarks. So we should be seeing bookings come down at some point in SV and see us working that backlog down.

So I think booking is a strong story this quarter and particularly encouraged with some of our like MP and Aerials that we see some early cycle signs here. We see some independents picking up in Aerials, which is typically a sign for us that there might be some early cycle momentum building here that we're encouraged by for the year.

Your next question comes from the line of Kyle Menges with Citigroup.

I was hoping if you could just talk about any changes to how you're thinking about margins across the segments for the year and tariff impacts? I think you said in the press release, fairly negligible, but are tariffs at least somewhat of an incremental headwinds weighing on the guide.

Right. This is Jen. So maybe I'll start with MP first. Given the great performance in Q1, we expect a further step up in our margin profile in Q2 and Q3, driven by the higher volume on support of our backlog and the higher bookings and also favorable mix and price/cost favorability in that segment. So we expect that to go up further.

Now on ES, we expect that Q2 to be very similar than Q1. Our Q2 margin profile, our volumes continue to be driven by Utilities. And then we expect a meaningful step-up in our margin profile in the second half of the year for ES versus first half of the year, driven by ESG book-to-bill that Simon actually referenced in his prepared remarks. We expect higher-margin digital and aftermarket to drop through into second half of the year. And then finally, Utilities continue to drive throughput as both of our Walkershor and Birmingham and store facilities continues to ramp up.

So ending with the maybe SV. On our SV margin, we expect, like I mentioned in the prepared remarks, the Q2 and Q3 run rate to be very similar to our Q1. And then a marginal step down in Q4 due to Q4 due to lower -- less working days and due to customer inspections. Now in terms of the A segment, we do expect that Q2, we expect a natural step-up driven by our seasonal demand at 25% incremental. We then expect Q3 a further step-up driven by favorable customer mix, favorable capitalized variances and cost actions. And then Q4, which is a natural step down driven by seasonal lower demand, partially offset by realization of additional cost actions. So again, for Aerials, Q1 was price/cost unfavorable. For the rest of the year, it is price cost favorable, which leads to a full year of price cost control.

Got it. And I'm just curious, your confidence level in Aerials being price/cost favorable for the rest of the year with maybe some incremental tariff impacts. Curious if there's any ability to get additional price or getting some help perhaps from a higher mix of independents? Would just love to hear that.

And Kyle, I forgot to address your question on the tariff piece. From a sequential standpoint, I don't see additional heatewind on our tariffs. The reason why I mentioned that in the press release, it's negligible in the tariff is because the change in the 232 calculation is largely offset by the IPO going away. So for us, for the Aerials business, we do have 6 months of back -- already in our backlog, and we can see what is the margin profile of those backlogs. We can see a favorable mix and our customer mix and also in these that is in our backlog and us with the pipeline as well. So we're very comfortable with the price cost favorability for the rest of the year.

Yes. So to put forward visibility on price, cost and mix, that's basically what giving us the confidence of the step-up in margins in there.

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

I guess it's great to hear that tariffs are not having much of an impact, but I'm curious as to how you're managing inflation more broadly, right? I mean we're seeing it in material costs. We're seeing it in energy, freight components. So where are you today versus maybe where you were back when you initially issued this guidance from an overall cost standpoint? And what are you doing to be able to maintain positive price cost, like you talked about earlier. Is this a function of additional pricing adjustments on your end? Or is there something else in here how you're operating this year that we should be aware of?

This is Jen. So in terms of our cost inflation, any of our CPI index changes that usually has a 3- to 6-month lag due to the hedging program that we do have, the band contracts that were locked in for 3 to 12 months ahead of time. The commodity inflation is really baked into our current outlook. What we see in terms of the only risk from a cost inflation standpoint, it's higher inbound freight cost that we might have to incur for some of our international routes.

From a mitigation standpoint, as you know, our SV segment already making 6% to 8% of value out of price in our backlog, which covers the CPI inflation based on delivery lead times. The SV segment also has commercial that's on a pass-through pricing mechanism so that it doesn't really impact us at all and MP and ESG is more of a book-to-bill business right now given the normalization, which means that if we cannot mitigate the cost ourselves, we have the ability to slow down them as a surcharge.

Our 2026 guidance already conservatively accounts for the known energy and commodity headwinds. And with North America now representing more than 80% of our revenue where energy inflation is for moderate and end market fundamentals remain robust. I see that we're well positioned to manage the energy price validity in 2026 without any material downside risk to our current outlook.

All right. Understood. My follow-up in materials processing, very good order performance there. And I'm wondering if this is a function of dealers finally starting to restock. If that's the case, I'm wondering relative to history, where you seeing this process is? How many more innings do we have in terms of delivery stock and how do you separate that from actual end-user demand at this point and how that develops?

Yes, great question. It's a little bit of both. It is definitely end user demand is picking up as well, particularly in the United States. So we've had the tailwinds of mega projects for quite some time. But now data centers, we actually see more spend actually landing in terms of infrastructure and road and bridge building, if you will, and all those are mobile crusher applications. Now obviously, that drives some of the sentiment and that also drives some of the willingness of our dealers to replenish.

But we also see RPO conversions picking up, as I think I mentioned earlier on this call, so it's a little bit of both. Fleets are where they need to be. They are not high. They are not low, but basically, most of the bookings in crushing and screening is triggered by RPO conversion. So if a customer converts a rental into a procured unit, it turns it into a booking from our dealer onto us. So it's a little bit of a mix of both of more end user demand, a little bit better sentiment and then fleets being in the right place.

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

Just first question on the Specialty Vehicle segment with just a bit more time accrued under your belt owning REV. I'm just wondering if there have been any notable takeaways or findings that inform you about the outlook for the business and kind of the prospect for synergies as you look out? So maybe just kind of an update on REV to start.

Yes. No, I appreciate the question. Obviously, very excited. A lot of good things happening. They had a good start of the year. It's only 2 months. We actually had a slightly better start to the year than we had originally anticipated because of some of the weather in January, we weren't able to fly customers into 4 final inspection of their trucks. So some of that kind of revenue that we were anticipating in January actually dropped into February. That's why they were up a bit more in February, March, than I think they will be for the remainder of the year. That's why we're holding their guide to high single digit, even though they were well into the double digits for the first 2 months.

But yes, I mean, it's obviously a lot of backlog to work through. So the focus needs to stay on production output, quality production output, and that's what the team has been focusing on for the last 6, 7 quarters, and we want to make sure that we help them maintain that momentum. And that's really where the focus is. But at the same time, we are very inspired and encouraged by the synergies that we're seeing, not just from an overhead standpoint, but also operational synergies looking at each other supply chains, and there's a lot there.

So we're very encouraged by the synergy pipeline as that is ramping up, and that's building out. And then as I said in my prepared remarks, we have or work streams to basically integrate the business, and we're doing really well on all of those work streams. So so far, it's been -- it's been a great first couple of months, and we're very excited with what that business can bring to our group overall.

Got it. Okay. Probably a bit of a stretch to call this a related follow-up, but so be it. And maybe just to -- I want to spend a minute for an update on your stake in Aptronic. There's obviously lots of buzz these days around humanoid robotics. And there's been some speculation of additional funding rounds likely on the horizon, potentially like a $15 billion or $20 billion implied valuation for that company. So I was hoping you can just remind us of your ownership stake. And I guess, secondarily, how if at all, you're leveraging that technology within your operations.

Yes. Thanks for the question. Maybe for context, Aptronic is a humanoid manufacturer, and we made an investment in Aptronic several years ago because we believe that humanoids would have application in our business, and we're thinking about warehousing, manufacturing, maybe even job sites. And our stake has certainly nicely appreciated over the last couple of years. But yes, we have an active technology pipeline with Aptronic and we actually launched our first prototype of a 0 gravity arm that was developed by -- codeveloped Aptronic and Genie at the ConExpo show a little over a month ago and proudly voted as 1 of the 5 best innovations shown at the show by, I believe, it was Construction Weekly.

And it's a great -- that's an industry game changer we think, because it significantly increased safety and it allows basically 1 person in the platform to install ceiling panels or dry wall because the 0 gravity arm holds it all in place effortlessly and you can manipulate and operate that arm really with just 1 finger. So that's a great example of what Aptronic is bringing to our industry. And the feedback that we received from customers at that show was really encouraging. So those are the kind of things that we're working on with Aptronic, and we're very pleased with that partnership.

And Tim, this is Jen. If I could just add on the -- we account for that at the cost perspective. So the valuation that we talk about is not on record.

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

Specialty vehicles, I appreciate the January month when you did not own it, there was less shipments and you sort of got the benefit that they shipped later in the quarter when you did own it. But let's just talk about the first quarter pro forma. It seems like Specialty Vehicle revenues pro forma, if you don't, at the whole quarter or about $615 million, $620 million, something like that. When you say revenue run rate to be similar to the first quarter, is that sort of the revenue number you're referencing? I just want to follow up on that, just so I get a clarification first.

Yes. It's probably -- you're not far off on that number. It's probably going to step up a little bit in Q2, Q3, but then it's going to come down in Q4 because we have less working days in Q4, but you're not far off, David.

I guess the spirit of the question is your ability to bring better throughput to REV Group's factories was a key aspect, maybe the opportunity to really leverage the backlog this year. And just curious why we would not see a step-up, you can -- I understand if it's first quarter, we don't want to look out too far and change the guidance, but I'm just curious why we would think there's no throughput increase from that first quarter run rate because it would imply the rest of the year has very little growth right from a year ago?

Yes. We are guiding high single digits for the segment. And typically, about 2/3 of that is probably price and 1/3 of that is unit growth. Now we do have, I mentioned, investments coming online, but those mostly will come online in the fourth quarter of the year. So they don't yet have a meaningful impact for 2026. But that -- going from mid-single to high single-digit kind of unit growth, that's really the focus that we have for that business for 2027. Now obviously, there's 2 years backlog. We think that, that eventually will settle at a 1-year kind of backlog level. That's where -- that's what we think is the sustainable level. So that's the trajectory that we're working on, David.

Again, the sequential, I was just thinking the backlog seemed to get repriced well, that there'd be a little more sequential from that first quarter run rate. I'm just trying to level set everybody, just that seems like an area where especially trying to get that backlog down, I mean, as you said, it's a huge backlog. It's 2 years of backlog. I appreciate that will be coming down. But just trying to understand the factory opportunity, the backlog repriced opportunity just to make sure we understand the revenue. I guess, it is what it is. You're saying the revenue will be flat sequentially from a pro forma basis, kind of 1Q to 2Q, 3Q. I'm just making sure I understand fully.

Yes. No, I said step up from Q2 to Q1. And sorry, Q1 to Q2 will be a step up and then Q3 and then Q4 will be a step down because of working days. So the units billed per day is going to continue to step up over the course of the year.

Yes. So David, this is Jen. If I could just add on your earlier.

Thank you for your comments, Jen, that's fine. Okay. The earlier comment was revenue and margins 2Q and 3Q similar to 1Q. And I just wanted to get clarification on that.

Your next question comes from the line of Jamie Cook with Truist Securities.

Congrats. Sorry, another question on Specialty. Again, I just want to make sure I understand the margins. You're going to do better than the 12.5% adjusted EBITDA margins for Specialty, Jen.And I think last quarter, you talked about sort of a 30% incremental. I guess is that still the right way to think about it? And how are you thinking about Specialty in terms of like where those margins can go longer term? It seems like we should be able to do better than what REV Group talked about in terms of their margin expansion. So where can that actual EBITDA margin number go?

And then my second question is on Aerials. I guess, Simon, with Aerial markets potentially getting better. I'm just trying to understand how that's impacting like the bidding process in the sense that things are getting better. Does that mean more people are interested in it? Or like to what degree would you want to hold off on the sale because markets are getting better, perhaps maybe next year, you can do better than the flat margin you're going to do this year? Just trying to understand how the market is inflecting or impacting the decision on the sale.

Yes. Jamie, so in terms of margin profile for ASP, maybe in fact, you just mentioned rapid they did an Investor Day probably 2 years ago on committing to a 2027 Investor Day margin profile. In fact, they're right now in 2026, they will be achieving that 1 year in advance, so I'm very pleased with the performance. With regards to the margin step up over in Q2 and Q3, as you can see in our pro forma for just 3 months, January to March, the EBITDA margin is 13.1%, higher basis point improvement versus last year. I expect this margin profile to continue to have a step up sequentially more than 100 basis points year-over-year.

So every single time that you look at year-over-year, it will be more than this 10% basis point margin improvement throughout the year, even with the step down in the delivery in Q4. Very comfortable with the price and the backlog, very comfortable with the throughput that we're seeing. And most importantly, what makes this business margin sustainable and keep on improving is on the sourcing that they do have a clawback mechanism with the vendor. There's a lot of centralized sourcing initiatives that have actually already started and we do expect that, that will prove to until the end of the year as well.

At this point in time, the -- what I shared in the margin profile does not include any other synergies outside of corporate. So I'm very comfortable with the margin expansion year-over-year throughout the year, more than Q1 pro forma basis.

Yes. And I'll take your follow-up, Jamie, on the process. Yes, it doesn't really change the process. We -- we've always been very clear that this is a through-cycle discussion, and that's exactly how the discussions with multiple parties have been. It's a long term -- it has a long-term nature. And the fact that I think it's well documented that Aerials is a cyclical business, that historically 5, 7 years up, 2 years down. We're now at the end of the second year. The fact that it cycles up a little faster than maybe some anticipate for us. The first quarter came in as we expected. The bookings came in as we expected.

So it doesn't really change our view on the process and our view on the outlook, but it's obviously a good problem to have to see the early signs of a cycle.

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

I heard you say you're expecting some pre-buys in Ohio ESG in the back half. I was wondering how does that impact your view about orders and revenue growth potential for that segment in 2027 after you're done with the prebuy related pickup?

Yes, we don't -- so this business doesn't really cycle, Tami, very strongly. So we're talking -- it's all within the margin, if you will. We don't see a major uptick in terms of prebuys either. In the second half, we think there is some. We actually think that 2027 looks pretty good from a -- just from a fleet expansion standpoint. And there's -- what I did not mention, I believe, in my prepared remarks is that there's a lot of new technology coming out as well in the second half that we think will drive a lot of momentum for us going into 2027. We're obviously not guiding today for 2027 but we're not concerned that whatever happens in the second half will have a material impact on 2027. There's a lot of momentum there.

Understood. That's very helpful. And so related to that, given you're expecting a lot of technology to be introduced in the back half, should we expect stronger price realization as you price for these enhancements?

Well, I mean, our mantra has always been to be price cost neutral in whatever value or cost we find or add is for the benefit of the shareholder. That's our mantra. And I don't think we should forget that this business is already operating in the high teens, performing really strongly. And part of the reason is because it's -- we're running a very efficient factory in Fort Payne, Alabama, and we're running a very accretive product portfolio that is well accepted by its customer base because of the benefits that it creates for our customers.

So we'll take that same approach. We want to be market-based in terms of our pricing, and we want to continue to create value for our customers. That's what's going to drive that.

Your next question comes from the line of Jerry Revich with Wells Fargo Securities.

Simon, I'm wondering if we could just get your latest thoughts on capital deployment. If you do complete the aerials the divestiture, what are you seeing in terms of the M&A landscape? How likely is it that we'll be looking at stock buyback versus additional opportunities to expand the portfolio? Can you just give us your updated views?

Yes. I appreciate the questions here. I really don't want to get ahead of myself here on this. Our most -- our immediate focus is on integration and execution, deliver on what we've committed to for the year. Really, if you think about it, we've gone through quite some change in the last 2 years. So making sure that all the work streams get done in terms of the integration and building up our synergy is our primary focus. And whatever the balance sheet will look like as we move forward, as always, we will look at what is best for our shareholders.

And we have -- we like the optionality. The optionality is only growing. It's only getting better for Terex and which means that our opportunity to add value for our shareholders is only going to increase going forward. So we'll deal with it when it comes, but it will be -- the tiebreaker could be whatever is best for our shareholders.

Super. And then separately on specialty, really good operating performance in the quarter, as you shared in the pro forma financials. I wanted to ask from a booking standpoint, can you just talk about what kind of book-to-bill we should be expecting for in 2Q and 3Q, what's the cadence based on the awards pipeline that the team is working towards in that line of business?

And you said Specialty didn't you, Jerry?

Yes, Simon.

Yes, so the bookings are typically lumpy in Specialty vehicles. So it's kind of touch and go, but if you look I can probably give you maybe more of a trend answer. We expect that at some point, the bookings will start to soften just because to David's question earlier, as we continue to ramp up throughput and lead times will start to slowly improve, naturally, bookings become a function of lead time and availability and will have to come down because trucks being good to use is a very -- is a consistent number that just grows at a mid-single-digit CAGR every single year.

So the bookings will evolve as a function of how lead times improve. So we expect bookings to slowly come down and eventually where supply-demand will meet is -- we're planning for is around that 1 year lead time. So that's how I see. I don't know if it will quite pick up this year yet, but certainly next year.

There are no further questions at this time. I would now like to turn the call back to Simon Meester for closing remarks.

Thank you, operator, and thank you all for the questions. Yes, Terex is off to a good start of the year and the integration of the legacy REV business is progressing as planned. In less than 2 years, we have effectively merged 3 businesses into a single much stronger company and given that we're still early in the year and in light of ongoing geopolitical uncertainty, we believe it's prudent to maintain our full year guidance at this time, and we remain firmly focused on delivering against it.

And I'm particularly proud of the 17,000 Terex team members who make it all possible day in, day out.

Thank you for joining us today, and we look forward to speaking with you again next quarter. And with that, operator, please disconnect the call.

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

Greetings, and welcome to the Terex Fourth Quarter 2025 Results Conference Call. [Operator Instructions]

As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Derek Everitt, Vice President, Investor Relations.

Good morning, and welcome to the Terex Fourth Quarter 2025 Earnings Conference Call. A copy of the press release and presentation slides are posted on our Investor Relations website at investors.terex.com. In addition, the replay and slide presentation will be available on our website. We are joined today by Simon Meester, President and Chief Executive Officer; and Jennifer Kong, Senior Vice President and Chief Financial Officer.

Their prepared remarks will be followed by a 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 the risks that could cause actual results to be materially different from those expressed or implied.

These risks are described in greater detail in the earnings materials and in our 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 for these non-GAAP measures can be found in the conference call materials.

Please turn to Slide 3, we will hand it over to Simon Meester.

Thanks, Derek, and good morning. I would like to welcome everyone to our earnings call and appreciate your interest in Terex. Last week, we concluded our merger with [ REV ] Group for defining milestone in Terex's transformation. With this combination, we have created a leading specialty equipment manufacturer with premium brands across multiple industries with a strong manufacturing footprint, a leading technology play and clear tangible synergies across the portfolio.

We'll begin with our 2024 acquisition of ESG, which delivered value immediately, is now being amplified by bringing Terex and [ REV ] together , creating greater scale and an even more resilient new company. [ REV ] generated approximately $2.5 billion of revenue and $230 million of adjusted EBITDA in its recently completed fiscal year, with the majority coming from essential low cyclical end markets.

Beyond strengthening the predictability of our growing earnings and free cash flow, the merger also reduces our overall capital intensity, giving us greater flexibility to create additional shareholder value. I want to thank both the Terex and REV teams for their tireless efforts to close this transaction ahead of schedule.

It's only been a few days since closing, but the teams are already working hand in hand to execute our integration and synergy plans. We completed the ESG integration in Q3 of 2025 and capture synergies ahead of expectations. We're using the same integration playbook for the merger with REV. The integration will be straightforward. REV's businesses are joining Terex as a stand-alone operating segment with no organizational changes outside our corporate functions.

Our new specialty vehicle segment will include emergency vehicles and will continue to be led by Mike Bernick and recreational vehicles, which will continue to be led by Gary Gunter. Both Mike and Gary bring deep REV experience assuring continuity while driving further improvements. We expect to deliver roughly half of the $75 million run rate synergies within the next 12 months and the full amount by 2028.

Most early savings will come from eliminating duplicate corporate costs, but the synergy potential goes much deeper. Over the last 16 months, we have reshaped the Terex portfolio, creating what I believe is the most intrinsically synergistic, resilient and competitive portfolio in our history.

We now have significant scale in specialty vehicles that share similar operational and go-to-market characteristics. This creates not only near-term efficiencies but also meaningful opportunities for operational improvement and long-term growth across Terex. With regards to the strategic review of the Aerials business, which we announced during our last call, we have been receiving strong inbound interest from a number of interested parties.

We're being deliberate in our evaluation of the interest and the best approach to maximize shareholder value. Turning to Slide 4. Combining with REV significantly shifts our end market exposure, we now serve a large, diverse addressable market with stable attractive growth profiles. Customers across these verticals value life cycle services, creating sizable opportunities to expand our aftermarket and digital offerings.

Emergency vehicles benefit from stable and growing municipal budgets tied to maintaining required response times among the growing population. In waste and recycling, growth is fueled by population and recycling trends, coupled with ongoing fleet replacement.

Customers also accelerate upgrades to unlock the value of new vehicle innovations and digital solutions where we are the clear industry leader. Utilities are poised for strong growth from 2026 onwards as demand on the U.S. electrical grid increases particularly from data center expansion, industry forecasts call for 8% to 15% annual CapEx growth through 2030.

Altogether, we now have multiple channels into nearly every municipality in the United States, which collectively spend $200 billion per year of capital equipment, a tremendous long-term opportunity. In construction, we continue to see robust infrastructure activities supported by government funding. The pipeline of mega projects continues to expand, providing a tailwind through at least 2030. We're seeing momentum building in Europe and strong growth continues in the Middle East and India, where MP already has a solid foundation.

Let's move to a summary of our financial results on Slide 5 before handing it over to Jen to go into more detail. I'm proud of our team for delivering on our 2025 expectations, navigating numerous challenges throughout the year, their performance and the strength of our portfolio enabled us to deliver earnings per share of $4.93 consistent with our outlook.

EBITDA of $635 million or 11.7%, free cash flow of $325 million and a cash conversion of 147% all in line with our expectations. Looking to 2026, we see positive momentum across most of our segments to varying degrees. Environmental Solutions bookings grew 16% year-over-year in Q4, led by utilities. MP achieved its highest margins of the year in Q4 as efficiency and tariff mitigation initiatives to hold and bookings accelerated, particularly in aggregates and Material Handling.

Aerial secured nearly $1 billion of new orders in Q4, up 46% from the prior year and specialty vehicles recorded strong bookings the last 3 months with a roughly 2-year backlog coverage, coupled with strong momentum on margin expansion. This positions Terex for a strong 2026. And with that, I will turn it over to Jen.

Thank you, Simon, and good morning, everyone. Let's look at our Q4 results on Slide 6. Our fourth quarter financial performance was largely in line with our expectations. Environmental solutions continue to grow and deliver consistently strong margins. [ Latera ] processing achieved its highest operating margin of the year and our sales grew year-over-year in the quarter following 4 quarters of decline.

Total net sales of $1.3 billion grew 6% year-over-year. Excluding ESG, our legacy sales grew by 5%. Q4 operating margin was 9.3%, up 150 basis points versus the prior year due to improved performance in all 3 sectors. Interest and other expenses of $43 million was $4 million higher than Q4 last year. And the fourth quarter effective tax rate was 8.1%, driven by favorable onetime tax attributes.

EPS for Quarter was $1.12 or $0.35 higher than last year. EBITDA was $141 million or 10.6% of sales. 140 basis points better than last year. We generated $172 million of free cash flow in Q4, which was $43 million greater than last year due to higher operating income and improved working capital performance.

Let's turn to Slide 7 for our full year results. Net [indiscernible] 6% to $5.4 billion at the full year contribution from ESG acquisition more than offset declines in ARP. Legacy sales declined 11%. Operating margin of 10.4% was 90 basis points lower than 2024, due to lower volumes in ours and MP and higher tariff costs, which mainly impacted areas.

This was partially offset by improved margins in tariff utilities and the accretive addition of ESG. Interest and other expenses of $172 million increased by $89 million due to financing costs associated with acquiring ES change. Our full year effective tax rate of 17.2% was consistent with last year as feasible onetime tax attributes from the clean divestiture offset higher U.S. op income.

Earnings per share of $4.93 was consistent with the outlook we provided for the entire year. We improved our full year free cash flow by 71% to $325 million. representing a conversion rate of 147%. Despite volume and power pay wins throughout the year, our teams continued to execute working capital improvement plan and delivered on our full year free cash flow expectation.

ESG incremental cash flow more than offset the interest expense associated with the financing. We continue to improve our operating cash flow and working capital efficiency, giving us more options to return value to shareholders. Please turn to Slide 8 to review our segment results, starting with Environmental Solutions.

Our ES segment finished 2025 with another excellent quarter, generating $428 million of sales, representing 14.1% year-over-year growth on a pro forma basis. The strong growth was driven by improved throughput and delivery of utility and reuse trust. For the full year, sales increased 12.7% and on a pro forma basis to $1.7 billion. Q4 operating margins of 18.5% were 90 basis points better than the prior year, driven by improved performance in utility while ESG margins were consistent with the prior year.

On a full year basis, the segment achieved 18.8% operating margin, 220 basis points better than the pro forma 2024 results. driven by improvements in both businesses. I was very pleased with the ES segment performance in 2025, particularly the high degree of collaboration between the ESG and utilities teams.

Executing synergies and operational improvements that will benefit Terex going forward. Turning to Slide 9. MP fourth quarter sales of $428 million were 2.5% lower than last year. Excluding the divested green businesses, and sales increased by 2.8% in Q4 on a like basis.

Growth in aggregates with the primary driver as sales grew in every global region, with the strongest growth coming from Europe. On a full year basis, sales of $1.7 billion were 11.6% lower than 2024, mainly due to channel adjustments we experienced in the first half of the year. Operating margins continued to improve, reaching 13.7% in the quarter as efficiency improvements and pricing actions ramped up in the quarter.

The positive margin trajectory and increased bookings at MPL dating into 2026. Please turn to Slide 10. Arisco out 2025 on a positive note with year-over-year sales growth of 6.9% and including growth in North America and EMEA. Ara's Q4 operating margin of 2.6% was consistent with our expectations, 200 basis points better than prior.

Currency wins, including the expanded 232 tariff that was implemented in audio could not be fully mitigated in the period as ongoing supply chain and cost reduction actions will continue in 2026. Please turn to Slide 11. Q4 bookings of $1.9 billion grew 32% compared to last year on a pro forma basis, with positive trends across our segments.

In Environmental Solutions, we continue to see positive momentum in bookings, which grew 16% year-over-year, up 13% on a trailing 12-month basis. led by strong demand for utilities for heels. A held backlog of $1.1 billion provides strong forward visibility for the segment heading into 2020. SP bookings increased 24% year-over-year or 32% when you exclude the divested cleans business.

The growth was flat by aggregate and material handling. More than offsetting some moderation in come. MPN ended 2025 with $71 million more backlog than the prior year. $100 million higher when you adjust out the digested clean businesses from 2024.

Finally, our bookings of $971 million was up 46% compared to prior year, driven by replacement demand from our national customers, while growth was strongest in North America. We also saw growth in bema and Asia Pacific, providing good visibility into 2026.

Now turning to Slide 12 for our 2026 outlook. We are operating in a complex environment with many macroeconomic variables and geopolitical uncertainties, and results could change negatively or positively. The outlook we are providing today reflects our current portfolio and does not account for any cost to achieve the synergies, purchase accounting adjustments or other nonrecurring items.

Following the close of RAC transaction last week, our 2026 outlook reflects the newly combined company, including 11 months of rec with positive momentum from strong Q4 bookings and backlog in every segment. We expect 2026 sales to grow approximately 5% on a pro forma basis to $7.5 billion to $8.1 billion.

We further expect pro forma EBITDA to grow by approximately $100 million or 12% year-over-year to between $930 million and $1 billion or 12.4% EBITDA margin at the midpoint. Our EBITDA outlook includes approximately $28 million of synergies for 2026, in line with our goal to achieve $75 million of run rate synergies within 2 years.

We anticipate interest and other expenses to be approximately $190 million, consistent with pro forma 2025 based on average debt outstanding of about $2.7 billion. The effective tax rate is expected to be higher at 21%, driven by higher U.S. as income.

As expected, the merger has a modest 3% diluted effect on EPS in 2026 due to higher number of shares outstanding post merger. We expect 2026 EPS between $4.50 and $5 with a share count of 111 million shares as compared to a legacy tariffs range of $4.80 to $5.20.

For modeling purposes, approximately 15% of our full year EPS is expected in the first quarter as will only include 2 months of specialty vehicles earnings and seasonally lower volume and legacy tariffs. We expect 2026 cash conversion of between 80% and 90% of net income, including transaction costs and cost to achieve synergies.

Our net leverage is expected to improve over the pace of the year. Looking at our segments. We expect environmental solutions to grow mid-single digits in 2026, met by utilities where we continue to see strong demand for bucket trucks and bigger directs used in the electric power market. We are currently anticipating roughly flat sales on ESG with asset potential in the second half as we get more clarity on fleet requirements and EPA emission regulations for its second half pre-buying.

We continue to see growth in our market-leading digital solutions in the waste sector and expanding into utilities and concrete. We explore opportunities to expand this technology into emergency vehicles during intubation has achieved strong profitability in 2025, and we anticipate similar full year margins in 2026 as synergy execution and productive offset the unfavorable mix from highly utility core.

Turning to MP. We expect the segment to inflect back to full year growth in the high single-digit range in 2026. On a pro forma basis, excluding plan, fleet utilizations and aging equipment resulted in strong bookings in aggregate handling and environment. We also expect margins to improve in 2026 to higher volume, productivity and pricing actions.

Specialty Vehicle segment and through 2026 with roughly 2 years of backlog. We expect sales growth of high single digits from a comparable pro forma prior year total of $2.2 billion excluding divested loans and [ meatless ] REV businesses. We also expect meaningful margin improvement in ASP compared to the prior year period. EBITDA margins of approximately 12.5% and on a pro forma basis due to higher throughput, price and ongoing operational improvement.

Finally, in area, we anticipate 2026 sales and margins to be similar to 2025. We have good visibility heading into 2026 with $906 million back on strong Q4 bookings. Overall, I'm very excited about our opportunity to grow and continue to improve the financial performance of a new company in 2026.

Turning to Slide 13. In 2025, we maintain our commitment to invest in our businesses to fuel organic growth. with over $118 million in capital expenditures targeted at automation, innovation, throughput and efficiency improvements among other growth accelerates. As expected, we returned $98 million to shareholders through dividends and share buybacks last year.

We purposely structured the merger to maintain a strong balance sheet. -- and flexible capital structure to enable organic investments and lower net leverage. That said, we have not assumed any spin debt repayments as they do not mature until 2029. Please turn to Slide 14, and I'll turn it back to Simon.

Thanks, Jen. 2025 was a consequential year in the long history of tariffs. We successfully completed the integration of ESG navigated multiple macro end market headwinds and ultimately delivered on our original 2025 guidance. We also announced and have now completed our merger with REV.

With this merger, we have created a leading specialty equipment manufacturer with a highly complementary and synergistic portfolio serving a diverse set of attractive resilience and growing end markets. Our focus has already shifted to executing the rev integration, fracturing at least $75 million of synergies and delivering on the commitments we've made across each of our segments.

And I'm excited about the road ahead. and I know our team is energized as we continue to build the new tariffs together. And with that, I would like to open it up for questions. Operator?

[Operator Instructions]

Your first question comes from the line of Tim Thein with Raymond James.

The first question the MP segment and you highlighted strength in aggregates. And material handling within the order comments, which if sustained would -- or should be good in terms of product mix I'm curious on the pricing side and kind of your visibility in terms of what you have in the backlog. With respect to crushing and screening being an important piece there.

Some of your larger international competitors are facing some sizable tariff headwinds in North America. So maybe you can just talk about what you're seeing in your expectations just around that pricing tailwind that you highlighted in the fourth quarter, how that's kind of influencing your outlook for '26.

Tim, this is Jen. So the pricing, as you know, we do not disclose them specifically on the segment basis -- but you could see that we have a progressive step-up in our margin so far in Q4 versus Q3 for MP and a large portion of that is driven by price flowing through the P&L.

We expect that with the strong backlog that we ended in December, that too and it progressively stepped up again throughout the year for 2026 by quarter.

Good. And Jen, I apologize if I missed it. But with aerial specifically that kind of the interplay with tariffs and how you're expecting price cost to play out just more broadly for aerials in '26. I'm guessing it's more of a second half story, but maybe you can just comment on that. And again, I apologize if I missed that.

Right. So the arrows in the prepared remarks, we said that we're expecting kind of flat revenue and it was kind of flat margin profile we expect that in 2020 at that we had more headwinds in the hours given that the tariff is going to be 12 months of impact versus about approximately 6 months of impact in 2025. And that translates rounding on a number standpoint about $60 million more. And we're offsetting that to productivity and price for a net impact of flat throughout the year.

And first half day, we expect that, that's the price cost neutrality to be more skewed towards the second half of the year. But at the end of the year, we're going to be flat, holding our margin. with a flat top line. A little less favorable in the first half, a little bit more favorable in the second half.

Your next question comes from the line of Jerry Revich with Wells Fargo.

Yes, Simon, I'm -- so I wonder if you could just talk about the rev integration. So I saw the divestiture, the business has been operating really well in terms of driving higher efficiency rates. Can you just talk about the plan for the business from here relative to what we heard from the rep maybe 6 to 9 months ago?

And any update on order cadence and expectations for bookings as well. It sounds like there's more opportunity from a manufacturing standpoint, but I'm wondering if you can just expand on that, please.

Yes. No, thanks for the question. So it's been 9 days now since we closed. So we're very excited. Yes. Obviously, it's mostly a throughput story because, again, going into 2026, our Specialty Vehicles segment, legacy rev, if you will, still operates with about a 2-year backlog. And they did report relatively strong bookings again in their last fiscal quarter.

So it's mostly just to make sure that we keep burning their backlog down as much as we can. So it's going to be all about throughput. Now there's obviously price in that backlog. So it's going to be a combination of price and volume that's going to drive the margin improvement in 2026.

But it's mostly just making sure we keep that operational momentum. And that's why we were so eager on making sure that we keep the organization intact and that we can just purely focus on making sure we keep that momentum going into 2026.

Super. And separately, in ESG, I was pleasantly surprised with the bookings. It sounds like within the high part of the portfolio are more resilient than what I would have thought 3 months ago given what the waste companies have been talking about truck plans.

Can you just expand on what you're seeing? Is that the impact of the EPA '27 certainty? Or just if you wouldn't mind, just a bit clicking on the really good performance within.

Yes. Obviously, I would say the segment, the Environmental Solutions segment recorded outstanding performance in 2025. And a lot of that was driven by [indiscernible] by ESG. But also we saw synergies kicking in with utilities. So we saw the utilities business stepping up as well. But ECU is leading the charge, if you will, in terms of top line. And now in 2026, we see the kind of flipping. So utilities is now accelerating a little bit more than ESC, we are expecting ESG to be kind of flattish from a top line perspective and most of the growth coming from utilities.

But yes, we feel that, that segment has a lot of momentum. We don't see that slowing down anytime soon. So we're very pleased with how ES is performing.

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

Just wanted to on back a little bit more on the aerial side. So you had a very strong quarter for bookings there, and you talked about replacement demand from the rental customers. Can you just talk a little bit more what you're hearing from the customer base broadly in this space? And I think one of your competitors talked about a little bit of pull forward potentially into the fourth quarter. Did you see any of that? Or how are you seeing, in particular, maybe orders in January and February kind of following that stronger fourth quarter continuing that?

Yes. If you look at our -- if you look at last year, we had strong book-to-bill in both Q4 and Q1. I think average in both quarters was about $150. This year, Q4 coming in over 200%, we expect Q1 to be somewhat north of 100%, but it's probably fair to assume that both quarters will average again about 150% book-to-bill, so that and assess our guidance being flat because we expect Q1 to be a little softer than Q1 of last year, still north of 100%.

But overall, yes, going into the year with 5, 6 months of of coverage is obviously gives us a good forward visibility. But the reality is most of the demand is still just coming from mega projects coming from the nationals. Europe is picking up a little bit. not that material, but we haven't baked any major recovery with the independents into our guide for 2026. We expect that to happen more in 2027.

That's very helpful. And then could we just unpack a little bit more just on the commentaries around ES. I think if you could talk about the backlog there as well. It sounds like utilities have seen a nice uplift. So just the shape of that into next year.

And then if you could, I guess, Jen, if you could just unpack the margin dynamic a little bit. It sounds like utility should be a positive for margins, a nice tailwind there. And you expect, I think, if I heard correctly, ESG flattish, but it sounds like there are some factors maybe weighing on that margin on keeping the full segment more flattish for the full year.

So if you could just on back to puts and takes and maybe you talk about it on a quarterly basis, that would be helpful.

So I'll take the margin question, and then I'll let Simon take the back question. You're right. For the margin, when we said in the prepared remarks that the margin is flattish, I'm referring to a percentage-wise, and value-wise is still increasing. So the higher top line growth coming from utilities will drive an unfavorable mix.

However, it's being offset by the synergies flowing through in the ES reportable segment and also driven by the productivity that they have been working to. In 2025, we communicated that the utilities division within the ES segment has demonstrated progressive growth in the margin profile.

We expect that to continue into 2026 as the team actually relay out the Walker shop factory and also looking at standardization.

Yes. And then on the backlog, so yes, ESG did an outstanding job in 2025, leading the industry, quite frankly, in terms of throughput and reducing lead times. And so going into 2026, we see lead times now kind of have normalized in ESG. So we have -- we're back to kind of recovered levels, backlog coverage, so 3, 4 months forward visibility. We didn't put any EPA prebuys into our outlook for ESG.

And that's why we're kind of holding them flat and utilities is actually the backlog continues to increase. Hence, the reason we're expanding our capacity in that particular segment, which is already ramping up as we speak. So we're expecting to add about 20% to 30% capacity in utilities just to keep up with the rising demand.

Your next question comes from the line of Jamie Cook with Truist Securities.

I guess 2 questions. First, Simon, on the specialty business or REV Group. It sounds like the backdrop for 2026 is good with the extended visibility backlog 2 years out. I'm just wondering if there's -- obviously, it's a new acquisition. So to what degree is there conservatism in your forecast for specialty and if there was what would that come from? Is it just getting more -- burning through more backlog?

So just sort of your assumptions around there where there would be upside. And then my second question, just on aerial understanding you can't say that much, but it seems like the backdrop for selling that business is probably better versus when you initially announced it with a view that aerial markets have clearly bottomed potentially positive upside surprise.

So anything you can tell us is that asset more interesting to people just because it sounds like we should be getting some cyclical tailwinds.

Yes. Thanks for the question. So on specialty vehicles, yes, there's obviously a lot going on. The team is working flat out to make sure that we can actually start bringing the backlog down a little bit. So where we see any upside. I mean the team actually performed really strongly year-over-year 2025 to 2024.

We just want to make sure that we maintain that operational momentum. So I don't know if there's any particular upside I can call out. I'm very comfortable with the guide that we have laid out. And it's now -- it comes down to execution.

On Aerials, yes, I mean, we've set this in October, we believe it's a well-known asset. We believe it's well documented how that business performs through the cycle. It's a very strong brand, celebrating sixth year anniversary this year at ARA, which we're looking forward to. I can obviously not disclose too much because it's an active process.

But yes, we were very pleased with the inbound interest that we received -- and we're going to be very deliberate in evaluating the interest and decide on the best approach for our shareholders going forward.

And Jamie, if I could just add on the new reportable segment of S, the incremental margin on the higher volume is going to be in that range of 30% at the gauge with the higher in Q2 and Q3 and tapering down to Q4 due to seasonally lower revenue due to the weather.

So I think while we have baked in a very strong margin profile that's supporting our $100 million of EBITDA margin expansion in the midpoint of our range.

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

First on the dilution, a little bit less than I think the Street was thinking. And I just noticed the share count seemed to be a little bit lower when you said 111 for the year. Is there -- maybe I missed it, is there some share repo in that number? Just trying to get the math from now are just doing the basic conversion of the roughly 49.3 million shares that REV Group had.

Even the interest expense a little bit lower than I would have thought. So I'm just trying to understand exactly the dilution being only about $0.25

David, so the -- I think the 2 parts of the question. The first one in terms of $111 million of share count, that's because we only acquired that's a weighted average number and because we only issued them in February. So that equates to a written at $11 million, but full year is $115 million. I think that's maybe where you're looking at it.

Second question in terms of the dilution, yes. In fact, during the merger, I was -- we have alluded to the fact that it's going to be a mid-single digit of EPS dilution, given that the share count, the higher share count cannot be fully offset by the 11 months of RAP earnings. So that translates to be about 3%. And just for share count loans and then 2% based on a higher tax rate. So that's where we are.

That's helpful. I read the slide on 12 as the share count, 111 was for the full year not just for the quarter .

Yes, that's weighted average for the full year. Correct.

Sorry, the $111 million or the $115 million, just to be clear. .

I'm sorry, 11 is the weighted average for the full year.

Okay. The proceeds from an aerial sale, just curious now that you're a little bit further in the process. You own REV Group, the merger is done. You've obviously been able to move forward with some of the divestiture of a piece of the RV business. Given where the state of the portfolio is, we can debate the right multiple you can get maybe for aerials.

But when you think of the proceeds for that sale, whatever it may be, can you give us a little more clarity how you're thinking about that now?

Yes. So right now, they want a day 9 of our close the immediate priority is to strengthen the balance sheet to preserve the flexibility given that we funded this merger view both shares and cash. It's right now still too early to tell, depending when we actually find a strategic option for Aerials and at when -- where we're trading in terms of the share price but we will have several options, including a return value to shareholders through a we should do an early debt pay down to strengthen our balance sheet, reduce entrants and further improve our leverage or we reinvite in our business, especially in utilities and speciality to heat that is going supported by decent tailwind. But at this point, I think it's still too early to know.

Yes. We really like the optionality that is ahead of us here, but our immediate focus, as you will appreciate, is on integrating rev focusing on execution, focusing on delivering on our earnings and the cash conversion. And then we really like the optionality that's at the end of the road here.

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

Yes. Sticking with specialty vehicles here. I guess a couple of questions. First, how are you thinking about the recreation component of this business longer term? You're obviously in portfolio adjustment mode, which is why I'm asking. And when we're kind of thinking about the moving pieces to margin here, if I heard you correctly, embedded in your guidance, about 12.5% operating margin. .

How do you view the longer-term potential here if we're thinking 2 to 3 years out?

Yes. Thanks, Nick. I'll take the first one, and Jen, maybe you can weigh in on the second question. So on the RV business, yes, first of all, the announcement that was sent out yesterday in Midwest, that process was already ongoing before we closed the merger.

So don't read too much into that, that we are in portfolio adjustment mode. I would actually say we are in integration mode we are much more focused on what's right in front of us, and that is making sure that we integrate the 2 companies, that we build our synergy pipeline that we focus on execution of the 4 segments that we now own, and that's really our most immediate focus.

And now going into 2027 or beyond, I can't say we won't be -- continue to make some adjustments to our portfolio. But what's right in front of us is integrating rev and executing. Do you want to take the [indiscernible]

And Mig, I think your question on the EBITDA for 12.5% you're referencing to the new reportable segments, and that is without metric and lines and that was last year on a pro forma basis 11 months.

As you know, you're very familiar with Raf. We have publicly disclosed a 2027 target at the enterprise level, ranging for that 280 basis point margin improvement from 2025 to 2027. And at this point, we see that at the top end of the range, and heading to it that direction. So I think for modeling purpose, you could do model that out over the next few years.

But they are in line with what they have communicated in their last December 2024 Investor Day, but at the top end of the range.

That's helpful. Lastly, you gave us some context on tariffs, which is good. But I'm wondering more broadly from a price cost standpoint, how are you thinking about 2026 and what's embedded in here at steel has gone up quite a bit of late and maybe you can comment on any hedges or the cadence of price cost as the year progresses.

Right. So the -- In terms of still, we do not import raw steel and 70% of what we use as an HRC. You're right, make that the steel price has increased as expected as vendors try to sell from the U.S. We will continue to monitor that closely and execute our hedging contracts. .

So right now, we have our Q1 and Q2 of our HRC steel consumption hedge at a favorable rate of 10% to 15% lower than the forward price and any of the imported still on fabricate parts as really part of our $130 million of par that would bake into your guide of this $4.50 to $5, and that includes revenue.

Your next question comes from the line of Abe Grosset with UBS.

So in terms the capacity increases within Environmental Solutions. How much are you expanding capacity? When are you expecting those to come online? How is that split between to businesses in the segment. Just any kind of color you can give there?

Yes, we're expanding capacity in our utilities business, not in ESG per se. We're ramping up our facility in Waukesha, Wisconsin. And we're adding about 20% to 30% capacity over the next 2 years. and some of that, roughly half of that will maybe slightly less than half of that will come online in 2026. And sorry, I forgot what was the second part of your question.

Yes, it was really how is it split? And what is the overall capacity increase that you're thinking.

5 Yes. So it's -- utilities is the smaller segment within Environmental Solutions, and we're adding about 20% to 30% over the next 2 years in utilities. And the reason we feel that that's a justified investment this because I mentioned in my prepared remarks, that we expect CapEx to grow 8% to 15% for the next 5 years in utilities, just by the nature of upgrading the grid. And obviously, we sell and make products that will help upgrade the grid. So we expect that, that market will be quite bullish for us for the next 3 to 5 years.

Makes sense. And then I guess in the second I think you had said last year that you were looking at about $25 million of synergies from Environmental Solutions by the end. So just kind of curious where you are in that progress? And if that $25 million plus number is still how you're thinking about it for the exit rate for this year?

Yes, we actually inserted our first year of integration above that $25 million of run rate synergies. That's the reason why that even with the high utilities growth in 2026 that cost and unfavorable mix in terms of margin, we're still able to hold the margin percentage due to the synergies dropping to into 2026 within the Environmental Solutions segment.

Your next question comes from the line of Kyle Menges with Citigroup.

Congrats on closing the REV G deal. I did want to just double-click on the ESG guidance a little bit. I mean talking about flat guide and I was thinking maybe that would imply that the OE sales portion of that could be down a little bit this year.

So I'm curious just what should give investors confidence that this might just be a blip here in 2026 versus maybe the first year of a softening of this rep use recycling cycle?

Yes. Just so we're aligned here. We're guiding mid-single-digit growth for the Environmental Solutions as a whole and then ESG within that environmental solution we're guiding flat for 2026, excluding potential prebuys in the second half 2026, that would be upside to the guide.

So yes, we don't -- we see that end market is fairly noncyclical. We don't see any kind of -- we actually see continued growth going into 2030. The only reason we see ESG within Environmental Solutions kind of slowing down the growth rate a little bit is just because we're caught up on lead times.

We're now back to largely being a book-to-bill business, which is where we were before COVID. So we don't take that as a leading indicator that the business might be peaking. It's quite the contrary, we think that, that business has a lot of upside.

And for more reasons than just GDP growth. There's also fleet modernization going on. There's all sorts of new technology going into that space. So we see multiple angles for growth in that segment.

Great. And then just a couple of questions on aerials. Sounds like you're planning some pricing for '26 just would be good to hear how those negotiations have gone as you're entering 26 with the customers and then just a quick one, just anything to call out in your mix in '26 versus 25 as far as nationals versus independents? .

Yes. So for 2026, we continue to see most demand coming from replacement in North America and in Europe and mostly from the mega projects. We do not -- we did not bake in any kind of meaningful recovery in local private construction spend in 2026. We see that more happening in 2027.

Fleet utilization is up year-over-year. Our national customers are quite bullish for the next couple of years because of the megaprojects alone, but the real uplift for this segment will come when local and private construction comes back up. And we see that happening in 2027 and other in 2026.

So that's why the guide is kind of a little bit of moving sideways here because of the private construction spend not picking up until 2027.

Your next question comes from the line of Steve Barger with KeyBanc Capital Markets.

On Slide 4, in the emergency vehicle section, there's a note that says there's a mandated replacement cycle. What category of vehicles is that? And what percentage of the fleet turns over annually because of mandates? .

That's a good catch. I think that is every 10 years. I think you're talking refuse.

The emergency vehicles.

Emergency vehicles. SP28042895 Let me just look that up, we're on Slide 4 in the footnotes.

In the -- let me get back there. Yes, emergency vehicles, so the left most box, the second bullet, large installed base with a consistent and mandated replacement cycle? .

I'm sorry. I got you to add. I was looking in the footnotes, you're talking on the slide Okay. Got it. Yes. So obviously, sleep needs to stay fresh. And there is a mandated replacement cycle. There's not a real number tied to it per se.

But within emergency vehicles, municipalities want to keep their fleet with the maximum of time possible. And that's why they have specific kind of goals and targets around their replacement cycle. That's what that means.

Okay. And I know it's really early in owning rev, but you are maintaining leadership there. So my question is, just given the size of the backlog and where lead times in the industry are, do you see a path to accelerating production, which can result in a higher growth rate, maybe not this year, but as you look into '27 and '28. .

Yes. I mean, the industry is obviously investing in adding capacity and optimizing the throughput as it should because backlogs need to come down. I mean they're 2 years plus bookings continue to be strong.

And so just to make sure that we, as an industry, that we keep working on bringing our backlogs down, we're investing in capacity. And so are we there's our main location in Florida and our location in South Dakota. We're investing in capacity expansions and capacity upgrades.

And so we think that the kind of the sustainable target for backlog coverage is about a year -- and -- but it might take another 2 years or so before we get to that kind of backlog level. But yes, bringing down the backlog is what the focus is right now. And that will lead to a growth.

Right. So is it possible that business could grow in double digits, assuming orders hold up and the backlog coverage is there, while you try and bring those lead times down. And again, not this year necessarily, but at some point? .

Yes. For now, we are already ahead of specialty fees as a segment is already ahead of their Investor Day kind of commitment and so we don't want to count ourselves too rich here. We're guiding high single digits, and we think that, that's probably a more realistic outlook, and that's what we're guiding today.

There are no further questions at this time. I will now turn the call back over to Simon Meester for closing remarks.

Thank you, operator. If you have any additional questions, please follow up with Jen or Derek. And with that, thank you for your interest in Terex. Operator, please disconnect the call.

Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect.

Greetings, and welcome to the Terex and REV Group Merger Call. [Operator Instructions] As a reminder, this conference is being recorded.

It is now my pleasure to introduce your host, Derek Everitt, Vice President of Investor Relations. Please go ahead.

Good morning, and thank you for joining us to discuss the planned merger of Terex Corporation and REV Group, and Terex's intention to exit its Aerial Segment. A copy of the related press release and presentation slides are posted at investors.terex.com and investors.revgroup.com. The replay and slide presentation will also be available on those websites. This morning, Terex also announced its third quarter 2025 earnings. The corresponding presentation and press release are posted at investors.terex.com.

Please turn to Slide 2 of the merger 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 the presentation and in our reports filed with the SEC.

In addition, we will be discussing non-GAAP financial information we believe is useful in evaluating operating performance. Reconciliations for these non-GAAP measures can be found in the conference commentary. References to year is same year unless otherwise stated. Terex's fiscal year-end is December 31 and REV's fiscal year-end is October 31. References to the merged company's financial year on a pro forma basis reflect these different fiscal years. On Slide 3, we provide additional information and links to related documentation.

Continuing to Slide 4. Today's presenters will be Terex's President and Chief Executive Officer, Simon Meester; and REV Group President and Chief Executive Officer, Mark Skonieczny. Jennifer Kong-Picarello, Terex's Senior Vice President and Chief Financial Officer; and Amy Campbell, Chief Financial Officer of REV Group, will also be participating in the Q&A session that will follow the prepared remarks.

Please turn to Slide 5, and I'll turn it over to Simon.

Thanks, Derek. Good morning, everyone, and thank you for joining us today as we launch a transformative new chapter for Terex and REV Group. Before we discuss this exciting new step, I want to take a brief moment to thank the Terex team for another solid quarter. We delivered $1.50 of EPS on sales of $1.4 billion, with a cash conversion of 200% and are maintaining our full year outlook. The team continues to execute really well. We successfully completed the ESG integration, and we're very excited about what's next.

Today, we are announcing the merger of two great companies to create a U.S.-centric large-scale specialty equipment manufacturer with iconic leading brands serving highly resilient and growing end markets. The new combined company will be truly transformational in makeup and markets served. With complementary operations, management systems and channels, we have created the opportunity to unlock significant readily achievable synergies making a combined company stronger and more competitive that we win for our customers, our team members and our shareholders. We believe the financial profile, growth potential and leverage is highly attractive and will deliver significant value to Terex and REV Group shareholders. In addition to stronger, more predictable earnings and associated free cash flow, the combined company will have a low capital intensity profile, providing a solid foundation for future profit enhancing and growth investments.

Let's move to Slide 6 to review the transaction in more detail. Terex and REV has entered into a definitive agreement to merge in a stock and cash transaction that will result in Terex shareholders owning 58% and REV shareholders 42% of the combined company. This allows both Terex and REV shareholders to participate in the potential upside of the combined company. REV shareholders will also receive $425 million in cash consideration. The combined company will trade on the New York Stock Exchange under the current tariff stock ticker, TEX, and I will serve as CEO of the combined company, supported by a proven management team that reflects the strengths and capabilities of both organizations.

At closing, the Board will be comprised of 7 directors from Terex and 5 from REV. We expect to complete the merger in the first half of 2026, subject to customary closing conditions. Our teams have developed a detailed plan to deliver at least $75 million in annual synergies contributing to the highly attractive financial profile of the new company.

We're also announcing that we plan to exit our Aerial Segment and are evaluating a potential sale or spinoff. This exit will significantly reduce our exposure to cyclical end markets. Considering the achievement of synergies and the exit of Aerial Segment, the merged company is expected to provide a mid-teens adjusted EBITDA earnings profile in fiscal 2025 on a pro forma basis, near the top end of the specialty equipment peer group. At closing, the combined company is expected to have a strong balance sheet and liquidity position with approximately 2.5x leverage on a pro forma basis with the opportunity to delever further on the exit of the Aerial business.

Turning to Slide 7, and I'll hand it over to Mark.

Thanks, Simon, and good morning, everyone. Speaking on behalf of the REV Team, I'm excited about joining forces with Terex and embarking on the next chapter of our transformation, becoming an even stronger company with new opportunities to leverage our combined scale and operating systems to drive product innovation and even greater efficiency. Both our teams have done a lot to transform our businesses over the past several years. We have taken steps to strengthen our respective portfolios by acquiring highly regarded businesses, and making them even better while driving greater focus by divesting businesses that do align with our strategic direction, our financial thresholds.

Over the past few years, the REV team has deployed its operating system to drive broad-based improvements within the business. We executed simplification and process flow improvements across our manufacturing footprint, work diligently to improve safety and invested in onboarding and training for our employees. Our sourcing team fortified the supply chain for multi-sourcing initiatives that lowered costs and made material flow more dependable and less exposed to market disruptions. And we are now in the early stages of product simplification and commonization that we believe are the next steps in maximizing our operational potential.

I am proud of the hard work and improvements delivered by our team over the past 3 years and believe the company has reached a level of performance that provides a foundation for even greater momentum. Combining with Terex is a unique opportunity that we believe will create meaningful value for our shareholders.

I agree, Mark. The tariffs went through a similar rationalization exercise in recent years. And when Terex acquired ESG last year, we took a significant step to strengthen our portfolio, improve our margin profile with higher and more predictable earnings and associated cash flow. The recently announced divestiture of our Italian crane business that we expect to close very soon was another step in that direction. And clearly, merging with REV and exiting the Aerial segment will take our performance to another level. All that said, we are still in the early innings of our strategic transformation with significant synergies to deliver and growth opportunities across each of our end market verticals to continue to create shareholder value beyond this merger.

Let's turn to Slide 8. We are merging 2 strong companies to produce a combination that will clearly be created in the sum of the parts. After completing the Aerial's exit and adding $75 million in synergy value, the pro forma company is expected to deliver EBITDA margins of about 14% with a cash conversion of approximately 85%. At $5.8 billion in revenue, we will have meaningful scale with a strong balance sheet, well positioned to continue to invest and create additional value for our shareholders.

Moving to Page 9. The combined company will be U.S.-centric competing in a diverse and balanced set of attractive end markets. Approximately 85% of the combined revenue will be generated in North America with the vast majority from products that are made in our combined U.S. manufacturing network. The portfolio will be well balanced with about 40% of sales related to specialty vehicles with the remainder split between environmental solutions and materials processing. Each business has a demonstrated track record of delivering resilient and predictable operating results to a large degree because of the resilient end markets they serve.

From a Tirex perspective, the pro forma end market profile will be less cyclical than ever before in our history. And by design, with nearly 60% of revenue associated with emergency vehicles and waste collection, the significant share of our volume is tied to essential services that are not subject to economic ebbs and flows like other markets.

On the utility side, we expect accelerated growth for years ahead stemming from AI, data centers and the need to significantly upgrade the U.S. power grid. We also continue to see growth for infrastructure spending in the United States, Europe and around the world, which will benefit our materials processing business.

Turning to Slide 10, and you will see a snapshot of some of our great products and brands. We are a leading player in each of these markets. As I mentioned earlier, with combined pro forma sales of $5.8 billion, the total addressable end market for our products provide significant opportunity for additional penetration and growth. Terex utilities manufacturers, bucket trucks, bigger drecks and related products that enable Lineman to work safely on life electrical transmission and distribution lines across North America, a key advantage to maximize great uptime with emerging opportunity overseas. As a leading player in this space, we are increasing capacity and throughput within our current manufacturing footprint as we see share gain opportunities in this expanding market.

Our ESG business is a leader in refuse collection vehicles, compactors and related digital products. The HAL brand is regarded as a technology leader with a full range of automated side loaders, front loaders and multiple digital products. Our 3rd Eye digital platform is a meaningful and growing revenue stream on the ref side, of environmental solutions with extension opportunities across every vertical.

In the center, you will see examples of our extensive materials processing product range. Our Powerscreen and Finlay brands are global leaders in mobile crushing and screening within the broad aggregate industry and relatively new brands such as Ecotec are leveraging core NP technology to expand into environmental and other adjacent markets.

Examples of our industrial vehicles range include Advance, a market leader in front discharge cement mixers and hooks, material handlers, sold to scrap, recycling and port customers around the world.

Turning to specialty vehicles. REV has developed an extensive line of fire trucks and ambulances, all under brands such as eOne, Spartan, AAV and wheel coats that are recognized as market leaders in quality and reliability by the first responder community. REV's nationwide customer base is supported by an extensive dealer network to ensure their vehicles are available to execute their life-saving duties. In addition, REV's niche portfolio of motorized recreational vehicles include such leading brands as Fleetwood and Renegade.

Turning to Slide 11. Common characteristics across many of our end markets include economic cycle resiliency through reliable replacement demand in aftermarket service. Market growth supported by secular tailwinds and the ability to differentiate through quality, technology and life cycle support. The emergency response fleet with the support of its dealer network serves the nation's first responders from volunteers in small towns to the largest cities that own fleets of hundreds of fire trucks and ambulances and everything in between.

We continue to see demographic trends, including outward suburban expansion that leads to municipalities growing their fleets. REV has done an excellent job of customizing its product offerings to align with the needs of this diverse customer base and vastly different infrastructure requirements. Its end customers have stable budgets, supported by municipal tax receipts and departments that prioritize emergency vehicle replacement and fleet growth to maintain coverage requirements.

There are similar dynamics in waste and recycling, where growth is fueled by 4 main drivers, starting with population and economic growth, more consumption, generating more trash. And second, disciplined vehicle replacement, particularly with the national fleets and large municipalities. Third, accelerated replacement demand driven by innovation leading to lower total cost of collections from products such as automated side loaders that replace manual rear loaders and reduce emissions delivered by our CNG offerings. And finally, growth in digital solutions where we are the clear leader in this space.

Within Infrastructure, there are plenty of runway ahead with the allocated government spending with a clear need for more investments ahead. In the U.S. alone, the backlog of mega projects continues to grow providing a tailwind through 2030 at least. Looking abroad, we are seeing infrastructure spending momentum across Europe, while the Middle East and India, where MP already has a strong presence also continues to grow. And finally, the utilities market is also poised for significant net market growth. Demand on the U.S. electrical grid is increasing with the majority of data center-related growth still yet to come. Industry forecasts anticipate public power and independently owned utilities CapEx to grow between 8% and 15% per year through 2030. So with this portfolio leading businesses, we think we're very well positioned for growth for years to come.

Let's turn to Page 12, and I'll hand it over to Mark.

Thanks, Simon. I agree the combined company is well positioned for sustained growth. The investments we have made in our respective operating systems will help ensure we capitalize on those growth opportunities and deliver the synergy value that we have to find here today. Through our operating systems, our companies have provided a framework designed to drive excellence across all aspects of our organization, from operational efficiency and innovation to customer satisfaction and employee development. By leveraging a structured set of tools, processes and performance metrics, these programs ensure consistent execution of our strategic priorities, fostering sustainable growth and profitability.

They empower teams at all levels to focus on continuous improvement, problem solving and value delivery, creating measurable benefits for customers, employees, shareholders and communities alike. This disciplined approach will align the combined company towards achieving world-class results while reinforcing our commitment to being trusted leaders in the industries we serve while delivering value to our shareholders.

And at Terex, we launched the Terex Operating System, which is very well aligned in its design and purpose with the REV system to accelerate continuous improvement and leverage our growing scale. We also refined the integration excellence playbook component of our operating system as we integrated ESG there at muscle memory from its past and got it back in shape recently, setting us up well to execute this integration. Our organizations also share a performance-based culture. The combined team will be energized and fully capable of capitalizing on the many opportunities that lie ahead.

Let's move to Slide 13 to talk more about the $75 million in synergies. Our teams have already started to lay the groundwork for synergy realization. We have a detailed project plan and will hit the ground running the day we close. We expect to achieve about half of the $75 million run rate within the first 12 months as we consolidate corporate activities and eliminate duplication. Sourcing savings will ramp up starting with simpler categories like MRO, hardware, steel and more standard material before moving into more customized engineered components. Ultimately, every category will be addressed by the team, resulting in a more resilient and cost-efficient supply base.

On the operational side, we will build on the best practice sharing that has been done within both organizations and extend them across the company. The extensive U.S. footprint will provide greater optionality to increase domestic capacity, leveraging our combined capabilities. We expect go-to-market synergies over time as we optimize distribution channels and customer relationships, and we see meaningful opportunities to extend our 3rd Eye digital platform in the fire and ambulance verticals in the future building on the technology developing refuse, which we have started to extend into our utilities and concrete businesses.

The mission-critical status and intense conditions faced by first responders creates a natural use case for enhanced situational awareness for better maneuverability and safety provided by the 3rd Eye digital platform. We have a lot of exciting value creation opportunities and a track record of delivering.

Turning to Slide 14. With this transaction, we are essentially rebaselining the new company with much more resiliency and predictability in both top and bottom line performance, in different end market mix and an overall enhanced margin profile. As an example, we are significantly reducing our exposure to the cyclical construction markets. We believe that equity markets value resilience, predictable earnings and reward growth, the transformational actions we announced today hit both nodes.

The exit of the Aerial segment further enhances that profile by removing cyclicality in the combined business. With pro forma 2025 estimated EBITDA margin of 14%, we are creating a company with greater revenue growth potential and reduce earnings cyclicality that we believe is highly sought after by market participants. Moreover, our combined balance sheet provides optionality to take additional strategic steps over time to grow and further improve this attractive financial profile.

Let's wrap up our prepared remarks on Slide 15. Merging Terex and REV creates a large-scale specialty equipment manufacturer with a highly synergistic portfolio of leading businesses across a diverse set of attractive growing resilient markets. We see a strong fit between our cultures and our management systems. We have the playbook, the muscle memory and the team in place to execute our integration plans and unlock at least $75 million in annual synergy value. We will leverage our share capabilities to outperform in our end markets and generate strong earnings and free cash flow. We purposely structured the transaction to result in a strong balance sheet and flexible capital structure to enable future organic and inorganic investments.

I want to close by thanking the REV and Terex team members for their tireless efforts, getting us to this point. I look forward to the exciting future ahead for our combined companies.

And with that, I would like to open it up for questions. Operator?

[Operator Instructions] Our first question comes from the line of Stephen Volkmann from Jefferies.

Great and congratulations. I don't usually say that, but this seems like a lot of work in a big transaction. So best of luck on all that. I guess I'm curious, maybe as a starting point, Simon, you talked about the sort of more stable profile and the cost synergies, which all kind of makes sense. But what are you thinking strategically relative to growth going forward? I know you listed some specific growth things, but there were mostly kind of stuff that I think we already thought Terex had. So how does this kind of jump start growth for you over the next sort of 5 years or so?

Yes, Steve, thanks for the question. And yes, thank you. We are obviously very excited announcing the merger this morning. We think it checks all the right boxes. And to your point, it creates a new significantly less cyclical combined portfolio with attractive and growing addressable markets. And -- yes, besides the synergies that this brings and the more predictable profile, we do see a lot of growth potential, as I mentioned in our prepared remarks, across all of our verticals. And a lot of that is tied to just urban expansion, population growth, electrical grid upgrades, infrastructure investments, but also more waste than recycling. And that's just the addressable markets as they grow. But then as this group comes together, we also see a lot of opportunities in customers that we both cover in products that we can develop together. I'm thinking about the digital use cases that we referenced in our prepared remarks that we see use cases, for example, in some of the REV applications with our 3rd Eye products. So we see a lot of growth upside in both purely addressable market and in terms of revenue synergies.

Okay. Great. And then maybe just a follow-up relative to the AWP sale or spin. That's interesting from a timing perspective because I guess, one might argue that things are sort of bumping along the bottom there. Why not sort of hold on to that until a better business and sell it at some other point?

Yes. Great question. We think that the Aerial's journey is very well documented on how it performs through the cycle. Our Aerial's business has a strong brand, strong team, strong footprint, strong legacy. We are excited about the product portfolio and its pipeline. And obviously, the level playing field now that we have these two favorable antidumping rulings in both North America and in Europe. And we are convinced that there will be plenty of suitors out there will recognize the through-cycle value that we believe the Aerial's business will bring to their portfolio. So we think that, that is transparent enough.

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

I guess I also have a question for Mark, and this is a REV Group perspective here. I'm just sort of curious, Mark, to give your thoughts in terms of how this transaction came to be? And how you evaluated value creation from the standpoint of the REV Group shareholders? Your Specialty Vehicles business has done well. And you're clearly on a path to expand margins with a lot more to come as we look at the next couple of years, right? So that opportunity is still ahead. So as you think about this business now being part of Terex. Why does it make sense to enact this merger at this point? And from a valuation standpoint, I don't know if I'm doing the math correctly, but it looks to me like the transaction implies about 11x EBITDA on 2026. If that's correct, how did you think about the right valuation framework to apply in this transaction?

Yes, sure. So obviously, from how it came about just through the normal course of tanker discussions and the opportunity that was presented was really compelling as we've said in our prepared remarks. But as we also talked about, it's just a natural step in the transformation journey. And I think, Mig, in the past, we've talked about what kind of products that we'd be looking for, what kind of companies we'd be looking for. And obviously, we've stressed something in the refu or utility space was always on our radar. When you look at the leading brands that come together in this portfolio, it was just a natural fit for us, especially with the exit of the Aerial's business when you put these 2 companies together.

And from a valuation perspective, when you look at the mix of the consideration, it treats both shareholders very well and it provides the ability to participate in future upside of the company, the combined company, and the $425 million of cash consideration still leaves a strong balance sheet for the new company. So if you look at our shareholders specifically, they continue to participate in the upside that you are quoting there. But also get to participate in the synergy realization of $75 million and to participate in the value unlock associated with Aerial exit, which we've included in that -- in the deck. So I think that really was the construct and how we came about it and how I looked at it both from an operational, good tangential products and ultimately, the value creation that it gives our shareholders.

Okay. And then my follow-up, $75 million of synergies, certainly not a bad number, but as a percentage of sales for the combined entity, it doesn't seem like a big hurdle. So I'm kind of curious to what degree this number might prove conservative over time. And we haven't really talked about RV. I know this has been part of the REV portfolio, a smaller business, but perhaps less of a focus? Is RV considered for potential sales divestiture in the near term as well?

Yes. Thanks, Mig. So yes, $75 million run rate going into 2028. We think 50% is -- will be achieved within 12 months after closing. We have very similar operating systems, very similar culture. So we do think we will hit the ground running, and we have a good pipeline. We just want to walk before we run. And I think similarly to when we announced the ESG synergies, we just want to make sure that we manage the pipeline accordingly. And then obviously, we're going to try to overdrive the number, but that is the number that we're currently communicating, and we're going to do our best to exceed that expectation.

And when it comes to the RV business, first and foremost, we're going to focus on the things that we are announcing today, the integration of the 2 companies, the execution on the synergies and then the Aerial's exit. But going forward, we will continue to assess the effectiveness of our portfolio as both companies have done and will continue to do and just -- and make the right decisions for our shareholders.

Our next question comes from the line of Jamie Cook from Truist.

Congratulations on the transaction. I guess my first question, Simon, back to the unlocking of shareholder value. Key to that, obviously, is you guys either selling or spinning the Access business. So I'm just wondering your confidence level in sale versus spin and potential timing because if it's a spin, I guess I'd be probably more concerned with the market would value the Access business. So first that. And then I guess my second question, wondering if you could talk a little more about the opportunity with 3rd Eye. You mentioned it a little in your prepared remarks and whether with the 2 combined companies, what the aftermarket is as a percent of sales? And is there a bigger aftermarket story here, the ability to grow aftermarket and increase it as a percent of the total to again reduce cyclicality and potentially improve margins further?

Yes. Maybe I'll talk about Aerials and then maybe, Mark, you can share a little bit your thoughts on digital in the applications that your business addresses. So on Aerial, yes, as I mentioned earlier, the Aerial's business is a great business. There's a lot of equity in the brands. There's obviously 60 years of history, part of the founders of that industry. And it's been a public reporting segment for almost 20-some years or so. So we think it is very well known what the Aerial business does and can do through the cycle. It is a cyclical business, but there are suitors out there that like that kind of profile. So we are not concerned that there won't be any suitors. Quite the opposite, we think there will be quite a few. So for the simple matter is that it's a very recognized business on how it performs through the cycle. Mark, do you want to take the digital question?

Yes. I think, Jamie, I won't address the aftermarket side. But obviously, as I visited the facilities and look at the products, and there's just a plug-and-play replacement for some of the cameras that we use, but also the back-end software capabilities. We are in the beginning stages of looking at telematics and other things that, that product offers. So it's really an advancement of some of the things that we are doing from an innovation side. So it really gives us an upper hand in advancing that. So I would say the aftermarket part of that comes afterwards, obviously, but the initial install will be very favorable to the combined company, which is what we referred to. So I think that we're excited about that and the opportunity and the advancement that this gives us on the innovation side of the -- especially on the municipal-based businesses like we've talked about.

Next question comes from the line of David Raso from Evercore.

I was curious, Simon, the decision to exit Aerial, when was that strategic decision made? Was that something you thought about when you became CEO about 2 years ago? Was that already on the agenda? Or would you say it was more related to the potential swap here in businesses?

Yes. We have always had the intent to make our portfolio less cyclical. And the first step, we kind of diluted the cyclical part of our portfolio by means of the ESG integration. And I think that's exactly what happened, and our stock has shown more resiliency as a result of it in the last 12 months. And it's been a very successful integration. And then as this deal was -- or this opportunity was presented to us, we just started to analyze and we saw the merit and we saw the clear value that it would bring to our shareholders and that it would be that next step in terms of making the portfolio less cyclical. So no, it's just something that's kind of evolved organically over the last couple of months. And then we felt that it was a really compelling case and hence the reason we pushed forward with it.

Yes. I'm just trying to get a sense of how far along are we already in you understanding who the potential buyers are? Are books out already? Just trying to get a sense of the timing, if it's something you've thought of for a while. And as you discussed, you feel like the earnings over the cycle are well understood enough. The timing of the sale, maybe you're a little less sensitive to than others could believe. But just curious, how far along are you in this process knowing who the potential buyers are? And are the books already out?

Yes. No, they're not out. But yes, obviously, we talk to a lot of people just as you do. As I said, I think it's -- the business is well understood. And I think it's also, as I mentioned a couple of times, very well documented on how it performs through the cycle. And I don't want to get into too much detail on who we're talking to and what's going on. But we're starting the process formally today. And we will -- we feel confident that there will be plenty of suitors that will reach out to us over the next couple of days, weeks.

Okay. But safe to say this is not ground zero starting the process. It's been something that's been in the works at least in that, okay.

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

The question I had was on distribution, specifically as it relates to Terex's ESG segment and the Specialty Vehicles group of REV Group. I'm just curious if there is any overlap there. I'm thinking -- I know there's some mix of direct sales as well as what goes through dealers. And so again, I'm just thinking to the extent there's overlap or any potential kind of channel conflict just given that a lot of these specialty dealers will carry multiple lines and multiple brands. And so I'm just thinking if that's any issue that has to be thought through.

Tim, this is Mark. And from our perspective, and we've looked at that, there is no overlap across these channels, which sort of is again, the beauty of this transaction, bringing these complementary products together. So there is no overlap that we're aware of that will cause an issue.

Got it. Okay. And then just on the -- I apologize if I missed it, but was there a time line in terms of -- for the AWP sale or spin? And then anything you can help us with respect to the tax basis of that business as we think about those 2 potential options?

Yes, we have not communicated an explicit time line. And yes, we will keep you updated as material developments occur, but nothing else to share on that at this point.

Our next question comes from the line of Michael Shlisky from D.A. Davidson.

Congratulations. I wanted to circle back to Mig's question and just kind of follow up there. Looking at the 2026 EBITDA for REV Group, Mark, it is looking like around 11x, but you had some pretty sharp increases in your 2027, 2028 outlook where have much higher than that, 25%, 35% higher by that point, roughly $75 million worth. So I guess, one, I want to make sure that you're not double counting. You're still on track to get that 2027, 2028 EBITDA goal that you've already stated. And then secondly -- and this is all new synergies beyond that. And then secondly, I think the multiple is a lot lower or a bit lower when you consider that most of that number in 2027, 2028 is I don't want to say in the bag, but largely booked because it's a lot of fire trucks. So I'm just curious how you engage in discussions, given what you know about where you think that is going as opposed to where it's been and the trailing EBITDA?

Yes. Again, I think this transaction allows our shareholders to continue to participate in that as you've seen in our quarterly results and the fact that we've been ahead of the targets for 2027. So from the progression to those targets. So we feel very good about the accomplishments that we've had so far to date with the throughput increases and the margin realization that you're pointing out. So this is not a reflection at all of our ability to hit those. We are very confident in those numbers that those, and they were obviously supported the deal when we looked at valuations for both sides of the shareholder base. So I would say that. And then obviously, the synergies on top, as you pointed out, gives us value creation as well as the ability to participate in the unlock, like I said, to Mig on the Aerial exit on the side of the Terex house. So ultimately, I think all that was taken into consideration when we did the deal.

Okay. And then secondly, I wanted to ask the synergy outlook for the combined company. Is that combined with Aerials or without? I guess I'm kind of curious, you'll get some synergies on purchasing steel and so forth post the merger, but are there dissynergies if and when you spin off the Aerials and you'll have the opposite. We'll have a little bit less scale on buying steel and other components. I guess I just want to know, is it net or is it gross, the current synergy expectation?

This is Jen. That's a net amount. So we have taken into account the dissynergies.

Our next question comes from the line of Kyle Menges from Citigroup.

Congratulations on the deal. I am curious how you're thinking about integration of these 2 entities over time. It looks like there's some operational cost revenue synergies, especially between the ES segment and REV Group's businesses, but also looks like these 2 will kind of run as individual segments. So any thoughts there would be helpful.

Yes. Thanks for the question. Yes, first of all, in terms of integration, the plumbing, so to speak, will follow the same playbook that we used for the ESG integration. And we think we have a strong process there and a strong track record on doing these kind of integrations. And then the way we will complete the segment's makeup, so to speak, is that the REV segment will become a dedicated third segment to the Terex portfolio.

Got it. And then on synergies, it feels like the bulk of cost and revenue synergy would be between the ES segment and REV Group. So curious what the synergy is between REV Group and Materials Processing and just now how you think Materials Processing, how that segment fits in the portfolio?

Yes. The big swings are the -- obviously, the corporate cost synergies because we're merging 2 public companies. And then there is multiple efficiencies in SG&A and supply chain and logistics. Also in terms of our shared services footprint, there are synergies there and then a big one in terms of manufacturing best practices. And one of the examples I'd like to call out is if you look at what -- how our utilities margins, for example, have improved over the last 12 months just by the virtue of now reporting into the ES segment, you can see that how those manufacturing best practices can really drive margins up. So those are the big swings in terms of synergies between the 2 companies.

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

Congrats on the deal announcement. Simon, just wanted to go back to the point on cyclicality on Aerial, I understand, and I think this has been asked in a number of different ways, but I just wanted to touch on it a little bit more. Just given you don't need the proceeds to kind of delever to a reasonable range here, why not keep Aerials as a means of kind of maintaining some diversification in terms of kind of end market exposure near term? And maybe just kind of -- that's just kind of a different way of asking basically, if you don't mind kind of expanding on some of the implications of the intention to sell Aerials on kind of your view of either the near-term upside opportunity associated with the U.S. rate cycle or kind of improvement there and also the longer-term views of the ability of Aerials to kind of achieve mid-teens margins kind of through the cycle, I believe that I think that was kind of the longer-term target. So if you could just talk about -- are these positives getting pushed out to the right? Any structural changes to kind of how you look at that business would be helpful.

Yes. Thanks for the question. So yes, we're basically -- with this merger, we wanted to rebaseline the company. That's what we wanted to do. So with these -- with the REV Group and our Materials Processing segment and our Environmental Solutions segment, we're basically becoming a new company. And what we want to pursue is a more predictable, much less cyclical kind of earnings profile. That's what we want to do with the company going forward. And we believe that Aerials is a proven business. It's a strong business. There is a lot of upside coming from the mega projects alone in the United States. And then obviously, we see now Europe starting to invest in infrastructure, public construction as well, which will fuel further demand. We're not going to get into guiding, obviously, for 2026 here on this call today, but we think there is a lot of upside for the Aerials business for years to come. And then combine it with, I think, a well-documented proven track record on how it performs through the cycle, we think it's a very nice business for anyone.

That's very helpful. And maybe just could you touch on -- I guess, comment on what you kind of perceive would be kind of the fair value for this business given the current demand backdrop and everything you just discussed? And importantly, as it pertains to potentially different avenues to divest. Any concerns over the current geopolitical kind of environment and whether that limits the potential range of interested parties in these assets? I guess we're asking -- I'm asking because there's been other construction OEMs who kind of put on pause some intentions to sell assets due to kind of geopolitical challenges, maybe limiting international parties from moving forward. So just curious if you could comment on that.

Yes, I'm not going to comment on any kind of valuation. I think that, that would be too premature on this call. And in terms of its appeal, I mean, it's one of the -- it's a leading brand in its space. It's a very strong business with a strong brand. We have a level playing field in its addressable market, which means that there is no immediate risk for any kind of dumping activities in North America and Europe. So an attractive end market. And it has a pretty strong U.S. base. So quite honestly, I see it as the exact opposite. I see it as a very interesting asset that could give any owner a meaningful footprint in a very attractive end market and a big part of that being the United States and Europe, which are -- which is probably 90% of it anyway, if not more. So I see it completely opposite. I think it's a very attractive asset.

We have a question from Steve Barger from KeyBanc.

And sorry, I didn't have time to look this up, but can you tell me the dollar amount and duration in years of REV Group's backlog and maybe the concentration of it by product category, if you report that?

We don't report it by product category, but maybe, Amy, you want to take that. But it's about $4.5 billion all in and 2- to 2.5-year backlog. I don't know if you want to comment on.

You answered the question pretty well there, Mark. No, that's correct. We have a $4.5 billion backlog. We do break that out, $4.2 billion of that is in what we consider our Specialty Vehicle segment and about $300 million is in our Recreational Vehicle segment. And that 2- to 2.5-year backlog is strictly for those fire trucks and ambulances.

Got it. And there are other fire truck and municipally oriented companies out there that, in some cases, have higher than current margins embedded in backlog due to strong pricing. Is that the case with REV Group as well?

Yes. We have the same. During the pandemic, we saw backlogs for emerged fire and emergency equipment manufacturers increase across really all brands. And all of the providers of that equipment have been working through those backlogs and continue to work through those backlogs.

That concludes our question-and-answer session. I'd now like to turn the call over back to Mr. Simon Meester for closing remarks.

All right. Thank you. So thank you for your questions today. I want to just reemphasize how excited we are by today's announcement. We are merging 2 great companies, creating a low cyclical portfolio with strong synergies, a better margin profile, a U.S.-centric footprint, leading brands and last but not least, a low capital intense kind of structure. So we're very excited on how this sets up and the value that it brings to our shareholders. So with that, I want to thank you. If you have any additional questions, please follow up with the respective Investor Relations leads. Operator, please disconnect the call.

This concludes today's session. You may now disconnect.