Terex Corporation

All participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Randy Wilson, Director of Investor Relations for Terex Corporation. Thank you, sir. You may begin.

Good morning, and welcome to the Terex fourth quarter and year-end 2021 earnings conference call. A copy of the press release and presentation slides are posted on our investor relations website at investors.terrax.com. In addition, the replay and slide presentation will be available on our website. I'm joined by John Garrison, Chairman and Chief Executive Officer, and Julie Beck, Senior Vice President and Chief Financial Officer. Their prepared remarks will be followed by Q&A. Please turn to slide two of the presentation, which reflects our safe harbor statement. Today's conference call contains forward-looking statements which are subject to risk that could cause actual results to be materially different from those expressed or implied. In addition, we'll be discussing non-GAAP information that we believe is 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 three, and I'll turn it over to John Garrison.

Thank you, Randy, and good morning. I'd like to welcome everyone to our earnings call and thank you for your interest in Terex. We are proud of all Terex team members who are keeping themselves and others safe, meeting the needs of customers and helping our communities. I would like to thank our team members around the world for their continued commitment towards zero harm safety culture and Terex way values. Safety remains the top priority of the company given by ThinkSafe, work safe, home safe. Our strong commitment to zero harm is driving improvement of safety metrics, such as total recordable incident rates, which has significantly improved over the past five years. This is a testament to the hard work and dedication of our team members. Please turn to slide four. Our strong environmental, social, and governance foundation drives stakeholder value, A few highlights as we progress on our ESG journey. First, environmental. Terex products help our customers to meet their sustainability goals. Two-thirds of Genie scissors, one-third of Genie booms, and 60% of material processing products have an electric option. Turning to social. Diversity, equity, and inclusion is being embraced and driven throughout the organization. leading with strong governance. Our ESG efforts are led by senior management with oversight from our board of directors. We are firm believers in our actions matching our words, whether it's producing sustainable products, promoting diversity, equity, and inclusion, or being good global citizens. The team recognizes there is more work to do around this important topic, and we will provide updates throughout the year. Please turn to slide five to review our Q4 2021 financial highlights. We had an excellent quarter. EPS of 82 cents nearly quadrupled year over year. Sales were up 26% year over year. And we ended 2021 with a record backlog of $3 billion, up 122%, driven by strong customer global demand. And focused cost management continued. resulting in 300 basis points of operating margin improvement. Overall, the fourth quarter financial performance demonstrated strong execution by our team members in a dynamic and challenging operating environment. Please turn to slide six. Our execute, innovate, and grow strategy has strengthened our business operations in 2021. On execution, The team proactively managed supply chain disruptions to deliver sales growth of 26% year-over-year, aggressively managed costs to deliver a 430 basis point improvement in SG&A at the percent of sales, and improved Genie's future cost competitiveness as our temporary Mexico facility is now producing telehandlers and continues to ramp up. Turning to innovation. We introduced new products, including environmental and recycling solutions and materials processing, new electric offerings in Genie, and electric grid products in utilities. We continue to invest in connected assets and digital capabilities, such as customer-dealer integration and telematics across the enterprise to better serve customers. We invested in our business for future growth, both organically and inorganically. The team expanded production capabilities of mobile crushing and screening equipment in China and Northern Ireland, acquired MDS International, offering adjacent products for our MP customers, and continued expansion of service facilities such as our new Houston, Texas location for utilities customers. Please turn to slide seven. The materials processing segment is a consistent, strong performer. It is a diversified, high-performing portfolio of businesses which continues to invest for future growth. MP Brands have leading positions in their respective markets with excellent end-market product and geographic diversification. We have a great opportunity to grow organically through innovation, product and service development, and expanding into product adjacencies, including conveying, washing environmental and recycling parts and service remains a focus for the segment as it continues to develop digital offerings for dealers and customers more than 8 000 of mp's machines are fitted with telematics hardware and the number of dealers using customer dealer integration or cdi has doubled in 2021 mp's end market diversification is a strength whether it's aggregates construction, recycling, or global infrastructure. All of these markets are growing. Please turn to slide eight, and I will review AWP offerings and end markets. Starting with our utilities business, it has excellent growth prospects. The need to maintain and grow the electric grid along with continued 5G rollout will drive multi-year demand. Some key product lines for Terex Utilities include bucket trucks, digger derricks, and tree trimmers, used for the maintenance and expansion of electrical grids. Also, we recently invested in Viatech's battery technology for utility trucks, called Smart Power Takeoff, or Smart PTO. This environmentally friendly solution allows our utility booms to operate without truck idling. As a result, our customers can reduce vehicle maintenance and carbon emissions. Turning to our genie business, Genie is a globally recognized brand with great products. The 60-foot JBoom was named a contractor's top 50 new product. Hybrid power options on scissors and booms provide indoor and outdoor job site flexibility and quiet emission-free performance. And our new telehandler offers increased lift capacity and lower cost of ownership. These products demonstrate Genie's strength in listening to customers and responding with innovative, industry-leading products. Genie's end markets of construction, infrastructure, and industrial applications will drive demand. Further, we are at the beginning of a new multi-year replacement cycle in North America and European rental markets. Please turn to slide nine, and I will discuss the supply chain environment. Like most other industrial companies, we are facing shortages and cost pressures for materials, logistics, freight, and labor. These headwinds have constrained our growth in the short term. The significant increase in COVID cases in January and February around the world are impacting our production and supplier deliveries. However, we are aggressively managing these challenges. The team continues to mitigate cost pressures and minimize production disruption by staying close to our existing suppliers and expanding our supply base. Redesign components to maximize availability of critical inputs to improve production. Provide transparent communication of delivery and cost headwinds for our customers. And we have taken pricing actions, but they have not been sufficient to offset unprecedented material and logistics inflation. which accelerated in the back half of 2021. We anticipate these challenges to continue in the first half of 2022. However, for the full year, we anticipate material costs stabilizing and being price-cost neutral as price realization improves throughout the year. Our production and supply chain team members are working tirelessly They are demonstrating resilience and flexibility to increase customer deliveries. And with that, I'll turn it over to Julie for her first earnings call with Terex. Julie?