Terex Corporation

Greetings and welcome to the Terex Second 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, Paritosh Mishra, Head of Investor Relations.

Good morning and welcome to the Terex Second 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 materials. Please turn to slide three, and I'll turn it over to John Garrison.

Thank you, Prakash, and good morning. I'd 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 around the globe for their excellent work in meeting the needs of our customers and dealers and for their continued commitment to safety. Our zero harm safety culture extends across everything we do. It is our first priority and primary responsibility to create a zero harm environment for our team members who think safe, work safe, and go home safe every single day. Please turn to slide four to review our outstanding second quarter financial results. This quarter, the team delivered sales of $1.4 billion, up 30% from last year, operating margins of 15%, and expansion of 540 basis points from the prior year. and earnings per share of $2.35, more than doubled on a year-over-year basis. As a result of the strong execution by our team members in the first half of the year and robust backlog across our businesses, we are raising the full-year outlook to approximately $7 per share. Please turn to slide five. Terex is well-positioned to capitalize on several megatrends. that are expected to drive continued growth in the coming years. Across the globe, the public and private sectors have made significant infrastructure investments, which are critical to support economic growth and meet the needs of increasing population and urbanization. Global annual spending on infrastructure is approximately $5 trillion. The U.S. is starting to modernize infrastructure after decades of underinvestment. and the Infrastructure Investment and Jobs Act alone is expected to drive $550 billion of additional spending over five years. Both our segments are well positioned to benefit from accelerating infrastructure spending. For example, our PowerScreen and Finley brands have leading positions in global mobile crushing and screening markets that will benefit from growth in the demand for aggregates. Terrace Utilities offers a wide portfolio of products well-positioned to capitalize on the investments needed to enhance the electric grid. And our genie booms, scissors, and telehandlers are essential components of any infrastructure project. In addition, the CHIPS Act and the Inflation Reduction Act are expected to generate more than $600 billion of spending related to digitization, chip manufacturing, clean energy, and onshoring over the next several years. In fact, manufacturing spending in the U.S. is up 56% in the last 12-month period, as multi-billion dollar and multi-year investments related to semiconductor manufacturing, clean energy, and EV battery projects are beginning. Our Genie business will benefit from growth in data warehousing and chip manufacturing onshoring projects, while Terex Utilities has leading capabilities in place to support strengthening demand from clean energy related electrification initiatives. Further, waste disposal and recycling regulations are becoming more stringent globally in response to increasing focus on sustainability. Our MP brands, including Ecotech, CDI, and Terex washing systems are at the forefront of the market. providing customers with innovative recycling solutions. We are excited about the opportunities ahead for Terex to capitalize on these megatrends by delivering innovative products and solutions for our customers. Please turn to slide six to review our backlog. For more than two years, we've been constrained in our ability to increase deliveries due to supply chain challenges. Our backlog of 3.7 billion remains significantly above historic levels, and it's the second highest backlog for Q2 in recent history. Customer and dealer pushouts and cancellations remain minimal. Consolidated Q2 bookings remain healthy at $1 billion, which is consistent with last year. Our backlog demonstrates the strength of our end markets, supports our improved outlook, and gives us visibility into early 2024. In addition, elevated customer fleet ages, and low dealer inventory levels continue to support demand. In our genie business, the industry replacement cycle is still ahead of us, and we are not at pre-pandemic levels, which creates an opportunity for future growth. In our MP segment, our bookings were up 9% year over year. Turning to slide seven for an update on our strategic operational priorities. We continue to make strong progress on our execute, innovate, and grow strategic initiatives. Our operations team had excellent execution during the second quarter, allowing us to improve deliveries to our customers and increase sales by 30%. Supply chain performance did improve during the quarter, but we continue to experience lingering supply chain disruptions in the system. Our team members reduced our hospital inventory levels by half and our persistent focus on cost reduction and productivity improvements contributed to a margin improvement of 540 basis points. Our work on the permanent GENIE facility in Monterrey, Mexico remains on time and on budget. In Q2, we made good progress and continued to transfer product lines to the new permanent facility with a focus on two telehandler lines. We started production of one model in early April which was followed by the second model in May, as planned. In the coming quarters, we anticipate additional product moves from other factories in our network. We also expect our in-house paint system to be operational in the second half of the year. While the new plant will have significant long-term benefits, the ongoing process will result in short-term manufacturing inefficiencies, which the Genie team is working hard to overcome. Our investments in the development of superior performing, environmentally friendly new products will also help us to deliver on our growth plans. I want to congratulate our GENIE team members for winning the 2023 IAPA Sustainability Award, a strong recognition for their contribution to reduce carbon emissions and improve energy efficiency. Turning to slide eight to review some examples of purposeful innovation. The Fuchs material handling machines are capable of working in a wide range of applications. For example, our Fuchs team recently launched a new model focused on forestry and tree care at the LIGNA trade show in Germany. The global demand for waste recycling solutions is increasing, driven by regulatory and societal changes. Terrace washing systems recently developed an innovative solution to process hydro-backed waste into products that generate revenue for our customers. while recycling water and reducing waste disposal. We see a bright future ahead for our environmental businesses by leveraging existing competencies and capitalizing on attractive market opportunities. Please turn to slide nine. We are committed to our ESG program that will deliver value for all stakeholders. During each quarterly investor call, we will feature one of the pillars of our ESG strategy. This quarter, we are highlighting governance. At Terex, we are proud of our firm commitment to strong governance practices. We have an engaged, experienced, diverse, and independent board of directors committed to maintaining strong governance practices. We also maintain extensive shareholder engagement. We conduct an annual say on pay vote, and a substantial portion of executive compensation is directly linked to company performance. Our board of directors also provides oversight for sustainability efforts. We are firmly committed to protecting our reputation by making decisions and taking actions that align with our Terex Way values and the framework outlined in our code of ethics. Please turn to slide 10. We continue to operate in a challenging environment with macroeconomic and supply chain uncertainties. we remain diligent in monitoring credit and interest rate market conditions that continue to evolve. We saw improvement in the supply chain during the quarter. Our team was able to reduce but not eliminate our hospital inventories, which indicates that we are not back to pre-pandemic levels. Additionally, inflationary pressures are moderating, but overall our costs continue to increase. I am confident in the team's ability to continue to adapt and overcome the macroeconomic challenges that we have been facing. And with that, let me turn it over to Julie.