Oshkosh Corporation (Holding Company)Common Stock

Greetings and welcome to Oshkosh Corporation 2026 First Quarter Results Conference Call. At this time, all participants are on a listen-only mode. A question and answer session will follow the formal presentation. If anyone requires operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Patrick Davidson, Senior Vice President of Investor Relations for Oshkosh Corporation. Thank you. You may begin.

Good morning, and thanks for joining us. Earlier today, we published our first quarter 2026 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 and other factors that could cause actual results to be materially different from those expressed or implied by such forward-looking statements. These risks and factors include, among others, factors that we listed in our release this morning and matters that we have described in our most recent Form 10-K and other filings we make with the SEC, as well as matters noted at our Investor Day in June 2025. 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 are John Pfeiffer, President and Chief Executive Officer, and Matt Field, Executive Vice President and Chief Financial Officer. Please turn to slide three, and I'll turn it over to you, John.

Thank you, Pat. Good morning, everyone, and thank you for joining us today. We continue to make progress on our long-term goals in each of our businesses. Customer engagement around our new products and technologies has been strong, as demonstrated at CES and the many trade shows where we have participated in 2026. The actions we are taking across the company this year are foundational to delivering our targets for 2028, and we remain confident in the future we are shaping for those who do the toughest work in our communities. First quarter earnings per share were modestly below the expectations we outlined on our last call, where we indicated EPS would be approximately half of the prior year's amount. For the quarter, we delivered consolidated sales of approximately $2.3 billion and adjusted earnings per share of 85 cents. Performance in the quarter compared with our expectations was impacted by fewer fire truck shipments in our vocational segment where a number of planned customer pickups were not completed even though we are still making progress on increasing production. Our outlook for the company has not changed and we are maintaining our full year consolidated guidance. Demand across our segments remains solid and we have good visibility for the remainder of the year. We are focused on execution and continue to expect improved performance as the year progresses. And we remain confident that we are taking the right steps to drive positive business performance, not just this year, but for the long term. Please turn to slide five, and we will review some highlights since our last call. Demand in our access segment is improving, supported by megaprojects including data center-related construction. Orders in the quarter exceeded $1.5 billion, resulting in a book-to-bill ratio of 1.6. Customer engagement remains high, and we are entering the summer construction season with a backlog of $1.8 billion at the end of the quarter. At the same time, demand continues to be uneven across end markets. While megaprojects remain a source of strength, broader non-residential construction activity continues to be impacted by macroeconomic factors. Against this backdrop, our focus on innovation and productivity continues to resonate with customers. At the ConExpo show in March, our JLG team showcased all new boom lifts and our new 26-foot micro-sized scissor lift, all designed to improve productivity, serviceability, and versatility. Our new boom lifts directly address key customer needs by reducing machine weight and increasing basket capacity. Our micro-sized scissor lifts, which are seeing strong adoption in data center applications, provide a safe and more efficient way to access confined spaces. We also highlighted advancements incorporating autonomy, including canvas robotics for drywall finishing and our robotic welding end effector, both of which generated strong customer interest as companies look for solutions to address labor constraints and improve job site efficiency. While we are encouraged by strong order activity and backlog, we continue to operate in a dynamic cost environment. We are actively managing the impact of tariffs through supply chain and manufacturing actions, and we expect to maintain a competitive cost position as the industry leader. Overall, we remain competent in the long-term outlook for the access segment and our ability to execute through the cycle as we manage our costs and deliver attractive margins over time. Turning to slide six. Demand across our vocational segment remains healthy, with a strong backlog of $6.6 billion. In the quarter, we increased fire truck production year over year, although shipments were below our expectations. This was driven by a number of factors, including weather and travel-related disruptions. We are focused on modernizing and improving production flow and removing bottlenecks to improve lead times, and we are making progress. We expect further improvements in the quarters ahead, supported by increased process efficiency and targeted capital investments. On the innovation front, we continue to see strong customer engagement. At the FDIC show in Indianapolis, Pierce showcased the capabilities and quality of our fire apparatus, along with Clear Sky connected vehicle technology, which enhances fleet visibility, uptime, and coordination for fire departments in the field. At McNeillis, we launched our AI-enabled material contamination detection technology as part of our McNeillis IQ platform. This solution leverages artificial intelligence and advanced analytics to identify contaminants in real time during collection, helping customers improve efficiency and sustainability. We expect to continue expanding our McNeillis IQ offering with additional technologies over time. Oshkosh Aerotech continues to perform well, supported by strong demand from airports investing in expansion and modernization. Order intake in the quarter was solid, particularly for air cargo loaders and jetway passenger boarding bridges, with key wins in Reno, Orlando, and Nashville. Our jetway backlog now extends beyond 12 months and we are investing in capacity to improve delivery times. Summing it up, we have strong visibility across the segment and we expect to convert backlog into revenue as production throughput improves and we reduce lead times. Please turn to slide seven. In our transport segment, we continue to make notable progress executing on our key programs and advancing toward our long-term objectives. For NGDV, production is on track. The fleet has now surpassed 20 million miles and is operating in 48 states. Importantly, feedback from the USPS and their drivers continues to be very positive, reinforcing the productivity and reliability benefits of the platform as we ramp deliveries. As we look ahead, NGDV production will continue to build through the year. with a greater contribution expected in the second half. On the defense side, we are also progressing on our FMTV program. We are launching the production of low velocity airdrop units with production expected to grow in the second half of the year. These units represent initial deliveries under the FMTV contract extension signed in June of 2025. Closing out my segment comments, we are executing our plans for transport and expect performance to improve in the second half of the year. With that, I'll hand it over to Matt to walk through our detailed financial results.

Thanks, John. Please turn to slide 8. Consolidated sales for the first quarter of $2.3 billion were flat compared to the same quarter last year as pricing, favorable currency and the impact of changes in cumulative catch-up adjustments in the transport segment offset lower sales volume. Adjusted operating income was $96 million, down from $192 million from the prior year, primarily due to unfavorable mix, which includes a cross-segments products and for access channel mix with higher NRC sales compared with last year, higher manufacturing overhead costs, which in part reflects our investments for future production, and lower sales volume. In the quarter, we recorded a benefit for IEPA refunds of about $13 million. Our estimate for the full-year impact of Cape 1 is about $23 million. This reflects our direct payments and excludes payments made by suppliers, which would be subject to future discussions. Adjusted earnings per share was $0.85 in the first quarter. Free cash flow for the quarter was negative 189 million, an improvement compared to negative 435 million last year. The improved result is despite lower earnings and reflected more disciplined working capital management as we built for the summer season as well as higher customer advances. Our expectation for cash conversion remains strong for the year. During the quarter, we repurchased approximately 300,000 shares of our stock for 47 million. In March, we also refinanced our revolving credit facility. The five-year agreement has similar terms to the previous facility with a capacity of $1.6 billion at a slightly lower interest rate. Turning to our segment results on slide nine, access first quarter sales of $943 million were roughly flat with the prior year. Access sales were better than we expected, particularly given the strong sales volume access delivered in the fourth quarter of 2025 in response to announced 2026 pricing. Compared to the first quarter of 2025, lower sales volume was partially offset by favorable currency. As John mentioned, demand has remained robust. We delivered a book-to-bill ratio of 1.6 during the quarter compared to 1.0 during the first quarter last year. Adjusted operating income margin of 4.1% was about where we expected for the quarter. The decrease in adjusted operating income relative to last year reflected mix, price-cost dynamics, and the impact of lower sales volume. You will recall that access is our segment most significantly impacted by tariffs. Vocational sales of $825 million were down from last year on lower shipment volume, partially offset by improved pricing. Sales volume reflected lower sales of refuse vehicles as expected, and fewer deliveries of municipal fire trucks, despite modest growth in our production compared with the same period of last year. As John mentioned earlier, weather and travel challenges impacted customer pickups as they were not able to take deliveries of fire trucks late in the quarter. Lower sales volume, higher manufacturing overhead costs, partly reflecting our investments in Pierce facilities, and adverse sales mix were partially offset by favorable price-cost dynamics, resulting in an adjusted operating income of $94 million and a margin of 11.4% for the quarter. As John mentioned, we are focused on continued improvement in throughput for fire trucks and jet bridges in order to increase the pace of deliveries. Transport segment sales increased $50 million to $513 million in the quarter due to higher sales volume and the impact of cumulative catch-up adjustments. Delivery vehicle revenue grew by $166 million to $217 million and represented 42% of transport segment sales during the quarter. Delivery revenue grew more than 30% sequentially compared to the fourth quarter of 2025. As expected, defense revenue was lower compared with last year due to lower tactical wheeled vehicle and aftermarket sales volumes. As a reminder, in the first quarter of 2025, we were still building JLTV units with the last units built in May 2025. Transport segment operating income was $4 million, up $3.6 million compared with last year, reflecting lower adverse cumulative catch-up adjustments and higher sales volume, partially offset by higher manufacturing overhead costs and adverse mix. We expect transport operating margin to grow in the back half of the year, as we transition out of past fixed price contracts, continue to ramp up NGDV production, and expect to receive additional NGDV orders. Turning to our expectations for 2026 on slide 10, we continue to expect our full year adjusted EPS to be in the range of $11.50. We are facing conditions that are more challenging and dynamic than we anticipated three months ago, and we expect roughly 30% of our earnings in the first half of the year. The back half will be stronger, reflecting improved price cost and access, higher firetruck production reflecting our investments, building on the FMTV contract, and for the NGDV, both higher production and our expectation for an additional order. We still expect free cash flow of $550 to $650 million unchanged from our prior guidance. At this time, we are not updating or reaffirming our expectations by segment, as we continue to manage our business in this evolving economic landscape. In access, we are seeing promising order activity, as you can see in the strong book-to-bill ratio of 1.6, which may result in a modestly greater contribution from the segment. In vocational, while our growth and margins are still expected to be robust, particularly for municipal fire apparatus, our first quarter delivery shortfalls and facility construction timing are likely to modestly reduce the contribution from that segment this year. Transport remains on plan. Our outlook for tariff impact has remained largely unchanged as IEPA tariff recoveries are broadly expected to offset the additional costs of the 232 expansion. As John mentioned at the outset, all the ingredients to deliver on our 2028 targets are in place or underway. With new and refreshed products, advanced technologies, and increased production to improve lead times on extended backlogs, the plan to achieve 2028 targets is clear. With that, I'll turn it back over to John for some closing comments.

Thanks, Matt. Summing it up, we expect continued improvement throughout the year as we execute on our plan. We are operating in a dynamic environment, including changes in tariffs and geopolitical uncertainty, but we are actively managing those factors through pricing, cost actions, and supply chain actions. We are maintaining our full-year adjusted earnings expectations in the range of $11.50 per share, and we remain confident in our progress towards delivering on our 2028 targets. Our confidence is grounded in three areas, strong backlog and demand, continued production improvements at vocational, and continued progress with our NGDV ramp and transport. I'll turn it back to you, Pat, for the Q&A.

Thanks, John. I'd like to remind everybody, please limit your questions to one plus a follow-up. Please stay disciplined on your follow-up question. After the follow-up, we ask that you rejoin the queue if you have additional questions. Operator, please begin the Q&A session.

Thank you. The floor is now open for questions. If you would like to ask a question, please press star 1 on your telephone keypad at this time. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up the handset before pressing the star keys. Again, that's star 1 to register a question. Today's first question is coming from David Rosso of Evercore ISI. Please go ahead.

Hi, thank you. Hopefully you don't hear the static when I'm speaking that I'm hearing back. Please let me know.

No, you sound good, David. You sound fine.

That's good to hear. Just curious, the second quarter implied at about $2.60. I know you mentioned you don't want to give business segment guide updates, but can you at least give us a sense of where were you thinking EPS could be for 2Q? I'm just curious how much of the first half got pushed into the second half. And given some of the commentary around why vocational was a bit light, just curious why the catch up wouldn't be a little bit quicker. So maybe the first part, what came out of 2Q? And if it was sort of weather related, why can't we catch up for that a little bit faster? Thank you.

Hey, David. It's Matt. So, you know, the elements in Q2 largely haven't changed year over year. We were always expecting access to be a little weaker. In terms of vocational, we said two things. One, obviously we did have the shipments that would slip into Q2, but we're also seeing some delays in our facilities. And so as we implement our production changes, the timing of some of that capacity coming on stream is pushing later into the year. And so that affects a little bit of the seasonality in Q2 as well.

David, I can give you this, John. I can give you a little bit more color. You mentioned that we didn't provide segment level guide. Just some color on what we're seeing. We see right now we're seeing a little bit better expectation on access equipment. As we go through the year, you saw the big $1.5 billion of orders So we're seeing favorability there. We're taking a more measured approach at the same time in our vocational business. Primarily, you know, we're going to see really big gains in terms of fire trucks for the year, but we're taking a little bit more measured approach there versus what we originally guided to. It all still leads us to the 1150 number.

David?

I'm sorry. I'm still here. Just the follow-up on that about transport defense, talking about the rest of the year for the other segments. Your postal revenue is generally where I was expecting, and it sounds like are we at that sort of full run rate, the quarterly run rate, as the year goes on? And do we need that second tranche of orders to the cumulative accounting catch-up? Do we need that set of orders to still hit your guide for transport defense margin? Just curious about that catch up in the second order that's required. Thank you.

Sure. So the calendarization of revenue and delivery is expected to grow across the quarters. So we would expect higher revenue as we progress through the years. We continue to ramp up production, but in line with our expectations and the USPS delivery schedules. We are assuming there is an order in the back half of the year as well, and so that's implicit in our guidance.

Thank you very much.

I appreciate it. Thanks, David.

Thank you. The next question is coming from Tammy Zakaria of JP Morgan. Please go ahead.

Hi. Good morning. Thank you so much for taking my question. I wanted to ask about the vocational segment. I appreciate the winter weather and timing. related comments, but just stepping back, do you expect any pre-buy driven demand, or is that embedded in your guide for the back half?

So we're not expecting significant levels of pre-buy. That might happen in the back half, but we're certainly not counting on it. Just for those on the phone listening in, this is really about 27 model year emission standards and chassis. We're not counting on that in our guidance. Certainly, if it happens, we stand ready with capacity.

Yeah, our view, Tammy, is if that happens, it will be upside to what we're currently expecting.

Got it. If I could ask a follow-up on that, how much volume uptake are you planning in the vocational segment year over year without any normalized volume uptake for the year?

It's really going to vary by segment, Tammy. So as we talked about before, we would see refuse vehicles down year on year without a pre-buy, which is what we talked about on the last call. Fire truck production, we are adding production throughput and efficiencies to modernize that line. So second half of last year, we were up roughly 10% year on year on our production. We would expect this year to be up 10% as well, roughly. on production, so continuing to add fire truck capacity there. As John mentioned on the call, we're adding capacity in Aerotech that comes on stream more early 27 than late 26, but have plenty of capacity to support our sales projections there. So we'll see growth in some segments, but on a year-over-year basis, we would expect refuse to be down, setting aside any pre-buy.

Understood. Thank you.

Thank you. The next question is coming from Meg Dobry of Baird. Please go ahead.

Yeah, thanks. Good morning, guys. I'm wondering if you can give us a little more color on just this evolving tariff picture. If I understand correctly, you did record a $13 million benefit in Q1, but then now you're dealing with updated Section 232. You know, how does this flow through the P&L through the year? You know, do you have more of a headwind now? You obviously recognize the benefits, so presumably that gets unwound to some extent.

Hey, Meg. So there are multiple moving pieces in that question, obviously. So the IEPA refund, we filed that. We put that, we put the accrual in Q1. It was about 13 and a half. It's 23 for the full year. That's a portion of the IEPA, so obviously our suppliers paid IEPA as well, so they should be getting refunds, as I mentioned on the call. We'll be having discussions with them on recovering those refund payments. And then you've got, as you say, 232 expansion. Responding to that comes in two pieces. One, we do see IEPA fully largely offsetting the negative impacts from that. And two, the team in access, which is primarily affected, is working diligently to mitigate that as well. Some of the best teams in terms of moving around production, we talked about that pretty much half of last year, and so they're working through mitigation plans there as well. So we think it's negligible to zero impact on the year between IEPA and 232.

There's more IEPA to come, Meg, just to make that point. There's more favorability to come in the future.

Okay. I guess my follow-up is on price-cost. I'm sort of curious as to how you think this dynamic evolves through the year, because obviously your year is guided, is very back and loaded, and it does appear that cost inflation is actually ramping, so presumably you're going to have more cost inflation to deal with in the back half than you do currently experience in your P&L. You know, what are some of the things that you're doing to address that to get us anywhere close to kind of the way you structure the guidance?

Yeah, so I'll take that, Meg. It's John. Our price-cost gets better and better as we go through the year. You are correct. We're dealing with a very dynamic environment, both with tariffs and geopolitical conflict, which creates inflation. And we've got incredible work going on on the cost side, but we also have some things that go on on the price side. And as the year goes by, we get more and more benefit on both of those. So, so far in the year, we've seen very little benefit on the price side. We get more price Q2 onward, and we'll get more cost reduction to minimize how much price we have to get from our customers as we go through the year. But it gets better and better as we go through the year, which is part of our confidence that the second half is going to be better than the first half.

All right. Thank you, John. Thanks, Meg.

Thank you. The next question is coming from Angel Castillo of Morgan Stanley. Please go ahead.

Hi, good morning, and thanks for taking my question. Just wanted to go back to the vocational segment a little bit. I was hoping we could unpack the margins in a little bit more detail. I guess you noted some of the shipment slowdown and a more measured outlook in light of that. But could you talk a little bit about, I guess, any impact of manufacturing costs or mix on the business and just kind of your expectations? And related to that, I guess, you know, as we think about kind of anything you can provide in terms of bookends or qualitative thoughts, you know, just to kind of help us gauge, you know, what margins now are embedded in the guide versus the 17% you had previously guided to for the year.

Yeah, thanks, Angel. So obviously volume was a driver in vocational. I mentioned mix. That's really around the mix of segments. So as you think about a bridge, as you have a mix out of fire trucks because of the shipments, then you're going to have some adverse mix effect. And then we have invested in additional capacity and throughput in in pure specifically. And so as we don't deliver those fire trucks, then we have kind of stranded cost, if you will, on the manufacturing side. So that's really how to think about vocational. In terms of the full year guide, while we're not providing specific guidance by segment, we still see this as a very strong business for the year. And the margins we would expect to be in the range of our long-term guidance in 2028, which is 16% to 18%. We originally guided 17%. it most likely will fall below that with some of the changes to our capacity timing, but below the 17 to be clear, but within the 16 to 18.

That's very helpful. Thank you. And then maybe a little bit of a bigger picture or maybe just more macro. A lot's going on in terms of geopolitics with Iran. Just how should we think about the Iran conflict's impact on your business? Obviously, always sad to see any fighting, but just I was hoping you could talk about the bigger picture dynamic of impact of any energy prices might have on your business, how that kind of flows through or not. And then also on the flip side, have you seen any step change in terms of orders for defense vehicles or any kind of incremental opportunities for sales there?

Yeah, first of all, the conflict, what it does is it drives inflation. That's how it impacts us. So when you see inflation, You see steel up 25%. You see aluminum up more than that. We all know what's going on with oil, of course. It's primarily an inflationary impact. By the way, these impacts are embedded in our guidance today. So they're all considered in our guidance. We know what we're going to do about it. We've got world-class teams that are working on positioning our footprint to make sure we keep costs as low as we possibly can. On the defense side, Our defense business is going well. We're shipping more as we get to the back half of the year on new contracts, which is a big change in price, which is part of the reason we're more confident in the second half. Because of that, we work really closely with the Department of Defense. We're noted as a high-quality, very reliable delivery type of a business with our defense operations. There's not anything that's happened that's going to impact 2026 at this point, but we're highly engaged with the Department of Defense to support their efforts.

Very helpful. Thank you.

Thank you. The next question is coming from Jerry Rivich of Wells Fargo. Please go ahead.

Yes, hi. Good morning, everyone. John, I'm wondering if I could ask about what you're seeing in access on your telematics data in North America and in Europe. It sounds like utilization is tightening based on what we're hearing from the rental channel. Is that consistent with what you see in the data in North America? And separately, we'd love to hear what you're seeing on the data front in Europe.

Yeah, thanks for the question. When I said I'll give you a little color on the segment level details, part of the reason that we feel better and better about the access business as we go through the year, we do triangulate the data that we get off of our machines together with what our customers tell us is happening with utilization, which ultimately leads to where they need equipment and when they need equipment. But it triangulates really well. You've heard some of our publicly traded customers talk about it. Utilization is getting better. And it wasn't like it was coming from a bad place, but it's certainly getting a little bit better. And that's a positive sign for the access industry. And the used market in access equipment is also a positive sign. The used market is healthy. And so there's orders for new equipment that's coming in. So by and large, that gives us a little bit more favorable outlook for access. Gary.

Super. Thank you. And can I ask, on the USPS side, obviously they're waiting. On funding from Congress, can you just talk about if production plan would be impacted at all if the order comes three months later, six months later? Can you just update on the current production lead time?

Currently, I don't think it's going to affect 2026 because we've got orders on the books to produce 2026. But we expect the United States Postal Service, and they expect, We'll continue to place orders on an annual basis as time goes by because we have to keep our supply chain with enough visibility to keep the supply chain primed. United States Postal Service understands that. We understand that. The vehicles are doing extremely well. They want a consistent supply of vehicles for their required timelines. We're meeting their timelines today, so everything's going smoothly. But in normal course, we expect another order this year. And I don't know that's dependent upon any congressional funding. It's really dependent upon the budget for the United States Postal Service. But this program is moving smoothly. And with A606 accounting, when you get an order, it actually impacts your margins, as you know. That's why the order is important.

Thank you. Thanks, Jerry.

Thank you. The next question is coming from Kyle Menges of Citigroup. Please go ahead.

Great. Thanks for taking my question, guys. For the access segment, certainly orders were a bright spot in the quarter. I'm just curious maybe where you're really seeing that incremental demand by region and perhaps bifurcating between the NRCs and the independents.

Yeah, thanks for the question. It's largely still driven by the bigger projects. We call them frequently mega projects. These are projects that are hundreds of millions of dollars in size as discrete projects are quantified. So think data centers and PowerGen and stuff like that. So that's still kind of the bulk of it. NRCs tend to get more of that. So we're weighted a bit more to the NRCs, but that's okay with us. We've got great Great customers that we serve there to make this happen. But we're also starting to see a little bit of brightness in some private non-res end markets. Not all, but some. And we expect that that will continue to gradually improve going forward.

Helpful. And then just follow up on NGDV production. I think if my math is about correct, you might have been at around plus or minus 12,000 units of annualized production in the quarter. And I want to say the guide assumes that you get to the higher end of that 16 to 20K production run rate in the fourth quarter. Maybe just talk about how the ramp's going so far in your confidence level and getting to that higher end of the production target by 4Q.

Yeah, just to clarify, our guide assumes the low end of the range. So annual production going forward is 16,000 to 20,000 units. Part of that's dependent upon the Postal Service's schedule to receive vehicles. We'll be at the low end of the 16 to 20,000 units this year. Production is going well. We're in line with postal service requirements, even with a couple of hiccups with snow and things in South Carolina that doesn't happen very often. But we're in line with their expected deliveries on contract, and so we feel good about it.

And sorry, just to clarify, just to clarify, you said you'll be at the low end of that target for the full year or also in the fourth quarter?

For the full year. Full year. We'll be a low end of 16,000 to 20,000 units for the full year. Back half is bigger than the first half.

Got it. Thank you, guys.

Thank you. The next question is coming from Stephen Volkman of Jefferies. Please go ahead.

Hi. Good morning, guys. Can I ask about Aerotech? That was kind of flat year over year. Sounds like you have some orders to ramp that, I guess. Just give me a sense of, you know, what you're seeing in that business. How do the margins kind of relate to the rest of the segment? And what are you doing in terms of increases for capacity?

Yeah, thanks for the question, Steve. Aerotech's a great business for us. I wouldn't read too much into the shipments were kind of flattish in Q1. Q1 is just one quarter. You saw our backlog continue to build in Aerotech. So this business is going to continue to grow. We've got great customers who want to continue to invest. They are continuing to invest. The backlog is strong. The margins, all I can tell you is they're double-digit margins in this business. And of course, we'll continue to grow our margins as we go forward. We're putting, you know, it depends on the specific product because we do jet bridges and we do ground service equipment like cargo loading equipment and and so forth depends on the specific product so we're putting a little bit more bricks and mortar into the jet bridges because there's a really strong business for us the ground service equipment is also a strong business we're doing more a little bit more 80 20 in that business to drive capacity improvement and throughput on the existing production lines

Super. And then just quickly, Matt, the tax rate was a little lower in the first quarter. What's the full year tax rate now?

Unchanged from our prior guidance on the full rate tax rate. Thanks, Steve.

Thank you. The next question is coming from Tim Stein of Raymond James. Please go ahead.

Thank you. Good morning. The question is on access. And Matt, to the extent that perhaps there could be some upside to the 10% margin that you outlined initially. And I know that's not what you're going to imprint, but to the extent there is more upside pressure on that part of the business, I'm just curious how the balance of the year is shaping up in terms of the mix within the backlog, specifically thinking about kind of the expectations as we go through the year with respect to price cost. and kind of how that interplays within the customer and product mix.

Yeah, thanks, Tim. So obviously, we're pleased with the quality of the backlog and the book to bill of 1.6 is a very strong book to bill, which gives us greater confidence for the year shaping up to be a stronger access than what we had originally seen early on. Obviously, price cost, we've talked about that being neutral for the year. That's still the plan, which means the back half will be stronger as you get cost reductions and pricing, as John described. In terms of the margin, you know, we want to see the year unfold a little bit more before we give specific margins, but certainly holding double-digit margins in this environment and for the year is important.

Yeah, okay. within one piece of vocational we didn't yet hit on. Just on the garbage truck side, is that the volumes for the year? I know the first quarter, and we've been anticipating this year to be a softer year, but just any revisions, just how you see that playing out and how we think about the cadence of year-over-year revenue change as we go through the year for that piece of vocational?

Not really. I mean, third year, Starting in the third quarter, we started to see orders drop off. We've talked about that on prior calls. We see this year kind of being, well, we see the full year being down, as we talked about earlier. First quarter, we were down about 25%. I think 25%, 30% for the year is reasonable.

Yeah, I'll just, Tim, I'll add some color to that. You know, it's similar to what we've been saying, what we said a quarter ago on the call. We expect it to be down in 2025. That hasn't changed. It's about the same. It's just cautious CapEx outlays by customers is primarily the reason. But I'll make a comment that we are investing in technology that customers really care about. We launched the contamination detection technology in Q1. Very positive initial feedback on that technology. The fleets remain aged. So long-term, we feel really good about this market. Healthy market for us going into 2028. 26 is just not a year that it's growing much. I got it.

Thank you. Thanks, Tim.

Thank you. The next question is coming from Mike Shulsky of DA Davidson. Please go ahead.

Good morning and thank you. Let's circle back to the fire commentary. I guess maybe can you maybe... Just looking at the overall inventories for Oshkosh, they actually were down a little bit, at least days of inventory over the prior year. You said that perhaps fire had some additional financial inventory. Could you help at least quantify in dollars how much fire inventory you had at the end of the year and what other areas of Oshkosh had inventory go down? And then also, it's already been May now. Have people come in to pick up their fire truck now that the weather, I assume, has cleared up a bit here?

Sure, Mike. Sorry, I'm not going to break out inventory by segment. That would be a bridge too far. But I'll give you some quality of color. So there are a few things. One, last year we had substantial inventories. We were ramping NGDV. Is that production stabilized? We've been burning down inventory there. In access, we've done a really good job focused on inventory, burning down both finished vehicle inventory, but also some of our in-process. And so that team's been doing a good job on inventory. They've also been doing a good job on receivables. And so the overall really strong working capital performance for all the segments. In terms of May, yes, people have been taking advantage of the beautiful weather here in Wisconsin to pick up fire trucks.

Yeah, we've had a lot more fire truck deliveries in the first part of Q2 as a result of that pent-up hold on shipments due to the factors we mentioned. But there's been a lot of fire truck deliveries so far this quarter.

Great. And then my follow-up here is also on fire. Did the weather issues during the quarter cause any issues with people being able to order or configure a truck or test drive a truck? Were there any delayed orders? And again, did people come in here in April, May, now that the weather is better, to actually order some fire trucks?

Yeah, no, that's not a factor. Order rates are still pretty consistent for us in the fire truck market, even with a big backlog. So that has not been an issue. You know, the issue was widespread weather across the country. You know, you saw it in the Northeast. You saw it in New York City. You know, there's a lot of places people couldn't get in and out of, and those types of disruptions matter when you have a very formalized delivery process for a fire truck where people have to come in, do their normal inspections before the product can be quote-unquote shipped. Thank you.

Thanks, Mike.

Thank you. The next question is coming from Chad Dillard of Bernstein. Please go ahead.

Hey, good morning, guys.

So a question for you on your vocational business and the sequential ramp. So it sounds like you're getting more deliveries of firetrucks in May. So I'm assuming maybe seasonality is a little bit better than expected. And I'm just trying to think through the eggs rate in the fourth quarter, given where your production ramp is. And then secondly, can you comment on your one Q fire truck backlog trends? Was the book to bill greater than one?

Going by memory, I think our book to bill was right around one fire truck. So think about it this way.

So Q2 will be sequentially much bigger than Q1. Q3 will be sequentially bigger than Q2. And Q4 will sequentially be bigger than Q3. And in total, we will have a very significant growth rate in fire trucks from 25 to 26. And we expect to continue the same in 2027. And when you look at the backlog and the health of the business, We are making real changes to our ability to produce fire trucks and more throughput in our manufacturing plants, which are going to yield very positive results over the next couple of years.

Got it. That's helpful. And then just going back to that. $23 million IEPA benefit. Any thoughts on what the claim process will be for suppliers? Does that $23 million go out at a future date? And then the remaining $10 million for the rest of the year, how does that layer in?

Yeah, let me help you understand. So 23 is the full refund claim. Obviously, some of that was for materials imported within this year, so it will have limited impact on the year because it just changes what's in inventory. The 2317 really is associated with prior years, so that would be the good news of that 13 and a half we accrued in Q1. So the remainder of the four, in essence, will be in the second quarter. The suppliers follow the same process we do. So the CAPE system opened. It worked effectively. It was very efficient. We started to get cash from it already this week. I would expect our suppliers to do the same. It obviously is a discussion with our suppliers, and so that'll happen as that happens naturally. Thank you.

Thank you. The next question is coming from Steven Fisher of UBS. Please go ahead.

Thanks. Good morning. Just a couple of follow-ups on the tariffs there. What have you assumed, Matt, for the IEPA replacement after the 122 tariffs expire in July? I think that might be an element of your perhaps price cost in the second half of the year. And also, were there any USMCA dynamics that we should be aware of as part of these changes?

So we're assuming the present tariff landscape continues throughout the full year. So we would assume the 122 tariffs basically continue. and no change to USMCA. So fundamentally, we're assuming the present tariff landscape extends through the full year.

Okay, great. And then a follow-up on the vocational side and the fire trucks. I think you may have said last quarter, correct me if I'm wrong here, they had about $150 million of planned spending to improve the overall throughput and production, and maybe you'd spent about half of that. Just kind of curious where you stand on that. It sounds like you are making progress in getting those sequential deliveries to improve over the course of the year and into next year. But just here's a bigger picture on the investments you're making and when we think we can be through that and more comfortable with the overall throughput of the business line.

Yeah, thanks. Good, good memory. So yeah, it was 150 million, we were about halfway through that and the last year, we continue to make the investments throughout this year, we expect the bulk of that investment to be completed by the end of the year. As I mentioned, we had some availability of space and getting permits and so forth, that shifted a little bit more back end than what we had originally anticipated at the beginning of this year. But we would expect the bulk of those investments to be completed by the end of this year with most of that capacity on stream.

And I'll just let you know, Steve, we have our best people on this, and we have done this before in other segments, and we're already seeing results from the work that we've been doing.

Terrific. Thank you.

Thank you. The next question is coming from Jamie Cook of Truist Securities. Please go ahead.

Hi, good morning. I guess two questions. One, John, you know, just on the M&A front, you've been a little quiet for you, you know what I mean, in terms of not doing deals in a while. And then, you know, I'm just wondering, too, if there's parts of your portfolio that you know, that are underperforming relative to your targets, which could be an opportunity for you. And then my second question, just as it relates to the guide, and I guess it being more of a back-end loaded year, how would you characterize sort of, you know, what's in your control versus more macro? Because I guess from the call, it sounds like a lot more of it. It's just the capacity, you know what I mean, from vocational that's pushing things out. So, And to the degree it's under control, my guess is people would get more comfortable with the back-end loaded guide, but just any color there. Thank you.

Thanks, Jamie. Let me start with your first question, which is on the M&A front. We always talk about our always-on process, and always-on means we are always looking at targets. And we're very patient, and we're very picky about what we think makes sense. If you look at the deals that we've done, we like every single one of them. There's not one that we have any regrets about. They're all contributing to the health of our company. But M&A activity can be a bit lumpy. And we are very focused. So we've done some smaller technology deals recently. We bought Canvas, and Canvas is a really important part of JLG's autonomy strategy. And so you'll see us continue to do some things, certainly on the technology front. And when we see the right opportunity, again, we're patient. We're a bit picky. It can be lumpy. We'll make another acquisition outside of technology as well. Let me go to the second half of your question, which is the second half of this year. You know, what supports our... view on the second half of the year. Number one is the access equipment business is continuing to gain a little bit of momentum. We feel good about it. We feel good about our price cost building as we go through the year. And so that's a big part of it. In addition to that, we continue to talk about fire trucks. Fire trucks is a great business for us. Fire departments need more trucks. We've got a big backlog. We'll continue to increase production every quarter as we go through the year, and that will materially impact the second half of the year. We've also got our NGDV ramp. It gets bigger in the second half than it has been in the first half, and we expect an order with A606 accounting, an order of boost margins on the program. And finally, Our FMTV contract starts to kick in. The new contract kicks in in the second half of the year. That's materially higher pricing on that contract, and that makes a nice boost to our business as well as FMTVs will have a big jump in pricing and margins. So those are the primary factors. You know, if you look at that, a lot of that's within our control.

Thank you.

Thanks, Jeannie.

Thank you. The next question is coming from Steve Barger of KeyBank Capital Markets. Please go ahead.

Hey, thanks. Good morning. Going back to the Aerotech capacity expansions, after you do the bricks and mortar and the 80-20 actions, how much will capacity expand in percentage terms? How will throughput grow? And what revenue will the business be capacitized to?

I think that'll be subject to a future conversation, Steve. It's a good question. We'll have more to say on that in the future. That capacity, just a little bit of clarification. Bricks and mortar is a strong term. We're not building new buildings, but we're expanding some work inside. We're upgrading some facilities, improving throughput, some production efficiency, specifically around jet bridges. That takes a little time. So we'll be talking more about that more around 2027 than 2026.

Okay. And then, John, just following up on the last question about second half waiting and what's in your control, and just extending that thought process to 2028, can you just reiterate why you see that path as achievable? And are you leaning at this point toward the low scenario for 2028, or do you think mid is still achievable?

No, we still would say mid is right where we expect to be. I mean, when you look at the demand in our end markets and you look at our backlogs that we've already got, that's the underpinning of it. And then you look at the work that we're doing to right-size our capacity to be able to deliver that. That's the confidence that we have in 2028. The technology that we build into our products, which is right in line with what our customers really want us to do, whether it's autonomous operation or it's embedding AI, or in some cases still, when it makes sense, electrification. That's all part of why we're so bullish on 28. We're defining what the future of these end markets should look like, whether it's an airport, a construction site, neighborhood operation we're really defining what the future should be which is better than what it has been in the past and that drives our confidence in delivering 2028 that's good detail I appreciate it thank you at this time I would like to turn the floor back over to mr. Davidson for closing comments

Thank you, Donna. Thanks for joining us on the call today. We will be meeting with investors at several conferences during May and June, and have a good rest of the day.

Ladies and gentlemen, this concludes today's event. You may disconnect your lines or log off the webcast at this time and enjoy the rest of your day.