Oshkosh Corporation (Holding Company)Common Stock

Greetings and welcome to the Oshkosh Corporation third quarter 2024 earnings caucus call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It's now my pleasure to introduce your host, Pat Davidson, Senior Vice President of Investor Relations for Oshkosh. Thank you. You may begin.

Good morning and thanks for joining us. Earlier today we published our third quarter 2024 results. A copy of that release is available on our website at OshkoshCorp.com. Today's call is being webcast and is accompanied by a slide presentation which includes a reconciliation of GAAP to non-GAAP financial measures that we will use during this call and is also available on our website. The audio replay and slide presentation will be available on our website for approximately 12 months. Please refer now to slide two of that presentation. Our remarks that follow, including answers to your questions, contain statements that we believe to be forward-looking statements within the meaning of the Private Securities Litigation Reform Act. These forward-looking statements are subject to risks that could cause actual results to be materially different from those expressed or implied by such forward-looking statements. These risks include, among others, matters that we have described in our Form 8-K filed with the SEC this morning, and other filings we make with the SEC. We disclaim any obligation to update these forward-looking statements, which may not be updated until our next quarterly earnings conference call, if at all. Our presenters today include John Pfeiffer, President and Chief Executive Officer, and Mike Pat, Executive Vice President, Chief Financial Officer, and President of our vocational segment. Please turn to slide three, and I'll turn it over to you, John.

Thank you, Pat, and good morning, everyone. I'm pleased to announce another solid quarter with revenue growth of 9% and an adjusted operating margin of 10.3%. Our adjusted EPS of $2.93 was in line with our third quarter expectations we shared during our second quarter earnings call. We continue to see improving performance and growth across our vocational business portfolio and an improving defense segment outlook with new contract award pricing. While our access segment is experiencing softer market conditions in North America in the near term, we expect we will continue to deliver resilient, healthy margins. In light of somewhat softer access equipment markets, we are updating our full-year 2024 outlook for adjusted EPS, to be approximately $11.35 per share versus our prior estimate of approximately $11.75 per share. During the quarter, we achieved a significant milestone as the United States Postal Service began placing our Next Generation Delivery Vehicles, or NGDVs, in service for last mile delivery. The NGDVs leverage our market-leading innovation and technological capabilities to provide the U.S. Postal Service with the industry's most state-of-the-art, purpose-built delivery vehicles that modernize and decarbonize their fleet while enhancing driver safety. We are pleased with early positive feedback on NGDV performance in the field, and we remain focused on executing our production ramp-up, which is progressing well. Last month, the Science-Based Targets Initiative notified us that they approved our greenhouse gas emission reduction targets. SBTI's validation of our targets reflects another important step in our journey of reducing our carbon footprint while consistently delivering groundbreaking solutions that shape a more sustainable future. Please turn to slide four and we'll get started on our segment updates. The access team delivered year-over-year third quarter sales growth. While we believe megaprojects and fleet ages remain tailwinds, pockets of slowing non-residential construction activity and persistently higher interest rates have been putting pressure on the market. Furthermore, as mentioned on our last call, we have seen customer demand revert back to more typical seasonality. We remain competent in our ability to deliver solid margins even during a period of softer market conditions. We are working with our customers on their 2025 requirements, and we continue to expect meaningful orders during the fourth quarter of 2024 and first quarter of 2025. Overall, we believe the access market will remain healthy over our long-term planning horizon. Our access team continues to advance its products with state-of-the-art technology, Our ClearSky Smart Fleet Connected Solutions Platform is an example of this capability. Customers are enthusiastic about the two-way communications and other technology enhancements, including over-the-air software updates, digital access control, and integration into our online express e-commerce platform that are improving productivity. In early September, we completed our previously announced acquisition of AUSA, a leading European manufacturer of specialty equipment, including wheeled dumpers, rough terrain forklifts, and telehandlers. We are pleased to bring AUSA into the Oshkosh family. AUSA is a market leader in Spain and serves adjacent new markets for us, including vegetation management. And it expands our agricultural presence and complements our traditional access equipment markets. We also believe that leveraging our North American sales channel for AUSA products will support growth moving forward. For example, our slide deck shows JLG's new E313 electric telehandler manufactured by AUSA. The battery-powered E313 offers zero emission, and low-noise operation for moving materials around in critical workspaces. Please turn to slide 5, and I'll review our vocational segment. Our vocational segment achieved strong year-over-year revenue growth of 17.6% in the third quarter, leading to another solid adjusted operating margin of 13.7%. Demand for vocational products remains very strong and our backlog continues to grow, providing long-term visibility. We remain focused on achieving increased throughput in our existing facilities to support growth. Concurrently, we are reviewing our manufacturing footprint as we evaluate additional investments to increase production capacity over the next few years. Furthermore, we have continued to lead in technology insertions across our range of products, from autonomous functionality to electrification and to intelligent product features. We expect this technological advancement to provide substantial benefits to our customers and drive growth for our company. In September, Republic Services issued another significant order for 100 of our new purpose-built zero-emission electric Volterra ZSL refuse and recycling collection vehicles. as Republic strives to improve productivity while reinforcing its commitment to a reduced carbon footprint. Customer interest in these revolutionary, fully integrated electric vehicles remains very high. We have more than 100 customer demonstrations scheduled that began in the third quarter and will continue over the next several months, allowing current and future customers to experience firsthand the significant benefits of our Volterra ZSL. I'd like to highlight two smaller but important vocational businesses on today's call. Both our IMT service vehicle and front discharge concrete mixer businesses have been performing well, delivering strong margins and contributing to the success of the vocational segment. We celebrated the one-year anniversary of the Aerotech acquisition on August 1st, and we are pleased with the integration and results to date. By combining our strengths, we expect to drive innovations in electrification, autonomous functionality, and intelligent product features. The team at Aerotech showcased several innovative products at the Ground Support Equipment Expo last month in Lisbon, Portugal. The show was well attended and featured our market-leading airport ground support equipment, our electric ARF Volterra, as well as JLG equipment, which is also used extensively at airports. Our display demonstrated the broad capabilities Oshkosh provides to the air transportation industry, as well as the strong commercial synergies between our businesses. Global air passenger metrics continued to strengthen with International Air Transport Association's August figures showing growth of 8.6% year over year. Let's turn to slide six for a discussion of the defense segment. Sales were up 14% as a result of NGDV production, higher tactical wheeled vehicle deliveries, and aftermarket parts sales. As a reminder, we expect to ramp up NGDV production throughout 2025 and exit 2025 at full rate production, leading to strong revenue expectations for these vehicles in 2026. We completed a five-year contract extension for the FHTV program in early August, which includes a combination of better pricing and a robust economic price adjustment provision. We also expect to complete a three-year contract extension for FMTV A2 in the first half of 2025 with both better pricing and similar EPA. We expect to begin delivering units under both of these contract extensions in early 2026. We believe these contract extensions provide solid visibility to customer demand and will support stronger, more resilient margins over the next several years. We continue to wind down domestic JLTV production and expect to ship the final domestic units in early 2025. On the technology front, during the quarter, we submitted our prototype proposal for phase two of the Robotic Combat Vehicle, RCV, program. Our offering leverages engineering expertise across Oshkosh, including Pratt Miller, to provide the U.S. Army with innovative, adaptable technologies to enhance soldier performance and mission success. The Oshkosh RCV is purpose-built and brings capabilities necessary for increased performance, improved maintainability, and flexibility in multi-domain operations. With that, I'll turn it over to Mike to discuss our results in more detail and our updated expectations for 2024. Thanks, John.