TEX Earnings Call

OperatorGreetings and welcome to the Terex Second Quarter 2026 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. If you would like to ask a question, please press *1 to raise your hand. To withdraw your question, press *1 again. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Drew Konop, Vice President of Investor Relations.

Drew KonopGood morning and welcome to the Terex Second Quarter 2026 Earnings Conference Call. A copy of the press release and presentation slides are posted on our Investor Relations website at investors.terex.com. In addition, the replay and slide presentation will be available on our website. We are joined today by Simon Meester, President and Chief Executive Officer, and Jennifer Kong-Picarello, Senior Vice President and Chief Financial Officer. Their prepared remarks will be followed by Q&A. Please turn to slide 2 of the presentation, which reflects our safe harbor statement. Today's conference call contains forward-looking statements, which are subject to risks that could cause actual results to be materially different from those expressed or implied. These risks are described in greater detail in our earnings materials and in reports filed with the SEC. On this call, we will be discussing non-GAAP financial information, including adjusted figures that we believe are useful in evaluating the company's operating performance.

Drew KonopReconciliations for these non-GAAP measures can be found in the conference call materials. Please turn to slide 3, and I'll hand it over to Simon.

Simon MeesterThanks, Drew. Good morning, and thank you for joining us today. Terex delivered a strong second quarter with revenue of $2.2 billion, increasing 8.5% compared to last year on a pro forma basis. The quarter's performance reflects revenue growth in all segments, improved earnings conversion, and progress against the strategic priorities we've laid out in the past two years. Today, I'll begin with our consolidated performance and the demand backdrop we are seeing across the portfolio.. I'll then discuss how each segment is executing against those market conditions before providing an update to our full-year guidance. And Jen will then take you through the detailed financials. At the consolidated level, second quarter performance was supported by revenue growth and improved earnings conversion, both sequentially and year over year. Adjusted EBITDA of $269 million increased $26 million or 10.7% versus last year on a pro forma basis, driven by meaningful improvements, especially in the materials processing and specialty vehicle segments.

Simon MeesterBookings increased 25% year over year on a pro forma basis. Our backlog of $6.9 billion provides solid coverage and supports our confidence in the second half and today's updated full year outlook. From a macro perspective, The demand environment for our business is positive and improving in many of our verticals. U.S. non-residential construction is benefiting from the ongoing transition of planned projects to new starts, supporting demand across multiple segments. Year-to-date, U.S. non-residential construction starts rose 18% to $368 billion, driven by momentum in data centers, energy investments, and civil projects such as bridge, water, and sewage infrastructure. Mega project starts totaled approximately $80 billion a year to date through May, creating increased opportunities for many of our businesses. Across our end markets, we're seeing higher utilization rates for our products, increasing capital expenditures by our customers, and positive sentiment from channel partners.

Simon MeesterThese indicators in our bookings trends support our view that demand is growing in many of our verticals.

Simon MeesterLooking ahead, policy and infrastructure activity in Washington also provides a promising backdrop, including enactment of the 21st Century Road to Housing Act and introduction of the Build America 250 Act. The timing and implementation of these programs may vary, but the direction of public and private investment is supportive. Healthy municipal budgets and replacement needs support demand for fire apparatus, ambulances, refuse collection vehicles, and related equipment. Within specialty vehicles, during the quarter, the City of Chicago approved the purchase of 80 fire trucks and 40 ambulances as part of its fleet replacement plan. The breadth of our specialty vehicle portfolio allows us to serve communities of all sizes. And because these are essential assets that municipalities replace on a regular cycle, they provide a recurring source of replacement demand. In Environmental Solutions, long-term demand is supported by a large installed base of refuse collection vehicles, digital and aftermarket activity, and robust transmission demand in utilities.

Simon MeesterWhile the segment is navigating a temporary softness in refuse collection vehicles, ESG's second quarter bookings increased versus the prior year, the first year-over-year increase since the first quarter of 2025, indicating that momentum could be building going into 2027. Long-term demand for refuse collection vehicles is intact, including a regular replacement cycle and customer interest in technologies such as automated side loaders, Third Eye camera systems, and back office software that can improve productivity and safety for our customers and their operators. Terex Utilities is benefiting from demand tied to grid modernization, renewable energy investment, data center related power needs, and storm hardening activities, which we expect to support the business over the next several years. In Materials Processing, the U.S. mobile crushing and screening market is showing growth in fleet utilization and rent-to-purchase conversions.

Simon MeesterWe also saw increased bookings for material handling and concrete mixers, which supports our view that the segment's overall demand is broadening. In Aerials, customer demand is supported by non-residential construction activity, with customer mix in the quarter skewed toward national accounts that have greater exposure to mega projects. Turning to Execution, I believe it is important to point out that after we completed the two largest transactions in our history in just the last two years, Both the ESG acquisition and the merger with REV are trending above their respective business cases to date. Across our new and bigger portfolio, our focus is to convert backlog more profitably, improve throughput, realize synergies, and continue to bring exciting new products to market for our customers. The second quarter demonstrated our progress in all those areas. Starting with Specialty Vehicles, the REV Group integration is proceeding well and the segment delivered record earnings performance.

Simon MeesterThe teams are executing against the integration plan and synergy realization is progressing as expected. Our near-term priorities for the segment are to improve throughput, reduce lead times, and expand capacity in targeted product categories. During the quarter, we made significant progress with the expansion of our ladder truck plant in Ocala, Florida, and we're nearing completion of the expansion in Brandon, South Dakota. The Brandon investment is intended to increase capacity of the S180 semi-custom pumper and further reduce lead times, directly supporting our longer-term growth objectives. We expect the first deliveries from our Brandon expansion within the fourth quarter. In Environmental Solutions, ESG is making progress with its ongoing manufacturing efficiency improvements in an already world-class facility. In utilities, we are aggressively ramping up shipments to keep up with the accelerating demand and are executing our planned capacity expansion.

Simon MeesterUtilities also introduced the TRX product line, including 4 different models with different working heights, eliminating the need for a commercial driver's license, giving our customers more flexibility to operate their fleet. The product line is an industry first with a production unit of a 50-foot aerial on a Class 6 chassis.

Simon MeesterIn Aerials, the team continued to navigate tariff headwinds and execute mitigation efforts in their supply chain and improve operational efficiency. As expected, our price-cost position improved in the second quarter, and we believe the full year will be price-cost neutral based on the visibility we have within our backlog and our ongoing cost-out actions. Before turning to our 2026 guidance, let me provide an update on our strategic review of the aerial segment. We are pleased with the progress we are making. We have interest from multiple parties and are working towards an outcome that maximizes value for our shareholders. We do not have any specific details to share at this time, but we will update you as the process unfolds.

Simon MeesterBased on our second quarter performance, our backlog coverage, and synergy pipeline, we are raising our full year guidance. The increase reflects strong first half execution overall, increased volume in Aerials, and improved performance in Materials Processing. We now expect sales of $7.9 to $8.2 billion, adjusted EBITDA of $960 to $1 billion, adjusted EPS of $4.70 to $5.10. And with that, I'll turn it over to Jen to walk through the financials in more detail.

Jennifer Kong-PicarelloThank you, Simon, and good morning, everyone. Let's review our second quarter results starting with consolidated performance on slide 4. Consolidated sales, including the results of Specialty Vehicles, were $2.24 billion, up $751 million, or 51%, as reported. On a pro forma basis, excluding the sale of the Cranes and the Midwest businesses, sales increased $175 million, or 8.5%, with growth across each of our segments. Adjusted EBITDA margin was 12% compared to 11.8% on a pro forma basis in the prior year. Adjusted EBITDA increased by $26 million, driven by healthy demand for our products, operational execution, and realized synergies, in spite of significantly higher tariffs compared to this time last year. Adjusted earnings per share was $1.37, including a net benefit of $8 million from IEEPA tariff refunds. Plus a one-time unfavorable customs-related accrual. Working capital continues to improve.

Jennifer Kong-PicarelloNet working capital declined to 15.2% of sales compared to 16.7% in the first quarter and 22.8% a year ago, primarily driven by the merger with REV Group. We generated $128 million of operating cash flow, and $101 million of free cash flow within the quarter. Net debt ended the quarter with $2.28 billion, including $407 million of cash on hand, and that leverage improved to 2.3x net debt of 12-month adjusted EBITDA. We also returned $20 million to shareholders through dividends in the quarter. Turning to segment performance, starting with Environmental Solutions on slide 5. Environmental Solutions sales increased by $26 million or 5.9% versus the prior year to $456 million. Growth was driven by strong demand and increased shipments in Terex Utilities, which more than offset temporary softness in demand for ESG. Despite the temporary unfavorable mix, the segment reported an adjusted EBITDA margin of 17.5%, down 250 basis points year over year due to the aforementioned unfavorable mix coupled with production ramp-up inefficiencies and lower absorption in ESG.

Jennifer Kong-PicarelloMoving to Material Processing on slide 6. Materials processing sales increased 11.1% or $47 million to $464 million, driven by healthy demand, particularly for mobile crushes in the US, supported by infrastructure, data centers, and other industrial projects. Adjusted EBITDA margin expanded 440 basis points to 18.8%. Reflecting a favorable product mix and price-cost discipline. One-time benefits contributed approximately 180 basis points to the margin performance within the quarter. Turning to Specialty Vehicles on slide 7. Specialty Vehicles sales increased $38 million, or 6.2%, to $650 million driven by improved throughput and fire. SV adjusted EBITDA margin improved 210 basis points to 14.5% compared to last year, reflecting favorable mix, operational efficiencies, and price realization, partially offset by cost inflation. Turning to Aerials on slide 8. Aerials sales increased 10.9% year over year to $673 million, driven by demand from national accounts that's supported by mega projects.

Jennifer Kong-PicarelloAdjusted EBITDA margin was 5.7% in the quarter, down 340 basis points from last year, which had significantly less tariff impact. As expected, Aerials improved margin sequentially in the second quarter by 560 basis points, reflecting improving price-cost dynamics and higher production volume. We are on track to be price-cost neutral for the year. The IEEPA refunds we received in the quarter were offset by a one-time unfavorable customs accrual. Please note, Terex is not accruing for future refunds not yet received. Turning to bookings on slide 9. As Simon mentioned, consolidated second quarter bookings were $2 billion, up $400 million or 25% year over year on a pro forma basis. In Environmental Solutions, bookings were $417 million, an increase of 18% versus last year's quarter, mostly driven by utilities. We expect bookings in utilities to be solid for years to come, and our focus is to ramp throughput to meet the accelerating demand.

Jennifer Kong-PicarelloIn ESG, bookings were up year over year, which could indicate momentum is building going into 2027. Having said that, that given the conversations with our customers and suppliers, we no longer expect a material second half pre-buy of RCVs ahead of 2027 EPA regulations. As a result, we're updating our second half ES segment revenue outlook to low single-digit growth. Materials processing second quarter bookings of $469 million increased 18% on a pro forma basis. While aggregates demand was the main driver, bookings also increased meaningfully in material handling. MP ended the quarter with $599 million of backlog, up $232 million, or 63% year over year, supporting an updated full-year outlook of low double-digit sales growth. This implies high single-digit year-over-year growth in the second half.

Jennifer Kong-PicarelloSpecialty Vehicles bookings were $588 million in the quarter. Up 9% versus the prior year, led by the previously announced City of Chicago order. Increased throughput drove higher sales and lowered the segment's backlog as intended. We expect this segment will execute against this backlog, and our outlook remains high single-digit revenue growth for the year. Finally, our second quarter bookings of $530 million, reflects 71% growth versus last year, particularly from national customers tied to large funded projects and infrastructure and non-residential construction. Aerials ended the quarter with $914 million in backlog, an increase of $200 million or 28% versus the prior year. Given Aerials' first half performance, healthy bookings, and backlog visibility. We're updating the full-year outlook to low double-digit sales growth. Now turn to slide 10 for our update to the consolidated 2026 outlook.

Jennifer Kong-PicarelloWe're operating in a complex environment with many macroeconomic variables and geopolitical uncertainties, and results could change negatively or positively. The outlook we are providing today reflects our current portfolio, and does not account for any cost to achieve the synergies, purchase accounting adjustments, or other non-recurring items. Today we are increasing our outlook for the year with 2026 sales expected to grow approximately 7.4% at the midpoint on a pro forma basis to a range of $7.9 to $8.2 billion. We now expect pro forma EBITDA to grow by approximately $124 million, or 14.5% year-over-year, to between $960 million and $1 billion, or 12.2% EBITDA margin at the midpoint. Included in our EBITDA outlook is approximately $28 million of synergies that we're well on our way to realizing. Updated guidance reflects 22% incremental adjusted EBITDA margin conversion at the midpoint. Pro forma despite a dynamic tariff environment.

Jennifer Kong-PicarelloWe anticipate interest and other expenses to approximately $185 million based on average debt outstanding of $2.7 billion. The effective tax rate for the full year is still expected to be 21% despite favorability in the first half of the year. We now expect 2026 EPS between $4.70 $5.10, with slightly more earnings per share in the third quarter and a typical seasonal step down expected in the fourth quarter. Please note the share count for the second half will be approximately 114 million.

Jennifer Kong-PicarelloFinally, we expect to deliver $300 to $350 million of free cash flow in 2026. With that, I'll turn it back to Simon for his closing remarks.

Simon MeesterThanks, Jen. I would like to thank everyone again for joining today's call. Just to quickly summarize what we shared today: we see strong demand from most of the markets we compete in, and we see clear momentum from the execution of our strategy. The REV integration is progressing as planned, our synergy pipeline is building, and the new specialty vehicle segment is improving throughput quarter after quarter. Environmental Solutions is well positioned with its manufacturing know-how, digital offering, and multi-year demand in utilities. Materials Processing is executing effectively, and together with Aerials benefiting from investments in infrastructure, data centers, manufacturing, and overall power generation. We are raising our full-year guidance because of the performance we delivered in the first half and the visibility we have in the backlog and the momentum we're building. Taken together, these results demonstrate the strength of the new Terex, a more diversified, more resilient, and higher-performing company with clear opportunities to grow, improve margins, generate cash, and create value.

Simon MeesterI want to thank our global team members for their dedication, our customers and dealers for their partnership, and our shareholders for their confidence in Terex. And with that, we'll turn the call over to the operator for questions.

OperatorWe will now begin the question and answer session. Please limit yourself to one question and one follow-up. If you would like to ask a question, please press *1 to raise your hand. To withdraw your question, press *1 again. We ask that you pick up your handset when asking a question to allow for optimal sound quality. If you are muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster.

OperatorYour first question is from the line of Mig Dobre from Baird. Your line is open. Please go ahead. Go ahead.

Mig DobreThank you very much. Good morning, everyone.

Mig DobreMaybe I would like to start with double-clicking a little bit on environmental solutions here.

Mig DobreYou know, can you give us a little perspective as to what's embedded in that low single-digit revenue outlook— revenue growth outlook, I should say— how you think about the refuse business versus utility? And, you know, I guess the second part here, just the guidance seems to imply compression, revenue compression in the second half. How should we think about the effect that would have on margins for this segment?

Mig DobreYeah.

Simon MeesterGood morning, Mick. I'll take the first one, and I'll let Jen weigh in on your second question. So yeah, from a top-line perspective for the segment overall, obviously strong bookings, 18% year-over-year sequential, also growth in bookings 20% versus prior quarter. I know you asked about refuse, but, you know, part of Environmental Solutions is obviously also utilities. We see a lot of accelerating demand in utilities, and we're expanding capacity to keep up. In ESG, which is the refuse collection vehicle business within Environmental Solutions, we actually saw bookings were up as well year over year and sequentially. And we do see momentum building for 2027. And when we look at, um, when we look at that business, um, you know, we look at bookings trends, we look at fleet utilization, we look at telematics, we look at what customers are telling us, and we, we clearly see that in the first half, maybe even starting late last year, you know, there was probably a little bit too much fleet in, in the system.

Simon MeesterIt's not that America is producing less waste or that there are less garbage trucks on the road. But clearly, you know, there was a little bit of rethinking that needed to happen between supply and demand, and we think that that happened in the first half and is now mostly behind us as we see bookings coming, coming back up. That's the first piece. The second piece, in our initial guide we assumed there was going to be some pre-buy activity in the second half of 2026 going into 2027 when the new engine emission regulations come out. We now think that that will actually spill over in 2027 as, as some of those changes are grandfathered and, and delayed by a couple of months. So we don't see as much of an uptick in pre-buys in the second half as originally assumed. We still think that bookings will sequentially recover. We still think that 2027 is most likely a growth year for refuse. We just see it being delayed by a couple of months because of the delayed in pre-buys.

Simon MeesterJen, you wanna weigh in on the margins?

Jennifer Kong-PicarelloHey, good morning, Mick. So from a margin perspective, we expect, I would say, for Q3 to be very similar based on with Q2, given that it's gonna be driven, the top line growth is gonna be continued to be driven by the utilities. And they have a very different margin profile. But we do expect that from Q3 to Q4 to be a step up in the margins at the segment level, driven by favorable product mix, favorable customer mix, and then the inefficiencies that I mentioned in my prepared remarks, especially in utilities, to be behind us. So those are the big 3 drivers in terms of the step up in the margins.

Mig DobreWatching. I appreciate that. That's helpful. And my follow-up, maybe on specialty vehicles, and this is kind of a bigger picture question. As you're starting to operate this asset and, you know, working with the REV team, I'm curious as to what you're discovering in terms of opportunities for either manufacturing efficiencies or being able to use some of the— the scale that Terex has that could bring to this business on a go-forward basis. And I do understand that you have communicated on the synergies near term and also the capacity additions that you have. So my question, I guess, extends beyond that if possible. Thank you.

Simon MeesterYeah, I'll let Jen talk about the synergies, but yeah, very pleased with how the integration is going. It's been 5 months now. We're very pleased that they booked a record quarter in terms of EBITDA performance. And Mick, you know this business, you know the momentum that that team was building and has been building over the, you know, the last 2 to 3 years before we merged with Rev. So We were obviously very keen and very focused on making sure we would maintain that momentum, that continuous improvement momentum, if you will. And that's exactly what has been happening so far in the first 5 months. We, you know, it's the exact same leadership team operationally that runs SV today that was running REV before the merger. And we continue to improve, we continue to improve throughput. We were up again in units produced in the second quarter. But then to your point, you know, with the acquisition of ESG, we think we acquired one of the best specialty vehicle manufacturers in the industry.

Simon MeesterAnd so what we see, what our game plan is and has been and will be, is we see that manufacturing excellence in high mix, low volume of ESG now helping Terex Utilities. So you see Terex Utilities margins coming up, and we expect that same manufacturing know-how to help SV going forward. You know, at the end of the day, it's all about continuous improvement and, and continue to try to reduce the number of hours per truck. But the most immediate focus is on just making sure we keep that momentum that we have in SV, and we're very pleased with how the integration is going and how the synergy pipeline is building. Jen, any context?

Jennifer Kong-PicarelloYeah, so Mick, from a financial standpoint, we committed that 28 million of synergies for the 11 months post-merger. We have, and they are largely corporate, and that's what I said in my previous call. We have realized about 20% of that in Q2 with a very good visibility of converting the remaining 80% in the second half of the year with a sequential step-up quarter over quarter. So like what Simon said, we're very confident of the integration that now translates to synergies that drops through the bottom line.

Simon MeesterNext question, please.

OperatorYour next question, your next question comes from the line of Jamie Cook at Truist Securities. Your line is now open.

Jamie CookHi. Please go ahead. Hi. Good morning. I guess two questions. First one on specialty. Could you just sort of elaborate what you're seeing in the fire truck business? I think backlog for total specialty was down about 1%. Your peers are experiencing declines. Just your growth has been better. So if you could elaborate there in terms of backlog orders and the outlook for fire truck. And then my second question is on aerials. Just trying to understand where the margins in the quarter were relative to your expectations. And given we're raising the outlook for Aerials, how are you thinking about the setup for margins in the back half of the year? Thank you.

Simon MeesterAll right. I'll talk about the fire truck backlog, and then Jen can talk about Aerials margins.

Simon MeesterYeah. So quite honestly, Jamie, we want that backlog to come down because obviously our customers are waiting for a very long time for their truck. And we are focusing on ramping up, continue to ramp up our throughput, which is what we're doing. And we're making another step in Q4 when our capacity in Ocala comes online for ladder trucks and our capacity for S180 pumpers, which is a low lead time product, if you will, a semi-custom product. When that capacity comes online in Brandon, South Dakota. So, you know, we're pleased with our bookings. We, as I mentioned, we secured a large order from the city of Chicago. Our bookings continue to grow. But quite frankly, what's more important for us and what you should be expecting if the backlog is to come down is that actually our book-to-bills should stay below 100%. In SV just by the virtue of lead times improving. And that's the mission, is to get our lead times down.

Simon MeesterAnd we think a more sustainable number for us and for the industry is to get lead times back to about a year or so. And that's the mission. And we think that that's what the trend will be over the next 24 months or so, where you will see a consistent below 100% booked bill just because lead times are improving.

Jennifer Kong-PicarelloHey Jamie, good morning. On Aerials' question, from a margin perspective for Q2, they came in better than expected. As I mentioned in my prepared remarks, in Q2 we took in unfavorable customer accruals in Aerials. Without that accrual, we would have achieved 8.3% of adjusted EBITDA. Overall, it's going to be, from a year-over-year perspective, still a relatively tough comp because, you know, last year, the Liberation Day was actually April, but we didn't really see the P&L impact hitting us until June last year. So it was 1 month of tariff impact last year versus 3 months of tariff impact this quarter. What we believe that, you know, it's important that we show from a like-for-like basis with the same kind of tariff impact is a sequential improvement that I mentioned in my prepared remarks of 560 basis point quarter-over-quarter sequential improvement. And that is despite an unfavorable mix, like what Simon mentioned.

Jennifer Kong-PicarelloWe saw more nationals coming in, in terms of our shipments as well, Q2. For the second half of the year, we do expect that we continue to see a quarter-over-quarter improvement in our margin expansion from Q2 to Q3 and a seasonal step down from Q3 to Q4 driven by less scheduled deliveries. We expect that the—. That we will be able to continue to drive the improved price-cost dynamics such that we are full-year price-cost neutral for the Aerials business. And year over year, that taking into consideration that with a higher tariff, because this year we'll have 12 months versus last year 7 months, plus the one-time customer accrual, that's actually a $70 million headwind that we're actually absorbing and driving the cost actions and also price-cost neutrality throughout the rest of the year?

Simon MeesterYeah, we just see a lot of positive momentum in aerials purely from a top-line perspective, and we see that continuing into 2027. And so our focus is just on sequential improvement, and that's what the team is delivering at the moment.

Jamie CookThank you.

Jennifer Kong-PicarelloYou're welcome.

Simon MeesterThanks, Jamie.

OperatorYour next call is from the line of Angel Castillo from Morgan Stanley. Your line is now open. Please go ahead.

Angel CastilloAerials, um, string here. Just, you talked about some of the incremental bookings largely being from, from nationals. So just, I guess, a couple of things. One, what are you hearing from the independents, uh, timing or just general kind of demand underlying those customers and the implications that might have to your margins here in the second half? And then separately, are you seeing anything, as we think about the nationals in particular, as this demand starts to pick up from their CapEx, any ability to take market share or just general shifts in market share there?

Simon MeesterYeah. So on the independents, and we said we saw the first signs in the first quarter and we continue to see those in the second quarter where independents bookings sequentially continue to improve. And as you know, Angel, they're a little bit more tied to private construction and commercial jobs, which tend to be more interest rate and input cost sensitive. And so we'll have to see kind of what the long-term impact is going to be on inflation and so on. And we quite frankly think that Europe is probably in a little bit more of a vulnerable spot where we see some markets kind of hinting with stagflation. We think the—. We see the U.S. market as being a lot more resilient, and as such, you know, we think that that independent bookings pattern will continue to improve. So that's encouraging. But as Jen said, the nationals just grew faster, you know, than we had originally assumed in the first half, and that's where the revised top line guide is coming from.

Simon MeesterAnd with that obviously comes a little bit of unfavorable mix. Yeah, in terms of market share, we typically don't talk about market share on, you know, on public calls. I do believe in the Genie value prop, and I know I sound biased, but I do believe the team has made tremendous progress with their value proposition, the customer-centric approach, and I do believe they are on a great run.

Simon MeesterBeen done commercially. So I'll just leave it there for now.

Angel CastilloThat's helpful. And then I want to go back to the 2027 dynamics that you mentioned essentially led to the pushout of that pre-buy on the refuse. Very good color there, but just curious at a broader perspective, just do those changes, including the penalties or phased rollout of those engines from the OEMs, Does that have any implications on, one, your ability to kind of standardize certain, you know, equipment or certain vehicles on the fire side? I think one of the strategies was to be able to, you know, kind of create a more standardized vehicle around some of these new engines. I don't know if it's the X10, but just curious if any implications on the ability to actually deliver on those, on the kind of standardization. And then separately, just as we think about any potential penalties or implications of cost, of those engines, did that have any material impact on your financials, or is that just all a pass-through and any ability to kind of get that across?

Simon MeesterSo you cut out at the beginning of your question, I assume you're talking about SV? Yeah, I'm talking just generally about the EPA 27 and the engine implications there to particularly your SV standardization of equipment. Yeah, yeah, yeah. So Yeah, so as I said earlier, is that we think that that's all kind of, you know, pushed out a little bit. It's not cancelled. So we still very much think, and it's confirmed by multiple sources, that the engine switchover will take place in 2027. It will be probably more of a phased approach. Some engines, to your point, like the X10 or some of the other engines, might go sooner or later. It really depends on what engine platform.

Simon MeesterYeah, we knew that this was coming for quite some time, and I need to give the legacy Rev team a lot of credit that they kind of started designing on where the puck was going. And so as those engines are being introduced, it will actually allow us to further optimize kind of our bill of material and our designs and our commonality. So that will be an efficiency gain for us. I think that was the first part of your question. And then, Jen, you—.

Jennifer Kong-PicarelloAnd, and, Angel, from a financial standpoint, there's no material impact to Terex, as what Simon mentioned. And as the— those benefits will be in 2027 when the EPA regulation gets affected, you're right that the cost is passed through from OEM, so we don't bear them. In ES, you know, if and when that EPA gets effected, there's some potential benefit again with regards to suppliers having additional flexibility. No impact from financial standpoint for Aerials and MP on this EPA regulations. Just because they are largely all proposals ongoing. So hopefully that helps.

OperatorYour next question is from the line of Timothy Thein at Raymond James. Your line is now open. Please go ahead.

Timothy TheinThank you. Good morning. The first question is just on the MP segment. If we think about kind of the margin progression for the year, I believe the expectation coming into the year was to have sequential margin improvement as we go through the year. But obviously you've got a bit of a bump here in the second quarter. If we exclude the 180 basis point benefit that you called out, is that still a reasonable assumption or were there some factors that may have pulled some of the performance into the second quarter? Just how are we thinking about, you know, the shape for the balance of the year is the spirit of the question.

Jennifer Kong-PicarelloGood morning, Timothy. Yes, we're very pleased with the MP, I would call it not just Q2, but first half of the year performance. As you rightfully said, our Q2 year-over-year margin expansion for MP was 450 basis points. Excluding the one-timer, it's still a very strong 270 basis point year-over-year improvement, better than Q1 as well. And that's driven by two factors. Mainly on the favorable mix and also in geography mix as well and price-cost discipline. As we look into the second half of the year, that would say a normalized EBITDA of like that 17%, excluding the Q2 one-timers. I would only see potentially a little bit of marginal step down just because we have seen an uptake in the material handling orders. Like what Simon mentioned, and that's from a margin perspective a little bit lower. So, but overall still a very healthy margin expansion. We expect that the full year from an incremental perspective without the one-timers for MP to be above our normalized incremental margin.

Simon MeesterIt's mainly just been a very strong year for MP in terms of execution. They're really executing very— in a very disciplined manner on price cost, and that's really helping the segment benefiting from the uptick that they're seeing in bookings.

Timothy TheinOkay, makes sense. And I get it, Simon, you want to keep the comments tight, but just on the review of Aerials, I mean, just as investors think about the potential timing of a potential movement on that, is it any sense for— I mean, is it is this a '26 event in terms of an announcement, or actually it slips into next year? I'm sure there are a number of factors at play here, but just any sense for the timeline that folks should be thinking about? Thank you.

Simon MeesterYeah, no, I appreciate the question, Timothy. There is no predetermined timeline. We're focused, you know, we're focused on making the right decision and properly go through this review. As I said in my prepared remarks, We're pleased with the progress we're making. We have interest from multiple parties. And we're just laser-focused on working towards what is the best outcome for our shareholders.

OperatorYour next question comes from the line of David Raso at Evercore ISI. Your line is now open. Please go ahead.

David RasoHi, just a quick clarification on the EPS cadence. Is the thought there sort of just flat sequentially 2Q, 3Q, and then that step down in 4Q? Just want to make sure I understand the framing and then I'll ask my question.

Jennifer Kong-PicarelloHey, David. Good morning. Yes. Based on our revised guidance and outlook, we have already achieved 48% of our EPS in first half of the year from a quarterly phasing perspective. If you back out the ex— the one-time Dutch custom accrual that we have, it's 12.8% of adjusted EBITDA at the Terex level. So it's fair to say that maybe Q3, very similar kind of profile, and then with a seasonal step down in Q4.

David RasoThank you. When it comes to the guide raise, because we don't have the exact margin guide by segment. When we think of the revenue guide going up $250 million but EBITDA only up $15 million in the guide, is that solely a function of the mix? Obviously, Aerial margins below the other businesses, but just trying to understand if there are other things that changed in your view on margins related to a few months ago. Thank you.

Jennifer Kong-PicarelloYes. And David, you're exactly right. The change, the top line growth that you see that you see there is primarily driven by our areas coming up from flat to low double-digit, and our highest, most profitable segment coming down from mid-single-digit to low single-digit. That mix change is entirely explaining for that drop-through in the margin profile. But I would say that, you know, even with the revised guide on a year-over-year perspective at a Terex level, we are seeing 22% of incremental margin year over year on a pro forma basis. And all our 3 of our 4 segments are operating at mid to high double-digit of EBITDA, while on a year-over-year absorbing close to about significantly higher tariff and also the customs accrual. In total, that number is about $90 million. So I would say that that's a very strong performance, 22% incremental full year despite the higher tariffs.

David RasoIn summary though, nothing changed negatively in your view. It was truly a mix issue that drove a fairly modest EBITDA bump up for the revenue. Is that a fair characterization?

Jennifer Kong-PicarelloExactly. Exactly. You're right, David.

David RasoThank you.

OperatorYour next question comes from the line of Kyle Menges at Citigroup. Your line is now open. Please go ahead.

Kyle MengesGreat. Thank you. I wanted to dig into MP a little bit more and specifically international markets, which are more important for the MP segment than others. And just curious what you're seeing in international markets within MP and any impacts from the Iran conflict? And maybe just broadly, where would you characterize those markets being at in the, in the cycle? And then assuming North America is your most profitable market, is it fair to, to say that as international markets rebound, there could be somewhat of an unfavorable mix impact?

Simon MeesterHey Kyle, thanks for the question. Yeah, so Terex obviously has changed quite a bit. So 80+% of our revenues now is in North America. But to your point, two businesses that have European or overseas exposure is MP and Aerials. But even within MP, North America is the largest market, followed by Europe and then Asia. So the story in MP overseas is Europe started promising in Q1 and then started to cool off a little bit in Q2. It's a little bit of touch and go. Our take on it is that the European economies are just a little bit more sensitive to the current kind of dynamic environment that we're operating in. It's, it's more of an export economy versus the US being more of a consumer economy. And so an export economy more, more sensitive to input costs and rising cost of fuel and inflation and so on. And so we see a little bit of softening, still growth, but a little bit of softening in Europe. But that's baked into the guide that we are—.

Simon MeesterThat we shared for MP's top line. India and Australia are the other two large markets. Both of those are actually strong. Australia driven by mining activity. And India are driven by infrastructure investments. And we have a big presence with MP in India, as you know, but we also have a reasonable presence in Australia. So Australia and India are accretive. Europe is a little soft. And then I would say in terms of margin impact, it's a little bit of a wash. I wouldn't I wouldn't give it a blanket summary that all overseas markets are dilutive. That's not necessarily the case.

Kyle MengesOkay, that's helpful. And then on Aerials, now that it's gaining momentum, returning to growth, just curious if that might change at all how you're thinking about the strategic fit of that business. At all, and maybe if that's helping demand from potential buyers as well?

Simon MeesterNot really. This is a strategic review. This has obviously long-term implications. We're not going to let how one quarter evolves versus another, you know, let us guide on how we strategically look at this. Having said that, it's obviously encouraging to see that aerials is cycling up, and it's definitely a good problem to have. But no, it doesn't really impact our long-term strategic view on how we perform one quarter versus the next.

OperatorYour next question is from the line of Steve Volkmann from Jefferies. Your line is now open. Please go ahead.

Steve VolkmannHi, good morning, guys. I just wanted to circle back to the capacity additions that you're doing in, in fire, I guess, and utility. I don't know if there's others happening as well, but when do we sort of expect those to come online and kind of get up to their normal run rates?

Simon MeesterI would say 2027 for normal run rates. I would say in utilities we still have a little bit of unfavorable absorption because we're ramping up, but by the end of the year in Q4 and certainly going into 2027, we should get into that favorable sweet spot in terms of favorably absorbing the assets that we're putting in place. Similar story for Ocala and Brandon, mostly coming online in Q4, getting to their run rates in 2027.

Steve VolkmannOkay, that's helpful. So is it conceivable then sort of by the end of '27 that we'll be back down to kind of the— I think you mentioned a 1-year sort of backlog or lead times. For these businesses. Is that possible?

Simon MeesterNot in Fire, no. We won't be there in just one year, but I think that will probably take two years for us to bring the backlog down by a full year, will probably take us two years. But yeah, I think that's really only the— I think a sustainable model is where we take lead times down to about a year in Fire, and that's what we're aiming for.

Steve VolkmannOkay, great. That's all I got. Thank you, guys.

Simon MeesterThanks, Steve.

OperatorYour next question is from the line of Steve Barger at KeyBanc Capital Markets. Your line is now open. Please go ahead.

Steve BargerThanks. Good morning. As the quarter progressed, I was hearing some more investor concerns about municipal spending. What is the muni-facing sales force telling you about funding and demand visibility? For the back half and into next year?

Simon MeesterYeah, great question. Good morning. Yeah, we don't, we don't see those concerns. We see, you know, consistent, consistent patterns, just like it has been pretty much for the last 10 years or so. So we don't see any, any concerns, any slowing, just a consistent pattern and cadence and sequential growth.

Steve BargerGot it. That's good to hear. And do you track inquiry-to-order conversion rates? And can you tell me just how that's trending across fire trucks and refuse trucks?

Simon MeesterYes, yes, we do. We actually track that in all of our businesses, not just in fire trucks.

Simon MeesterTypically, it's a pretty, it's a pretty fixed ratio. And We don't see that ratio going up or down. If anything, it might be a tad up, but I wouldn't call it material. But the center of gravity on our focus in fire is really on throughput and making sure that we build the trucks that we have in our backlog. That's really where the center of gravity is for this business. It's very much a supply business, if you will, and the center of gravity naturally moves more to kind of demand focus when you get your lead times back in check.

Steve BargerUnderstood. In the meantime, maybe I missed this, but did you talk about trends in standards or semi-custom versus custom?

Simon MeesterI did in my prepared remarks that we're that we have been, uh, introducing the S180 semi-custom pumper that is, uh, being very well received. It's basically, uh, a lower lead time, uh, more custom kind of solution for our customers, uh, and that seems to be, uh, adopting really well. If your first question is kind of tied to that second question, in that particular category, we definitely see an inquiry-to-booking ratio going up.

Steve BargerGot it. Appreciate the detail. Thanks.

Simon MeesterThank you.

OperatorYour next question is from the line of Jerry Revich from Wells Fargo. Your line is now open. Please go ahead.

Jerry RevichYes. Hi. Good morning, everyone. In Environmental Solutions, the margin performance is pretty good this year considering the moving pieces on the production cut and capacity adds in Europe. Utilities. I'm wondering if you can talk about, as you think about the business in '27, can we approach 20% margins as the underabsorption normalizes and as you folks get the returns from the utility capacity adds? How are you thinking about the path to the 20%+ margin targets in this line of business?

Simon MeesterYeah, yeah. Good morning, Jerry. Thanks for the question. You know, obviously a strong performing segment, and as we mentioned earlier on today, is that we see sequential improvement in ESG, and we see definitely accelerating demand in utilities. And I also mentioned the second data point that, you know, there's been quite some good synergies between the two businesses, and ESG has been a great manufacturer of high mix, low volume products, and that expertise is actually helping utilities to ramp up. And Jerry, you've, you've followed us for a long time and you kind of know where we were with our utility margins and where we are now. So that's really encouraging. Now obviously we're not guiding for 2027, we're not ready yet to guide, but we're very pleased with the sequential progress that we're making in both of those businesses.

Jerry RevichAnd Simon, are you willing to comment on the 20% plus margin target and how much progress you think you'll make towards that in '27?

Simon MeesterI think it's a little premature, Jerry. I would prefer to wait for our— when we are ready for our guidance for 2027.

OperatorThere are no further questions at this time. We have reached the end of the Q&A session. I will now turn the call back to Simon Meester for closing remarks.

Simon MeesterAll right. Thank you, operator. If you have any additional questions, please follow up with Jen or Drew. Thank you for your interest in Terex. Operator, please disconnect the call.

OperatorThis concludes today's call. Thank you for attending.