Terex Corporation

Greetings and welcome to the Terex fourth quarter and full year 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 Misra, Head of Investor Relations. Please go ahead.

Good morning and welcome to the Terex fourth 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 Simon Meester, President 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 Simon Meester.

Thank you, Paritosh, and good morning. I would like to welcome everyone to our earnings call and appreciate your interest in Terex. As many of you know, I've been at Terex for a little over five years now, but this is my first earnings call as CEO of the company, and I'm honored and humbled to take over from John Garrison and very excited about the road ahead. We have a great company operating in attractive markets and are financially strong. We have global market leading businesses and an exceptional team. So looking ahead, I would expect much of my focus to be on helping Terex accelerate its growth. And as we grow, we will continue our focus on zero harm safety and our territory values, which are an important part of our culture and embedded in everything we do. Please turn to slide four. We're starting the year in a great position after making significant progress in 2023 on our strategic initiatives. The Terex team delivered a 17% increase in sales, over 300 basis points improvement in gross margins, a 63% improvement in EPS, and our return on invested capital of 28.5% improved by 720 basis points. These outstanding results demonstrate the strength of the Terex operating model and the progress we've made over these last few years. Over the last seven years, our MP business has consistently grown near double digits per year, becoming a vital piece of the Terex success story, and closed the year as strong as ever at 16.1% operating margins. The MP team continues to find creative ways to build on its strong and diverse portfolio, illustrated by the recent launch of Green Tech, a new Terex brand that will provide a comprehensive product offering of tree care and vegetation management solutions. Our AWP business executed very well in 2023, grew sales by 18% year-over-year, and improved operating margins by 480 basis points to 12.7%. Our new state-of-the-art Monterey facility continues to ramp up as planned, and it's the largest facility we've ever built in Terex, and we're very proud of the team of the progress they've made. This facility has been mostly built for competitive reasons and to improve Genie's through-cycle margin performance. During 2023, We continue to invest in new products and in our manufacturing facilities besides Monterey. As an example, 10 of our facilities are now operating with net zero emissions. We invested in Apptronic to capitalize on the accelerating trend of adopting robotics, and we expanded our battery technology investment with Aculon and started building the first prototypes with both. I'm very proud of our team members' accomplishments in 2023. Carex is in a great position with a diverse portfolio designed to help our customers achieve their goals. In the next few slides, I'd like to share some examples. Please turn to slide five. Our market-leading brands receive recognition for their focus on return on investment and competitive cost of ownership. Our goal is to maximize the return on investment for our customers while delivering environmentally friendly and safe products. In 2023, we received many awards across multiple products and geographies, highlighting our reputation in the marketplace. We are committed to continuing to develop exciting products and technologies that provide differentiated value to our customers. Please turn to slide six. DEREC's equipment is used in many different applications around the globe, from waste handling and recycling to grid expansion and data centers. Other examples are vertical farming, as illustrated here at a customer in Denmark, and airport and stadium projects. Our products are required in all stages of the project lifecycle, from foundation, building, repair, maintenance, and eventual recycling of materials for reuse. We're proud of the role our products play in the many development projects around the globe. Please turn to slide seven. Sustainability is an essential part of our business strategy, where we focus on product innovation to enable our customers and end users to operate in safe and sustainable ways, team member and community engagement, essential to execute our strategy and achieve our goals, and responsible operations with sustainable practices that minimize our impact on the environment. We're proud to report that for a second consecutive year, Newsweek recognized our commitment to sustainability and naming Terex one of America's most responsible companies. Additionally, Terex has been awarded a perfect score in our first ever Human Rights Council Equality Index Review in a recognition of the important work our team is doing. to ensure an inclusive work environment and where all team members feel valued. Please turn to slide eight. In addition to a diverse and market-leading portfolio, our company is positioned towards markets that clearly benefit from global megatrends. Investments around the world in infrastructure, digitalization, waste recycling, and electrification are favorably impacting our end markets. Federal spending and incentives will support demand for our products in the years ahead. Our product portfolio is well positioned to capitalize on these opportunities. For example, the MP PowerScreen and Finlay brands have leading positions in global crushing and screening markets that benefit from both the growth in infrastructure and the associated demand for aggregates and from the growing demolition and recycling projects. MP brands like Ecotech, TBI, and Terex Recycling Systems have grown 26% this year driven by new product development and growing demand for environmental and waste recycling solutions. Our utilities business is well positioned to capitalize on investment required to upgrade the U.S. electrical grid to support the accelerating demand as the industrial world continues to move to the use of more electrical power. And our Genie products are benefiting from demand from infrastructure projects, data centers, manufacturing, and events and entertainment. These megatrends position us very well for 2024 and beyond. Please turn to slide nine. Our Q4 backlog of $3.4 billion is still significantly above historical levels and is the second highest in recent history, providing healthy momentum going into 2024. Our team members continue to successfully navigate supply chain issues last year and work hard to continue to improve customer on-time deliveries and return to more normal lead times. In fact, Q4 consolidated bookings at $1.3 billion increased 44% sequentially, consistent with typical seasonal trends and a return to more normal order patterns. Demand is robust for the reasons I laid out on the previous slide. We still see, however, some disruptions in the supply chain, but it continues to improve. Our MP business, has backlog that is above historical norms, and our AWP business logs strong bookings in the quarter with a book-to-bill ratio of 129%, with Genie having order activity above these levels and our utilities business taking orders for 2025. Overall, our backlog and booking trends are positive and give us a strong outlook for 2024. Let's turn to slide 10. We continue to see positive trends in our main end markets, especially in North America and India, but have seen some softening in Europe, which reported a slight sales decline in the fourth quarter. The U.S. government has announced more than 40,000 projects in transportation, climate, and broadband. Spending on manufacturing is up approximately 70% in the last 12-month period. driven by mega projects related to semiconductor manufacturing, clean energy, and EV battery projects. These projects make up two thirds of the non-residential market. These favorable end market trends combined with replacement cycle tailwinds and high equipment utilization rates are very beneficial for our Genie business. Additionally, The increasing adoption of our products in emerging markets such as India is another positive. The utilities market is expected to continue to grow, supported by investment in grid upgrades and grid expansion needed for zero carbon and electrification goals. In the U.S., power-related spending has been increasing at double-digit growth rates in recent months. Our utilities business will benefit from this growing demand while we expect to continue to be constrained by body and chassis shortages. Strength in U.S. infrastructure and general construction end markets will benefit empty crushing and screening concrete and crane businesses. We expect these tailwinds to offset some of the softness in the businesses with higher European exposure. We expect NP's environmental business to continue its growth driven by increasing demand for waste recycling. Our Fuchs business is focused on expanding into new geographies and products to offset the near-term demand softness. Overall, we're positive about our end markets. We had an exceptional 2023 and expect strength in most of our markets in 2024. With that, let me turn it over to Julie.