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Oshkosh Corporation builds specialty and military-style vehicles and other technology. If you own a four-wheel-drive vehicle, give a nod to Oshkosh; the company patented the four-wheel drive system in 1917.

This year's Fortune 500 marks the 66th running of the list.

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The manufacturer of specialty vehicles and vehicle bodies supplies heavy-duty equipment to customers including the U.S. military, fire departments, and municipal waste haulers.

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Wal-Mart stayed on top as its sales crept closer to half-a-trillion dollars. Apple moved into the top five. And UnitedHealth Group continued its steady climb. 

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Oshkosh Corporation designs and manufactures specialty vehicles and vehicle bodies for defense, fire and emergency, construction, and commercial applications. Its products include tactical wheeled vehicles, aerial work platforms, and refuse collection trucks. The company serves customers in both public and private sectors, including military organizations and municipalities. Oshkosh also offers support services and fleet management solutions.

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Oshkosh (OSK): Company Profile, Stock Price, News, Rankings

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Oshkosh

oshkosh

Greetings, and welcome to the Oshkosh Corporation First Quarter two thousand twenty five 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, Patrick Davidson, Senior Vice President of Investor Relations.

Good morning, and thanks for joining us. Earlier today, we published our first quarter twenty twenty five results. Copy of that release is available on our website at oshkoshcorp.com. Today's call is being webcast and is accompanied by a slide presentation, which includes a reconciliation of GAAP to non GAAP financial measures that we will use during this call and is also available on our website. The audio replay and slide presentation will be available on our website for approximately twelve months.

Please refer now to Slide two of that presentation. Our remarks that follow, including answers to your questions, contain statements that we believe to be forward looking statements within the meaning of the Private Securities Litigation Reform Act. These forward looking statements are subject to risks that could cause actual results to be materially different from those expressed or implied by such forward looking statements. These risks include, among others, matters that we have described in our Form eight ks filed with the SEC this morning and other filings we make with the SEC. We disclaim any obligation to update these forward looking statements, which may not be updated until our next quarterly earnings conference, if at all.

Our presenters today are John Pfeifer, President and Chief Executive Officer and Matt Field, Executive Vice President and Chief Financial Officer. Before we get started, I'd like to highlight our upcoming Investor Day. We are planning for a morning start on Thursday, June 5 at the New York Stock Exchange in Lower Manhattan. We look forward to sharing our plans for the future and you will get to hear from several of our key leaders in addition to both John and Matt. Please reach out to Victoria Connolly or myself if you are interested in attending in person.

Now please turn to Slide three, and I'll turn it over

Thank you, Pat, and good morning, everyone. We are off to a good start in 2025 with strong performance in our Vocational segment, good margins and resiliency in our Access segment and solid progress as we ramp up NGDV production in the Defense segment. For the quarter, we delivered revenue of $2,300,000,000 and adjusted operating income margin of 8.3. Our adjusted EPS of $1.92 was in line with our expectations of approximately $2 for the quarter.

We are confident with the underlying trajectory of our operational performance across all our segments, which we believe would keep us on track to deliver our full year adjusted EPS guidance in the range of $11 excluding headwinds caused by the recent tariff announcements. Before Matt provides more details on potential tariff impacts on our results, I want to make some key tariff points upfront. First, as we've said previously, nearly all of what we sell in The United States is built in The United States, and we have a broad US production footprint, which we believe puts us in a strong competitive position in our industries. Second,

a global supply chain, and we are proactively working to mitigate potential impacts from tariffs. Third, at this time, we are not experiencing significant secondary impacts of tariffs like supply chain disruptions or reductions in demand. And fourth, we continue to execute on our strategies despite near term volatility as we believe the trends that support our industry leading businesses align with our long term growth initiatives. Please turn to Slide four, and we'll get started on our segment updates. Access performance was in line with our expectations.

We delivered a resilient adjusted operating margin of 11.3% despite lower sales. We remain confident in the long term opportunities arising from mega projects and infrastructure spending. Our backlog remains strong, ending the quarter at $1,800,000,000 equal to the end of last year as we booked orders in the quarter of $930,000,000 and achieved a book to bill ratio of one point o. We did not experience any notable order cancellations from customers in the quarter. We continue to stay close to our customers to respond quickly to any changes in the macroeconomic environment.

A good example of our team's ability to respond quickly to tariffs was the localization of booms at our Hinoa facility in Italy in response to duties that the European Union applied to Chinese imports. I'm proud to report that it took our team less than a year to move production from China to Italy and begin shipping our first units to customers, thus mitigating the tariff impact. On the product front, the access team previewed our new microsized ES nineteen thirty m scissor lift at the ARA rental show in February. This category of scissor lifts is creating excitement in the market, growing at a solid clip and being used in places like data centers. Customers are particularly eager for our entry into this emerging category as they value JLG's quality, service, and support.

Finally, JLG hosted international customers at the BAMA event in Munich earlier this month. Attendees were enthusiastic about our product innovations, including our new line of multi fuel booms and Clear Sky Smart Fleet with its many technological advantages. This was another outstanding opportunity for us to showcase our products and technology that lead the industry toward a connected and productive job site of the future. Please turn to slide five, and I'll review our vocational segment. We achieved strong year over year revenue growth of 12 in the quarter and a robust adjusted operating income margin of nearly 15%.

The higher volume was led by higher rep use in recycling vehicle sales and strong price realization across the segment. The backlog remains robust at $6,300,000,000 providing excellent visibility to future revenue. We continue investing in people and resources toward our goal of increasing production levels across the segment to support strong demand, which we expect to lead to meaningful revenue and operating income growth. A great example of a growth opportunity that I'd like to share is with the city of Calgary in Alberta, Canada. Some of you may recall that Calgary was an early adopter of our Pierce Volterra electric fire truck.

Previous to that, they purchased limited apparatus from Pierce, but their experience with our Volterra custom pumper EV helped us, along with our dealer commercial truck equipment in Canada, secure a multiyear order for 22 conventional Pierce fire trucks for the city of Calgary. Innovations are key to our success, and we continue to develop advanced technology such as our CAMS, that's collision avoidance mitigation system, and Clear Sky Intelligence fully integrated telematics solutions showcased at FDIC earlier this month. These are great examples of our neighborhood of the future technological advances. Additionally, we announced a new lineup of Oshkosh's IMT cranes at work truck week in March. The updated family delivers increased reach, lifting capacity, and reliability across 16 models.

We've incorporated customer feedback in into the design and focused on commonality, ease of maintenance, and exceptional performance. Finally, Oshkosh Aerotech continues to perform very well and lead with innovative technologies like IOPS, fleet management software, and investments in autonomous baggage handling vehicles. Several of you on this call today experienced these products at our CES Airport of the Future display earlier this year. Customer demand for our jet bridges, ground support equipment, and advanced technologies continues to grow as customers seek to improve efficiency of airport operations. Let's turn to Slide six for a discussion of the defense segment.

We're confident in the defense outlook for 2025. Although first quarter results reflected lower volume and higher cumulative catch up adjustments, we are pleased with our progress on the production ramp up for the NGDV program and deliveries to the United States Postal Service. We are on target to increase NGDV volume to full rate production by year end. This should provide strong revenue growth in the back half of twenty twenty five and into 2026. We continue to execute programs for the United States Department of Defense.

During the quarter, we took orders for the FMTV low velocity airdrop vehicles as well as PLS a two autonomy ready vehicles for the US Army. We are also wrapping up negotiations for a sole source FMTV a two contract extension later this year. We expect the extension to include an economic price adjustment mechanism similar to our agreement for the FHTV program we announced in 2024. Just last week, we announced a 50 unit JLTV contract with the Netherlands Ministry of Defense for the Dutch Marine Corps. The contract calls for design modifications to the JLTV that fulfill requirements for the Dutch expeditionary patrol vehicles.

This order is an excellent example of the attractive international opportunities for our tactical wheeled vehicles, and we look forward to sharing more of these successes in the future. Before I turn it over to Matt, I wanna note that our defense business is going through a leadership transition. I am overseeing the segment for the time being, and we expect to announce a new segment leader later this year.

Thanks, John. Please turn to Slide seven. Consolidated sales for the first quarter were $2,300,000,000 a decrease of $231,000,000 or 9% from the same quarter last year, primarily reflecting the softer market conditions for access equipment in North America, as we expected and highlighted on our previous call, primarily offset by improved pricing in the vocational segment. Adjusted operating income was $192,000,000 or 8.3% of sales. Adjusted operating income was down from the prior year as a result of lower sales volume, higher operating expenses, and higher new product development spending, partially offset by improved price cost dynamics.

Adjusted earnings per share was $1.92 in the first quarter, in line with our expectations of approximately $2 per share. Free cash flow for the quarter was also in line with our expectations and reflected a net use of cash of 435,000,000 due to seasonal working capital needs. During the quarter, we entered into a new $500,000,000 20 4 month term loan to provide additional liquidity. We used the proceeds to reduce the balance on our revolving credit facility. The term loan, which can be repaid early, carries a slightly lower interest rate than our revolver.

We also continued to repurchase shares steadily throughout the quarter, repurchasing nearly 290,000 shares of our stock for $29,000,000 Share repurchases during the previous twelve months benefited adjusted EPS by $03 compared to the first quarter of twenty twenty four. Please turn to slide eight. At the beginning of our call, John mentioned our confidence in the underlying trajectory of our operational performance, which we believe would keep us on track to deliver our full year adjusted EPS guidance in the range of $11 if not for the impact of announced tariffs. Based on current announcements and what we are seeing as of today, we estimate that the direct impact of tariffs, net of targeted mitigation actions, could be about $1 per share. We are monitoring conditions closely and proactively working to mitigate the impact of tariffs through cost actions across the company.

We believe these efforts may offset the impact of tariffs by up to $0.50 per share. We do not anticipate these tariffs will have a material impact on our second quarter results as we work through existing inventories. Our estimate of the direct impact of tariffs is based off currently announced rates and excludes potential future indirect impacts, which are difficult to predict at this time. We remain committed to execute on our strategies despite uncertainty introduced by tariffs, and we believe the trends that support industry leading businesses will provide long term growth opportunities. With that, I'll turn it back over to John for some closing comments.

We delivered our first quarter in line with expectations, and I'm confident that we have the right team to execute our priorities regardless of the current macroeconomic environment. We believe our industry leading brands, strong product portfolio and strategic initiatives will serve us well and position us for long term growth. I'll now turn it back over to Pat for the Q and A.

Thanks, John. I'd like to remind everybody, please limit your questions to one plus a follow-up, and please stay disciplined on your follow-up question.

After the follow-up, we ask that you rejoin queue if

you have additional questions. Operator, please begin the q and a session.

Thank you. We will now be conducting a question and answer session. Again, we ask that all callers limit themselves to one question and one follow-up. If you have additional questions, you may requeue, and those questions will be addressed time permitting. If you would like to ask a question, please press star one on your telephone keypad.

A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment please while we poll for questions. Our first question comes from the line of Steven Volkmann with Jefferies.

Hi. Good morning, guys. I'm gonna lead off with a question on tariffs, and I bet you didn't expect that. Yeah. So, big picture, I'm I'm curious, John, how you're thinking about this.

Last time we had tariffs, you were able to basically offset all that with price. But let's be clear. I mean, this time, it seems like the demand environment is not quite as robust. So, you know, do you think over time that we should still expect that that you'll be able to recapture whatever tariffs sort of hand you here?

question, Steve. I'll tell you our MO. I mean, our MO right now is we wanna minimize impact that we pass on to our customers. Now you know we have pricing power in all of our end markets because we lead in all the end markets that we serve, but but our MO is to try to minimize impact to customers. And and so so we wanna use that as our last lever.

We've got a lot of initiatives right now. These tariffs are targeted. There's we kinda have the top three areas that we have to mitigate tariffs in in terms of countries in the world. And if we mitigate those top three, we mitigate the vast majority of problem that we see ahead of us. That's what the tariffs as they are today.

And so we're we are laser focused on doing that. I talked on the on my prepared remarks about what we were able to do in in Europe in a very short period of time to deal with European tariffs on China, and we'll continue to do that same type of work here. But, you know, we have pricing power, but the MO is we don't wanna pass a whole lot on to customers if we if we can avoid it, because of what you you said. There's, there's elasticity of demand in any market, and so so we wanna be prudent about how we go about this.

Got it. And and my extremely disciplined follow-up is last time it took, quite a while to to pass some of this through given long backlogs and various types of price. So just any comments there?

Yeah. So so what we learned last time is what everyone learned is, a, we do have pricing power, but, b, when we had general inflation, and this was not just US inflation, it was general inflation that was global, it did take us a little bit of time in some of our end markets to realize the price because of big backlogs and contractual obligations and so forth. So we've been able to, to change the way we do business to to give ourselves more flexibility now versus what we had a few years ago during the rampant inflation years. So we definitely feel good about that. But but I'll come back to say, you know, our MO is to try to minimize disruption for our customers.

the line of Mig Dobre with Baird. Please proceed with your question.

Alright. Thanks, and good morning. Just on this tariff topic, I'm I'm I'm curious if you can maybe give us a little more clarity in terms of where the cost headwinds are here. As you said, you manufacture things in The US. So, presumably, I would imagine this has to do with components.

Maybe you can highlight yeah. Maybe you can highlight some of the key countries that we need to watch for here just in case policy changes so that we get an understanding as to how your cost structure might evolve.

Morning, Meg. It's Matt. So if you think about our exposures, fundamentally, you think about the the three segments. Access is the most global of the segments. And so there, you know, you've got a a a broader supply chain.

Obviously, with the rate at which tariffs were put in, China has the outsized impact just given the the overall tariff amount there. And then we do source some from Europe in that global supply chain. The other two segments have a much more US focused supply chain. And so, really, in terms of mitigation, it's about negotiation, sourcing, and all those normal toolkit things you'd use for tariffs, which are slightly different than what you'd use for general inflation.

Alright. Understood. Then my follow-up is on the defense segment. First, I guess, thank you for starting to break out the NGDV so that we see the revenue there. Can can you comment at all in terms of that how that revenue should ramp, maybe what the exit run rate is going to look like in the fourth quarter?

And then relative to your initial guidance for segment margin, how should we think about the cadence of margin given that we're starting the year at breakeven, basically? Thank you.

So Mig, in defense, we've always talked about how we will exit the year at full year run rate, and that's 16,000 to 20,000 units of NGDB production. Obviously, the first quarter would be the lowest quarter, and we said that should be about linear across the year. So so that's really how I would how I'd think about the revenue In terms of, you know, margins in defense, you you would expect that to ramp up sequentially as well to support to support a reasonable rate as we guided earlier in the year. Net of I mean, crude tariffs, obviously.

Yeah. And the and the q one did not influence our our our outlook for the year at all. A little bit of tariff impact, but mostly the the q one being breakeven Mhmm. That did not influence our our confidence that defense was gonna do exactly what we expected to do.

Our next question comes from the line of Jamie Cook with Truist. Please proceed with your question.

Hi. Good morning. I guess two questions, and sorry, more tariff questions for you there. But of the, you know, $1 headwind that you're talking about, is there any way you could allocate that sort of across the segment? It sounds like most of that would hit access, and then I'm just trying to figure out of the 50¢, does more go to access as well?

So any, you know, help there would be helpful helpful. Thank you.

Hi, Jamie. Thanks for the question. So as I mentioned, most of the cost elements would be accessed in terms of how the cost flow through on tariffs. The cost offsets, those will be broad based across the company, so it'd be difficult for me to allocate that specifically to to the segments.

But, I mean, I'm assuming the buck, like, over half, you know what mean? Like, 70¢ or the majority of that is is all access. Because I'm just trying to think about the implications for margins. I mean, I think before you guys were targeting a 13% margin for the year. So, obviously, that's off the table, but I'm just trying to think, you know, how how low margins go there.

We're not gonna provide specific guidance on margin by segment relative to the tariff impacts because we see this up to a up to a dollar. And, obviously, it's a dynamic environment, so we're gonna have to adjust as, you know, as policies evolve.

Okay. And then, I guess, just back to access again. You know, John, any color you know, I guess, just broadly across the board, any color in terms of as you're talking, you know, to customers, you know, with regards to tariffs, just their, you know, their their sentiment. So far, the results, I think, across the board haven't been as bad as people would have thought. So just wondering what you're thinking or hearing how customers are, reacting.

Yeah. Sure. And, you know, we have great relationships with our customers, and we talk to them all the time, of course. So if you if you look at our customers, I think they've got a pretty balanced view on 2025. I think the the best indicator is our backlog coming out of the quarter at 1,800,000,000.0.

1 point 8 billion dollars backlog for Access is a is a very healthy backlog coming into a to a q two, and as was the order rate throughout the first quarter. So so that's kind of a a metric that I always point to because it's it it indicates, you know, what what customers expect. But underneath that, you know, you you hear our customers talk about fleet productivity or they talk about utilization rates. Those are both, you know, in a in a healthy range. There's no defleeting that's happening in the market.

So so the the customer sentiment is, continuing to be, what we would expect coming into to q two, and I think in line with with our expectations when we provided guidance, January ago. So so it's it's continuing to stay the course.

Our next question comes from the line of Jerry Revich with Goldman Sachs. Please proceed with your question.

Yes. Hi. Good morning, everyone. I'm wondering if I if I could ask hi. In terms of orders that you folks are taking today, can you just talk about the terms that you're implementing by business to provide protection just in case tariffs are at the high end of the expectation range?

Can you just talk about the parameters for fire trucks in particular that are in backlog as well, John, in terms what kind of protection, you folks might have on on that book of business given the long lead times?

Yeah. So I'll I'll tell you, a lot of the work that or all the work that you're referring to was already done, quite a while ago because as I mentioned earlier, you know, when we had the ramp in inflation a few years ago, we we have pricing power, but it took us a little while to realize it because of big backlogs. Mhmm. So we corrected that in our end markets. So some of those end markets have different t's and c's than others because, you know, you have, in one end market, a bonded order with municipality, and another end market is a is more private customer work.

But we have those terms and conditions in, and they vary depending on the end market. We feel comfortable with with where those are, but but I wanna go back and reemphasize, you know, our MO, you know, the tariffs are probably gonna lead to some price increases, but our MO is to try to minimize that impact on the customer. Again, because any market has elasticity to demand, and and we we know that, and and we wanna minimize the impact. I think we have a better chance of minimizing this impact because in the inflationary period of twenty one to twenty three, it was broad based and global. I mean, there wasn't a lot of places you could run.

When we have the tariff scenario, while it's relatively broad based, there there are we know exactly where the impact for us is and where it is not. And we know, therefore, in very targeted ways where we can where we can focus to be able to mitigate the impact of tariffs over time, and that's what we'll be doing.

Super. And and just to shift gears, you know, capital deployment has been a big focus for you folks. AeroTech doing really well. Do you see an opportunity in the current environment for meaningful M and A? Or is the focus here, let's make sure we execute on the tariff manufacturing transition?

Well, you know, mitigating tariffs is job one right now, of course. Right? I mean, I think probably everybody would tell you that. But, you know, we have an we have an m we we we do have an active corporate development group. We have what we always call an always on approach, and our team is looking at opportunities all the time.

And we we, you know, we still have a strong balance sheet, so we have capacity. I'll tell you what we look at. You know, when we look at our m and a work to be a little bit more focused on it, we look at growth in healthy segments, like within our vocational segment and near adjacencies to that. We look at growth and resiliency in our access segments, and we look at targets with recurring good recurring revenue streams. But I wanna point out I I do wanna point out that, you know, we carefully scrutinize our our capital allocation priorities.

And we'll always re always, no matter what the case, reinvest in our businesses organically. But but, really, right now, in this period of time, I will say that returning money to shareholders when our multiple is where it is becomes a bigger and bigger priority.

Our next question comes from the line of Angel Castillo with Morgan Stanley. Please proceed with your question.

Hi. This is Brendan on for Angel. If I could just touch on access quickly. So you noted not seeing material impacts from tariffs to customer demand yet, but volumes there were a bit of a headwind. So just kinda higher level, if you could give more color what you're seeing in terms of the overall construction market conditions in The US and Europe and how that might be impacting the, the higher sales discounts that you noted in the quarter?

Yeah. You know, I think that when you look at demand in the access equipment segment, demand is really still strong and healthy. And you hear our customers talk about it, those that are public companies, really solid with mega projects, thing you know, whether it's an infrastructure project or it's a data center, those in particular, you know, the the backlog certainly supports that outlook. And I think customers are seeing relatively healthy, demand in nonconstruction environments. You have to remember, our equipment goes into a lot of end markets that have nothing to do with construction, and those markets are holding up fairly well.

I think the area that we're seeing weakness, and this is this is probably not new, it's in the kind of the private nonresidential construction markets. There's a lot of projects out there, but there's a lot of projects that are kind of in wait and see mode. We're kind of on hold right now. Interest rates are still high. And and I think that that's why we gave the original guide that we did when we came into the year that that, you know, we guided that we'll be down about 15% in our access market.

We're kinda holding to that right now. We still think that that's our outlook. And that's driven again by that private nonres construction market that's there's a lot there's a lot on deck, just that, you know, with with with the conditions where they are, you know, people have to come up to bat. And we'll we'll you know, that but that's in line with our guidance. That's all in line with our guidance.

Okay. Great. Thank you for that. And then for my follow-up, if I if we could talk on vocational, you know, just what's driving the strong performance in refuse and recycling that you've seen? And how does that compare, I guess, to, your internal expectations?

Yeah. I think that, you know, the refuse and recycling market is one we've been optimistic about for a long time. We like the market. We like the resiliency of the market. We like the customers.

We like the the the need and the desire for us to apply our technological capability, whether that's autonomous functionality or electrification to lower cost, those types of, of opportunities. But so we've made some investments in this marketplace, and and some of the the you've seen the product investments. If you went to the CES show, go if you if you go to, to Waste Expo that's coming up shortly, you'll see a lot of new technology that we've we've come out come out with to to drive productivity in the end markets. We also made an investment in our manufacturing capability. We really have state of the art manufacturing now, and we're getting you're seeing the fruits of that investment right now as as that, the productivity in our plants is up dramatically.

The output is really healthy, and and that's what's driving some of these results, and and we expect that that will continue.

Our next question comes from the line of Tammy Zuccario with JPMorgan. Please proceed with your question.

Hey. Good morning. Thank you so much. So excess margins were quite impressive given the pullback in sales in the first quarter. So just wanted to get some color on the second quarter.

Usually, it's a sequential step up. But given all the tariffs, how should we think about access margin in 2Q versus what we saw in the first quarter?

Hi, Tammy. Thanks for pointing out the the resilience in Access. It's it's good to have a positive question like that. You know, we talked on our q four call about the work the Access team has done to improve resilience in in a a relatively down year. And what you're seeing in the first quarter and what we guided to for the year and inherent in the original $11 was that resilience in margin.

So, you know, set aside tariffs, I would expect your second, third quarter to be stronger than the first. We did talk about that on the the q four call. The first quarter would be our our lowest quarter. You you throw in tariffs. We still expect second quarter to be quite strong just because you don't really see a tariff impact because of inventories in the second quarter.

You know, beyond that, I'd reference the the the guidance we've provided in terms of the dollars and the offsets, but, you know, it's difficult to say how how the rest of the year shapes up.

Understood. And and to follow-up is the $1 EPS headwind, that's essentially a partial year number, not not not an annualized headwind, assuming the tech go ahead.

Yeah. No. No. That's that's that's right. So for this year, we see that as as a dollar, mostly back half loaded, obviously, just how tariffs will work.

Obviously, over time, we have more levers. Resourcing is is a bit of a lag. You can't do that in day one. And so that $1 would be the impact on this year. And and, again, we've got levers we pull over time depending on on how the tariffs work and how they're instituted.

Yeah. Tammy, you know, a a a good point. The $1 is a partial year number, but we are not standing still. We are you know, I talked about how quickly we were able to move to mitigate European tariffs, which is a pretty big number, by the way, that we were able to mitigate. We are doing the exact same thing with these tariffs.

Oshkosh (OSK) Q1 2025 Earnings Call Transcript

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