Terex Corporation

Greetings and welcome to the Tarek's first quarter 2023 results conference call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Paritash Misra, Head of Investor Relations. Please go ahead.

Good morning and welcome to the Tarex first quarter 2023 earnings conference call. A copy of the press release and presentation slides are posted on our investor relations website at investors.tarex.com. In addition, the replay and slide presentation will be available on our website. We are 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 will be discussing non-GAAP information we believe is useful in evaluating the company's operating performance. Reconciliations for these non-GAAP measures can be found in the conference call material. Please turn to slide three, and I'll turn it over to John Garrison.

Thank you, Paritosh, and good morning. I would like to welcome everyone to our earnings call and appreciate your interest in Terex. I would like to begin by thanking all Terex team members for their exceptional efforts in this challenging global macroeconomic environment and for their continued commitment towards their armed safety culture and Terex way values. Safety remains the top priority of the company, driven by ThinkSafe, Work safe, home safe. Tariffs team members continue to work tirelessly to improve our performance for our customers, dealers, and shareholders while maintaining a safe working environment. Please turn the slide forward to review our strong financial results. The team delivered excellent financial performance for the quarter. Sales of $1.2 billion were up 23% from last year and up 27% on an FX neutral basis. Operating margins of 12% expanded 460 basis points from the prior year. And earnings per share of $1.60 more than doubled year over year. As a result of our team members' continued strong execution in the first quarter and our strong backlog, We are raising four-year earnings per share outlook to a range of $5.60 to $6. Please turn to slide five. I'm excited about the future of Terex and the opportunities in front of us. Our MP and AWP segments participate in global diverse end markets and are well-positioned for profitable growth. Infrastructure investments are increasing throughout the world, but in particular in the United States. In fact, the Infrastructure Investment and Jobs Act alone is expected to drive $1.2 trillion of spending over 10 years. In addition, the CHIPS Act and Inflation Reduction Act are going to be supportive of additional spending in construction and infrastructure that should drive growth for our businesses. Our PowerScreen and Finley brands have leading positions in global mobile crushing and screening markets that will benefit from growth in aggregates. Our Genie products are needed for general maintenance, infrastructure, and construction projects, and will benefit from increased government-sponsored spending throughout the globe. Another important growth driver are initiatives that support circular economy goals. The global demand for waste recycling solutions is increasing. driven by regulatory and societal changes. Our MP brands including Ecotech, CBI, Terex washing systems, and our recycling systems are at the forefront of meeting demand for sustainability initiatives. The increasing reliance on electrification to reduce greenhouse gas emissions requires grid capacity expansion. Terex Utilities has a wide portfolio of products well positioned to capitalize on the investments needed to enhance the electrical grid. And our genie business in particular will benefit from increasing digitization, including data warehouses and chip manufacturing onshoring projects in the United States. Despite the near-term macroeconomic issues, we continue to be optimistic and excited about the opportunities for Terex growth. Please turn to slide six to review our backlog. Our Q1 backlog remains strong at $4.1 billion, up 2% from year end. In fact, our backlog has remained relatively consistent for the last five quarters, and we've had minimal customer and dealer push-outs and cancellations. Our current level of backlog is consistent with Q1 of 2022, the highest backlog for Q1 in our recent history. Our backlog demonstrates the strength of our end markets and supports our outlook for the remainder of the year and gives us visibility into early 2024. Elevated customer fleet ages and historic low dealer inventory levels continue to support robust demand. Consolidated Q1 bookings remained healthy at $1.3 billion, resulting in a book-to-bill ratio of 105%. Turning to slide seven for an update on our strategic operational priorities. We continue to make progress on our execute, innovate, and grow strategic initiatives that continue to strengthen our company. Our operations team had excellent execution in the first quarter, demonstrating adaptability and flexibility to overcome the dynamic supply chain environment. Our permanent Mexico facility is on time and on budget. The new facility is an important element of our strategy to improve Genie's through-cycle performance. Starting in March, Genie began to transfer product lines from our temporary facility in Monterey to our new permanent facility. Moves from other factories in our network will take place over the next 12 to 18 months. While these moves will have significant long-term benefits, this process will result in short-term manufacturing inefficiencies which the Genie team is working hard to overcome. The company continues to make capital investments in our facilities around the world. These investments are paying off, and we are proud of a return on invested capital of 24%, which remains significantly above our cost of capital. We showcase 20 new innovative products at ConExpo, ARA, World of Concrete, in Bama, India. Our investments in the development of environmentally friendly new products with superior performance will help to deliver growth. Our parts and service teams are investing in digital offerings for dealers and customers, including MyTerrax and LiftConnect. We now have more than 70,000 machines fitted with our telematics technology. Execution of our EIG strategy enabled our strong organic sales growth for the quarter. In addition, we continue to supplement organic growth with inorganic investments. We recently acquired Marco, a manufacturer of bulk material handling conveyors, further growing MP segments offerings with products that complement the existing portfolio. In February, we completed an equity investment in Naptronic, a robotics company, reaffirming our commitment to invest in technologies that enhance our product and solution offerings. Turn to slide eight. During the quarter, our team members were active in trade shows. We saw high attendance and interest in our products. In fact, attendance hit a new record at two of the biggest trade shows, ConExpo and Bama India. The attitude of our customers was upbeat. The MP team displayed a PowerScreen Gladiator product at ConExpo, a fully electric wheel crushing and screening machine. After significant success with this product in North America, we recently launched the Gladiator World Series this year for sales around the world. The Genie team introduced our highest capacity telehandler at the ARA show. The 12,000-pound telehandler is engineered to offer superior productivity and low total cost of ownership. We also introduced our first all-electric mini-mixer at ConExpo, expanding MP's concrete offering. Similar to our all-electric utility truck, the mini-mixer leverages our investment in biotech to develop zero-emission products. If you had the opportunity to visit our booths at these trade shows, I hope you took away from your visit that Terex team members are engaged with our customers, and our products and services offer the features and benefits that provide value. Turn to slide 9. At Terex, we are intently focused on developing and delivering sustainable solutions for our customers. In this example, Terex's recycling system sold the first all-electric, powered waste separation solution to a customer site in the UK. The installation combines our waste feeder, conveyors, screens, sorters, and separators. The system efficiently recovers products of higher value, including metals, aggregates, plastics, and cardboard from waste, thus diverting more material from the landfill. This is another example of Terex products making the circular economy a reality. Please turn to slide 10. Our environmental, social, and governance programs deliver stakeholder value. We continue to progress on our ESG journey and recently completed our materiality assessment. We heard from our stakeholders that product development, stewardship, and innovation are core business differentiators. Stakeholders regarded product quality and safety as critical for meeting regulatory requirements and customer expectations. Team member health, safety, and well-being are important. We know that zero harm is possible. It's not just an aspiration. We designated April as safety month for teams across the globe and scheduled a variety of events to reinforce and rededicate ourselves to zero harm. I want to thank our stakeholders who participated in our materiality assessment, which provided us valuable insights. Please turn to slide 11. We continue to operate in a challenging macroeconomic environment with inflationary pressures and supply chain constraints. We did see slight supply chain improvements. However, our hospital inventories increased in the first quarter after declining in the fourth quarter of last year. This is a clear indication of the level of disruption our teams continue to face and overcome. Overall, our market demand remains strong, and I am confident in the team's ability to continue to adapt and overcome the macroeconomic challenges that we have been facing.