Oshkosh Corp Stock

Greetings, and welcome to the Oshkosh Corporation 2026 Third Quarter Results Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Pat Davidson, Senior Vice President of Investor Relations. Thank you, sir. You may begin.

Good morning, and thanks for joining us. Earlier today, we published our third quarter 2026 results. A 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 12 months. Please refer now to Slide 2 of that presentation.

Our remarks that follow, including answers to your questions, contain statements that we believe to be forward-looking statements in the meaning of the Private Securities Litigation Reform Act. These forward-looking statements are subject to risks and other factors that could cause actual results to be materially different from those expressed or implied by such forward-looking statements. These factors -- these risks and factors include, among others, factors that we listed in our release this morning, and matters that we have described in our most recent Form 10-K and other filings we make with the SEC as well as matters noted at our Investor Day in June 2025.

We disclaim any obligation to update these forward-looking statements, which may not be updated until our next quarterly earnings conference call, if at all. Our presenters today are John Pfeifer, President and Chief Executive Officer, and Matt Field, Executive Vice President and Chief Financial Officer. Please turn to Slide 3, and I'll turn it over to you, John.

Good morning, everyone, and thank you for joining us today. Our third quarter 2026 consolidated sales of $2.8 billion and adjusted earnings per share of $2.41 fell short of our expectations. This shortfall and our revised full year outlook primarily reflect near-term challenges as we transform fire truck production. is the #1 fire truck brand in America with strong demand in a multiyear backlog. To meet this demand, we are transforming production from traditional labor-intensive assembly processes to more efficient, high flow production lines.

The long-term benefits of this are clear, supporting our customers by delivering more fire trucks to firehouses sooner while delivering a more resilient and flexible production system that results in improved returns for shareholders. When we spoke last quarter, we had made specific improvements in production bottlenecks to support throughput, and we're in the early stages of converting portions of our production to support high flow manufacturing processes. At that time, we identified inefficiencies around our parts flow. As a reminder, custom firetrucks are manufactured using thousands of parts, many are unique and fabricated internally.

During the third quarter, the routing of these parts led to greater production variability than we expected, resulting in lower fire truck production and deliveries. We are actively addressing these issues by improving material tracking for internally fabricated parts and point-of-use delivery, stabilizing the processes that support our manufacturing improvements and adding experienced manufacturing leadership to support the transformation. While our production has not yet stabilized at the higher rates we are targeting, we have a clear understanding of material flow and production challenges that need to be resolved.

We are taking our learnings from the last few months into our future planning where we will slowly ramp up our new high flow lines in parallel with our existing final assembly operations to mitigate potential disruptions. Once implemented, we expect to see stable production levels at about 10% above last year. We still expect our high-flow production lines to deliver the additional fire truck volume that achieves the 25% to 30% growth through 2028 that we discussed at our Investor Day last year. As a result of our revised near-term expectations for fire truck production, we are updating our outlook for 2026.

We now expect full year adjusted earnings per share in the range of $8.50 to $9.50 with potential timing of the next NGDV order also figuring into this range. Matt will go into this into more specifics in his section. Across the company, we see strong demand for our products driven by positive macro trends and as reflected in our backlogs, this is especially true for fire trucks and airport products in our vocational segment, and we saw orders recover during the quarter for refuse and recycling vehicles which is a positive indicator for that business. We also see strong demand for our access equipment to support mega projects, as you have seen in CapEx announcements from key customers.

Lastly, we have multiyear contracts for both defense and delivery customers in our Transport segment. We believe that these indicators of strong demand for Oshkosh products provide a solid foundation for our businesses going into 2027 and provide excellent visibility for the near future. Please turn to Slide 5, and we will review some highlights since our last call. Market conditions for the access segment continued to show improvement as the segment delivered another quarter of double-digit operating income margins with strong third quarter sales. As we discussed on the last earnings call, large infrastructure investments and mega projects led by data centers and data center-related bites are important drivers of demand. Sales in the quarter continued to be led by national rental companies as expected. We have good visibility for the final quarter of 2026 and into 2027, supported by strong orders of $2 billion in the quarter, leading to a $2.7 billion backlog at the end of the quarter.

Demand is clearly evident, and we expect it will underpin growth in the market for the next several years. We remain focused on margin resiliency as we continue to drive cost efficiency and engage in discussions with our major customers around demand trends and pricing. During the quarter, we announced a strategic investment in NextEra robotics. -- another step in advancing our vision for shaping the job site of the future. Nextera combines visual artificial intelligence, autonomous robotics and digital mapping to provide customers with greater ability in the project progress, quality and safety across an active construction site. We believe Nextera's capabilities complement JLG's connected equipment and smart fleet technologies. This puts JLG in a position to extend its value proposition beyond individual machines to the broader job site.

We will work with NextEra on customer engagement, field validation and future applications continue investing in advanced technologies that can improve safety and productivity for our customers. We look forward to sharing more with you on our journey for connected autonomous products at CES next January. Turning to Slide 6 in our vocational segment. As I discussed earlier, vocational results did not meet our expectations, reflecting fire truck production challenges. Elsewhere in vocational, we are encouraged by signs that demand for refuse and recycling vehicles is beginning to recover as customers plan their 2027 fleets. We are starting to see fleets generally returning to their normal order timing as we book solid orders with several key fleet customers in the quarter. These orders provide encouraging evidence that the market will improve as we move into next year.

With the college football season in full swing, the delivery of our fully integrated electric McNelis Volterra front loader to the University of Tennessee, is a good representation of how the quality and performance of our products continues to win over customers as we are seeing with 2027 orders. In September, our Oshkosh airport products business received an order from the U.S. Air Force for 34 Stryker 6x6 aircraft rescue and firefighting vehicles. with initial deliveries expected later this year. This order builds on our long-standing relationship with the United States military and reflects the trust our customers have in our advanced firefighting technology and purpose-built vehicles protect personnel, aircraft and critical infrastructure.

Finally, demand at Oshkosh AeroTech remains strong as airports continue to invest in infrastructure and modernization. Our investments in Gateway passenger boarding bridge production are expected to increase our output in 2027 to support that demand while we leverage 80/20 simplification principles to drive operational improvements across our GSE business. Overall, the long-term outlook for our vocational segment is positive. The actions we have taken, the leadership we have added, the progress we are seeing will position the segment stronger performance in 2027. Please turn to Slide 7. In the transport segment, we believe we have built the foundation for a strong finish to 2026 and a solid start to 2027. During the quarter, we welcomed officials from the Department of Ward to Oshkosh as part of the arsenal Freedom tour, highlighting the strength of our people, advanced manufacturing capabilities and industrial capacity.

Our defense business benefits from the scale, technology and manufacturing expertise of the broader Oshkosh enterprise, including proven commercial production systems, mature supply chains and the ability to respond quickly customer requirements evolve. That combination of commercial capability and defense expertise positions Oshkosh well to support the long-term needs of the United States military and Allied forces. Two weeks ago, at the AUSA trade show in Washington, D.C., we again showcased how the commercial strength of Oshkosh supports our war fighters. Our team met with key domestic and international customers who are important for our success in the segment over the next several years.

One of these international customers, the Royal Moroccan Armed Forces placed a follow-on order for HET A1 tractors and trailers earlier this month. This order building on the deliveries that began in 2025 is a great example of how success of our units in the field results in winning additional business with our allies. Turning to delivery. We're continuing to ship more NGDV to the United States Postal Service and fielded units have now achieved more than 60 million miles on the road.

We saw modest improvement in production sequentially from Q2 to Q3 and continue to work through our production ramp where key suppliers are a gating factor. We are investing in additional supply buffers that we expect will mitigate bottlenecks and normalized production by the middle of 2027. In summary, our backlogs are robust continue to see evidence of long-term demand across each of our segments, demonstrating the strength of our value proposition, our leadership position in resilient, high-growth markets and our ability to deliver for customers.

Now I'll hand it over to Matt to review our financial results and provide additional details on our outlook.

Thanks, John. Please turn to Slide 8. Consolidated sales for the third quarter of $2.8 billion increased $153 million or 5.7% compared with the same quarter last year. The increase primarily reflected improved sales volume in the access segment and improved pricing in all 3 segments, offset by lower sales volume in the vocational segment resulting from production challenges. Adjusted operating income was $217 million, down $57 million from the prior year, primarily due to unfavorable mix and higher SG&A expenses. These were partially offset by the higher overall sales volume and improved price cost dynamics. Free cash flow continued to be robust in the quarter as we achieved $275 million bringing our year-to-date free cash flow to $433 million.

Our strong free cash flow reflected our continued discipline in managing working capital, particularly related to higher customer advances and improved inventory management. During the third quarter, we repurchased approximately 556,000 shares of our stock for $82 million. This month, Moody's upgraded our credit rating to Baa2, reflecting the resilience of our company and strength of our balance sheet. Turning to our segment results on Slide 9. Access third quarter sales of $1.3 billion were up 21% from last year. The increase was driven by higher sales volume in North America and improved pricing. As John mentioned, market conditions showed continued improvement. We delivered a book-to-bill ratio of 1.5 during the quarter, significantly higher than the third quarter last year.

Orders in the quarter included early receipt of 2027 annual purchase orders from select NRCs and follow strong activity in the first half of the year. Axis achieved a double-digit adjusted operating income margin of 11.2%, a 20 basis point improvement over last year. The increase reflected improved manufacturing efficiencies on higher volume offset in part by adverse sales mix and higher incentive compensation. The solid adjusted OI margin also reflected roughly neutral price cost with improved pricing, largely offsetting higher tariff costs. Locational sales were $900 million, down $68 million compared with the same quarter last year, primarily due to fire truck volume as a result of the manufacturing challenges discussed earlier. We saw production and shipment volume roughly 20% below what we delivered in the third quarter of last year. Our volume also declined compared with what we achieved in the second quarter.

The vocational team is taking the right actions to improve our production operations, and we expect sequential improvements in the fourth quarter. Refuse and recycling vehicle volume was also lower than last year, consistent with after market conditions we have experienced throughout the year. As John noted in his remarks, we are beginning to see early signs of demand recovery for refuse and recycling vehicle and now expect demand to strengthen heading into '27.

Lower fire truck volume, coupled with higher costs as we execute our manufacturing modernization program at peers, impacted our vocational segment adjusted operating income, which was $102 million, down $49 million from last year, of which a little over $10 million can be attributed to additional spending on production improvement initiatives. Despite the challenges from our production transformation, the vocational segment delivered a resilient adjusted operating income margin of 11.4%.

Transport segment sales decreased $26 million or 4% to $562 million in the quarter. As a reminder, last year's sales included a license of JLTV related intellectual property to the U.S. government for $25 million that did not recur. Increased sales from the ramp-up of NGDV production were offset by lower defense sales volume. Transport segment operating income was $8 million, down $28 million, primarily reflecting the licensing of solar last year. We expect Transoperating margin to improve in the final quarter of 2026, and into 2027 as we continue to transition out of past fixed-price contracts and ramp up in NGDV production. We also continue to expect an additional NGDV order this year. .

Turning to our expectations for 2026 on Slide 10. As John mentioned earlier, we are updating our outlook with full year adjusted EPS now expected to be in the range of $8.50 to $9.50 while our outlook for access demand is improving, we are resetting our expectations for the pace of improvement for firetruck throughput in vocational, as John described earlier in the call. The bottom end of this range reflects the probability that we received the NGDV order in 2027 instead of this year. We now expect consolidated revenues of approximately $11 billion and adjusted operating income of approximately $850 million. For access, we expect full year revenue of $4.8 billion and an adjusted operating income margin of approximately 9 and [indiscernible]. While we are seeing improved demand in production efficiencies, we continue to manage a dynamic external economic and tariff environment that is impacting raw material prices and freight costs, which is reflected in this margin outlook.

For vocational, we expect revenues of approximately $3.7 billion and an adjusted operating income margin of 12.5% as a result of the extended transition of fire truck production to a modern high flow process. Lastly, transport, we are adjusting our full year revenue expectations to be approximately $2.3 billion with an operating income margin of approximately 4%. The revised segment revenue reflects low delivery vehicle production. We also continue to expect to follow-on order from the USPS to be received by year-end. This order could impact our earnings by up to about $40 million or $0.50 per share in the fourth quarter. The timing of this order does not affect production or cash flow for 2026. The low end of our adjusted EPS range of $8.50 to $9.50 reflects this order slipping beyond year-end. On cash flow, I want to complement the operating teams across the company as they have continued to drive cash flow improvements across the quarters. As a result of these efforts, we expect free cash flow of $600 million to $700 million up $50 million from our prior guidance.

With that, I'll turn it back over to John for some closing remarks.

Our teams remain focused on improving manufacturing execution at vocational at the same time, we are encouraged by strong demand in access and healthy order activity. We continue to generate strong free cash flow. Our priorities are clear: increased fire truck production continued strengthening performance across our segments and execute to deliver sustainable, profitable growth over time.

I'll turn it back to you, Pat, to get the Q&A started.

Thanks, John. I'd like to remind everyone to please limit your questions to 1 plus a follow-up. Please stay disciplined on your follow-up question. After that follow-up, we ask that you rejoin the queue if you have additional questions. Operator, please begin the Q&A session.

[Operator Instructions] Our first question comes from the line of Steve Volkmann with Jefferies.

I just want to sort of dial in a little bit to what's going on in fire, John. Because I think last quarter, we were talking about sort of fixed worker shortage, I think, and some standardized material flow. And this quarter, it seems more and more like you're talking about production flowing scheduling. I'm just trying to figure out, is this the same kind of issue that's getting elongated? Or are you kind of finding additional issues as you work through this?

Yes. Thanks for the question, Steve. So let me elaborate a little bit on this topic. I might reiterate a couple of things from my prepared remarks, but essentially, of course, I want to make sure it's understood that we are not satisfied with the disruptions or the pace of improvement that we have seen in fire truck production. Let me explain the overall context of what we're doing and why we're doing it. I think everybody knows, Pierce is the best fire truck brand in America. We've got a multiyear backlog, which is an indicator of how strong the demand is for the product.

So the challenge with this business is our capacity. So if you go back to, say, '23, '24 production rates, that was kind of indicative of what we've been doing for a long time. And those production rates were really insufficient to support today's market. So at that time, in '23, '24, if we needed more units, we'd throw more overtime work at it or something like that, squeak out a few more units, but driving materially higher production throughput consistently certainly takes more than that, and it takes really a modern production system, which is what we are doing right now. We are totally transforming and putting in modern high flow manufacturing into how we make fire trucks.

So changing how a fire truck moves through the plant, it means essentially the root of it right now means changing how thousands of parts reach the production line. We've made a lot of improvement in core process. Bottlenecks have been improved as we've gone through this process. Now it's about material flow on a very complicated product where everyone that comes down the line is a little bit different from the next. So each one has a little bit different bill of materials. We are addressing this by putting in great people who understand high flow manufacturing, digitizing and controlling parts flow down to every single unique part.

And we expect that, that's going to drive stability and meaningful improvement with fire truck production long term. It's really about how fire trucks are produced for the next decade and meeting strong demand for this product, getting fire trucks to firehouses faster and making piece a much, much stronger company. It's been harder than we wanted. Absolutely. It's been harder than we wanted, but we know what we have to do. We've got our arms around it. And we are going to fix this, and it's going to drive much better production as we go into 2027.

Okay, that's good color, I guess. Maybe just a follow-on -- disciplined follow-on and just your current view on sort of the trajectory of when we kind of get this behind us?

Yes. So as we go into Q4, we've got our arms around the material flow issues. We've got a lot of people working on driving specific improvements. We pay attention to that. It's about digitizing every single part. It's about barcodes, it's about routing, it's about location, kind of going into the nitty-gritty, as we get that work done, we're seeing that we're stabilizing production throughout Q4. That's why we put more of a moderated outlook for the year as we stabilize this production. We expect 10% increase in 2027, and we're very confident in that number. And we're very confident that this is going to drive 25% to 30% improvement by 2028, and which has been our objective all along.

Our next question comes from the line of Mircea Dobre with Baird.

Thank you for the question. I guess my -- I would like to start with transport and with NGDV specifically. The revenue here was essentially flat sequentially. And if I understood correctly, your comments implied that we're not reaching full rate production until mid-2027. So maybe you can clarify all of this a little bit more what's really going on here? And what's kind of holding you back from reaching that full rate production? .

And I hope you enjoyed the brewers one last night. So in terms of transport -- yes, good series. All right. In terms of transport quarter-over-quarter, what you're seeing is some higher production we did achieve higher rates. We stabilized at those rates in the third quarter. On a quarter-over-quarter basis, what's offsetting that is some of the lumpiness that you see in this type of operations. So we had the we had the onetime contract adjustment in the second quarter. And this time, we had some CCAs. But underlying this is higher production rates in the third quarter. We expect that to continue to improve in the fourth quarter at which time we'll see kind of that normative range of, call it, the 16,000 to 20,000 units we talked about. And then as we talk about getting through these gating issues by midyear, then we would be at the upper end of that range. So we're starting to hit that stride in the 16,000 to 20,000 units annualized. And then middle of next year, we would expect to be at the upper end of that.

Yes. So we're moving from the low end to full rate to the high end of full rate over time.

Right. But to clarify, I think I heard you talk about some bottlenecks or something going on in the supply chain itself. Is that a factor? Or am I misunderstanding here?

Yes. Sometimes, this is a complicated product. There's a lot of critical suppliers. We've got great suppliers, our household names. And sometimes we have a slowdown because of supply in specific areas of the plant. That's why we're putting more buffers in place in different parts of the plant to make sure we can continue to increase production in a more -- from kind of the low end of full rate to the high end of full rate in a more consistent way.

Our next question comes from the line of Jerry Revich with Wells Fargo.

I wanted to ask on the Arexis equipment outlook, as you folks are engaging in the conversations around 2027. How are you thinking about the underlying pace of inflation and the opportunity to see a normal cyclical margin recovery in that line of business? Do you think we can make up some of the price cost headwinds that we saw this year into '27?

Yes. Thanks, Jerry. Thanks for the question. We're -- first of all, we're really encouraged by what we're seeing in our access business right now. You talk about $2 billion of orders. We've got a good line of sight into what's going on. Of course, our price cost is always something that we pay very, very close attention to with the dynamic market that we're in on input costs. We will be price/cost neutral this year or a little bit better than that. So we're keeping pace with it. And we're confident that we're going to drive healthy incrementals as this business continues to recover. Healthy incrementals for JLG, I think, as you know, is 30%-ish range.

So we'll drive good incremental. I'll say, as we are in a dynamic market with steel prices and freight and things we pay attention to that, and we pay attention to how we have to pass those costs on if we cannot mitigate them through our total cost management efforts, which are pretty good. We've got really good total cost management efforts. We don't want to pass along costs that don't need to be. But when we do have to, then we will have to pass along some thoughts.

Super, John. And then in terms of -- on the fire trucks, just to expand on the comments there, you folks maybe years ago worked down build rates and then built them back up at significantly higher margin. And you took, I think at the time about 18 months to do that here, we're talking about a much faster time line. Can you just compare and contrast the environment then? And way you folks are running now and the level of confidence of a big step-up in margins that's implied by the guide in 4Q?

Yes, sure. There is no -- there is not a margin problem with our fire truck business really absorption and getting the units through the line right now as we transition to a totally new modern production line. So if you go back -- I wasn't here 15 years ago. 15 years ago, though, we were building trucks the same way we were in '23 and '24 kind of a slow-moving bay build type production with a lot of tribal knowledge in the manufacturing operations, which is okay, if you've got a market that's in very steady state, slow growth mode.

But as we've seen this market continue to develop, we realized we had to drive a totally different throughput for these products, better efficiency, and that's why we've transformed it this time. So I think 15 years ago, it was more about simplification of the product, 80-20 principles. Today, it's about high flow manufacturing.

Just building on your comment on Q4. Thanks, John. is we would expect a margin step up relative to Q3 as we see sequential production rates more consistent with maybe what we would have seen in Q2 as we stabilize production.

Our next question comes from the line of David Raso with Evercore ISI.

Regarding the vocational fourth quarter implied margin, just curious how you're thinking about that. Obviously, the bigger picture is the 2028 guide now that the numbers this year are around it feels like a bit of a stretch. But I'm just trying to understand where your head is on how quickly the vocational margins could step up from this fourth quarter number? Because even the fourth quarter number to be fair, I think people lost a little bit of confidence in saying sequentially, it's going to get better and it doesn't happen. And I'm just trying to understand the credibility around that. The fourth quarter margin is obviously lower than we would have hoped to start the year.

But it is up sequentially if you get that revenue sequential increase. How do we frame that? Just -- I know you don't want to give '27 guidance, but just given it's been a problem now for a few quarters. I think we'd really appreciate some thoughts around when you to the margins at like $1.1 billion, $1.2 billion vocational revenues a quarter, not even the $1 billion in the fourth quarter, definitely not the $900 million in the third quarter. How should we think about that margin level? Because we started the year at 17%, right? And I'm just trying to -- that's a wide gap, and we're just trying to get our head around it.

Yes. Fair question. Thanks, David. So if you look back last year, last year, we had a full year margin for vocational, almost 16%. That in the third quarter last year, it was about 15.5%. Fourth quarter was a little bit over $16 million. So very strong performance out of vocational. This quarter certainly was a step back at 11.4%, and that was also down relative to the second quarter at about 13% -- 13.5%. And so as we look into the fourth quarter and into 2027, the way we really think about this is by stabilizing production, we'll get back to the levels of production we had earlier in the year. And as I said on the call, in the third quarter, we actually had production take a step backwards, both year-over-year and quarter-over-quarter, which is moderately when you're in a production plant but reflects the disruption and level of parts flow that we saw in the third quarter.

So getting back to those Q2 levels and then moving forward from there at a stable rate is what we expect would deliver those rates. As you look into 2027, we see one refuse stability to increase production, as we talked about on the call in fire truck, more gradual than maybe what we would have thought at one point, but still a healthy rate. And then -- if you look at this in context historically, our guide for vocational at 12.5% is still a strong, robust business on a historic context, not where we would have liked it to be this year. And certainly, we expect to take a step forward next year. And we feel quite comfortable that we're on track for 2028 results to get that margin back into that 16% to 18% with the production actions we're taking.

Yes, David, our margins go back to where we all expected them to be in the 16% range. It's about fire trucks put and it's about the recovery of our refuse business.

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

I guess just 2 questions for me. And sorry, I've been juggling multiple calls this morning. But John, just given where we are in 2026 in terms of numbers, can you frame your '28 targets out there, what needs to happen for you guys to get there? Or should we just sort of dismiss them? Or is it time to push it up maybe a year because of what's going on with buyer in an emergency right now? And then I guess just my second question, did you guys give an update on your confidence level on the additional award for NGDV and that's all for me.

Yes. Let me start with the NGDV award, and then I'll go into our confidence on 2028. So the NGDV award, we're confident we're going to get another order. We've been working on it with the United States Postal Service. It's late October. So the question is, is it going to come before the year? Or is it good to come next year? It's going to come. It's a question of when, not if. So that's why we gave a lot of guidance versus maybe what people had expected because that assumes we don't get anything. And it comes next year.

So -- but there will be another order for NGDV. Let me talk about 2028. We are not pushing out our 2028 targets. We realize that we're a bit lumpy in terms of 1 year to the next recently. It's driven primarily, as we've been talking about by fire truck production. So what has to happen is we've got to see strong throughput in our fire truck operations, and we expect to see that. We're doing all the work that it takes it's been slower than what we had wanted, as you have seen. But we're doing the work required to transform and get the throughput on fire trucks. NGDV will continue to move towards a higher rate of full rate production. It's a big range of what full rate production means.

The orders have to continue to come in for NGDV's access is growing again. You saw a $2 billion order intake in the third quarter. All signs are there's going to be several years of growth in the access market and access will continue to drive margin improvement year-over-year. Their margins are good, but they'll be much, much better over the next couple of years as that business grows. And all the defense contracts, the pricing that's gone into the defense contracts that starts to show itself in Q4 more than it has. These are all that come into play which tell us that we should continue to expect what we -- 2028 as we had guided when we did our Analyst Day.

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

This is actually Stefan Dassitting in for Angel Castillo. Maybe my first one on the refuse demand recovery. You mentioned positive order trends in the quarter and the expectation for refuse stability going into next year. I guess, how much visibility does your current refuse backlog to give you confidence in those comments?

So Steven, so certainly seeing our backlog at the same level we were last year after it was at lower levels earlier in the year. Our conversations with our customers have been more positive in terms of how they're looking at 2027. So that gives me comfort that we're looking at 2027, more like a 2026, if not slightly better. And then we'll kind of take it from there. So I'd say overall positive signs relative to where I was sitting earlier this year, but certainly not off to the races.

And then maybe on access demand going into 2027. We've heard increasingly constructive commentary from the rental companies including higher CapEx budgets. Maybe if you could just give some additional color on how your customer conversations are shaping up for '27. I know you had some really good orders this quarter. And maybe if you could parse out, if any of the strength that you're seeing currently reflects incremental fleet demand being potentially pulled forward from next year at all?

Well, thanks for the question. I think that what we're continuing to see is that there are a lot of big mega projects supporting data centers, supporting power gen, supporting other things that are happening that typically get indexed towards the national rental companies, the customers that we serve. And they see this demand continuing for a long time.

If you just look at what's been financed and what's been kicked off that last multiple years, when we look at the market of there's stability in the private nonres area of the market, but that's not really growing very much. It's still primarily a megaproject driven market. So when the private nonres stuff, that starts to grow, that will be incrementally good news to us versus what we're seeing right now with the nationals. But -- but today, it's really driven by all the big projects that we all read about every single day in the newspaper.

Our next question comes from the line of Tami Zakaria with JPMorgan.

My first question is about NGDV. I think I heard you say you would reach the high end of the 16, 000 to 20,000 production range after 2Q next year, if I heard it correctly. So what level of operating margin [indiscernible] do you expect at that level of production, do you still expect and NGDV margins reach high single-digit to low double-digit percent range when the ramp is done.

Tami, so I would think about it midyear, no specific exact date. So as John mentioned, we're installing buffers, which improved the flow of the plant when you have suppliers gating here and there. So it gives us more production stability. In terms of operating margin, we're not going to get into the specifics of how we see operating margin, let's say, in the near term. But I would say for 2028, which is really where we've historically talked, it's in that 10% range. Traditionally, government contracting is 7% to 13%. So it's in the healthy range is our expectation over the next couple of years.

Understood. That's very helpful. And then regarding fire trucks, do you plan to reprice some of the backlog given that there's new information about noncompliance penalties possible next year for NOx regulations or did those orders already have escalators such that you wouldn't have to go back and reprice and I would just pass through.

Thanks for the question. So in terms of how the NOx and engines work obviously, we've scheduled our vehicles and work with our customers very closely in terms of what engines are installed in those vehicles. So we don't expect any material impact on how we how we price our vehicles from that. We work with a customer and customer basis based on what engine is installed into those vehicles.

Our next question comes from the line of Menges with Citi.

I wanted to follow up on your comments on still expecting 30-ish percent incremental margins in access in this up cycle. And maybe I would just like to hear what's giving you confidence in that -- is it maybe partially on some easy comps as you're lapping some negative price cost and tariff impacts. And it sounds like maybe you've got each of your comps going into next year on incentive comp and access.

I'm curious if there's anything and whether it's in the recent orders or conversations you're having with customers going into '27 that's giving you some confidence in getting to that 30% incremental and maybe how to think if at all, it's mix might play a role in getting to that sort of incremental margin if NRCs are continuing to drive the demand in '27?

Yes, Kyle, thanks for the question. So the 30% John cited, really, that's kind of a broad brush brush stroke as to what we would historically see from that business. As you think about scoping 2027, and let me just first off, be responsible for me not to say we're not providing any 2027 guidance at this point. But if you think about how to scope 2027, really, with this level of demand and these level of orders, we should get better production issues, more throughput those drive better operating performance that result in those sort of incrementals.

We do have better year-over-year comps as you cite, both from a cost basis as we've seen a more stable tariff environment, but also from flow through pricing, flow through material cost reductions we've had this year. And then lastly, there are some onetime lumpy things, as you say, like incentive comp, which has come back to normal levels this year relative to last year that also would contribute to those incrementals. But the team is laser-focused on driving price cost and driving positive incrementals. And so that 30% broad brush stroke, we'll have more specifics when we get into our 2027 guidance early next year.

Our next question comes from the line of Tim Thein with Raymond James.

Just to follow up on access. I'm just thinking about the ramifications of given -- of the strong orders that you've received and obviously, the backlog level that you sit at today, as you've -- as more of those big nationals have pulled forward some of those APOs. how is that -- does that give you more -- obviously, gives you more visibility, but are there implications in terms of you being able to kind of hedge and predict your cost base better just given that level of order that's in backlog.

So I guess that's part of the question is, does it afford you greater ability to lock in more of your raw material purchases such that you're able to kind of better match that price cost? And then I guess the offsetting to that is to the extent it is more fill nationals at least today is that and obviously, there's more time to go to fill those orders in, but are we looking at a year potentially where there's that laborable mix next year? Again, to the extent the market continues to be dominated by these mega projects. So I'll just ask one. That's just one long question.

So let me start, Tim, with some of the specifics, I'll hand it off to John for some of the color on NRCs in the long term. So we are encouraged by the level of orders. It does give us production stability and an outlook that we can manage our plants in a more consistent and optimal way. That makes the manufacturing team super happy, and it drives cost efficiency. There are instances where we can also schedule our buys and kind of cluster things to make sure we're optimal on the order and quantities and so forth to give us cost efficiencies. So it is helpful from a, call it, price cost planning standpoint for 2027 to have this.

I'll hand it off to John about kind of how we think about mix and demand overall.

Yes. I mean, First of all, we -- up to this point in time and going into the third quarter when we had these orders, we've had our pricing discussions with our customers. And that's in light of the volatile market for input costs that we're in. So we think that we've done some good work there together with our customers. We, of course, take cost out through a lot of work that we've done from tariff engineering to sourcing and other total cost management efforts.

And as we continue -- so we got a $2.7 billion backlog as we continue through this, so there's more volatility, then we'll have to reopen the discussions with our customers. But we think we've done a nice job of covering ourselves as we go forward. And we'll maintain our diligence there with our customers. But we feel good about the $2.7 billion backlog. We feel good about our -- we'll certainly deliver it. And we -- and as I said, we should deliver that with healthy incrementals, like JLG typically does as the market starts to come back from a lull, which is what's happening right now.

Our next question comes from the line of Lauren Sullivan with UPS.

This is Lauren on for Steve Fisher. My first question is on the new defense contracts for FMTV and FHTV. How are those performing so far in light of current inflation?

Good. So we're building under those contracts. The heavy we started building early this year or really late last year. So that's underway. The mediums were starting to ramp in progressively this year, and then that will progressively be an increasing percentage of our mediums over the course of next year.

And then by 2028, we would expect to be fully building under the new contract on both sides. So overall, production is going well. Orders are showing strong demand and the contract terms are there to support an inflationary environment if, in fact, that's what drives our cost.

Yes. Remember, Lauren, these contracts, by the way, will go through '29 in terms of production. They have -- they have economic price adjustment clauses in them that give us some good protection.

Got it. Helpful. And then as you mentioned, a lot of the strength in demand for access equipment is coming from the national rental companies. On the independent side, are you seeing any actual cut back in CapEx? Or is IRC CapEx more flat?

Or flattish. It's spotty. There's thousands of independents that we serve -- some are in good markets, depending on regionally where they're located. Some are in good markets. They're indexed to the right end market and construction. Some are in not so good markets. So if you look at the total, that's kind of flattish. We're kind of seeing we haven't yet seen a turn in the kind of private nonres markets outside of the big mega projects.

We have no further questions at this time. Mr. Davidson, I'd like to turn the floor back over to you for closing comments.

Thanks, Christine, and thanks, everybody, for joining us on the call today. We're attending several conferences in November and December. We look forward to meeting with you there. Take care, and have a great day.

Ladies and gentlemen, this does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation, and have a wonderful day.

All right. Let's move on. Good morning. For those who weren't in the last session, I'm Steve Volkmann, Jefferies Industrial analyst. Very pleased to welcome Oshkosh to the desk. We are going to do a fireside chat. I would love to have participation from the field. If you guys are so inspired, we'll give you an opportunity to ask some questions as well.

But I will kick it off. First, very pleased to welcome two folks from Oshkosh here, Matt Field, CFO; Pat Davidson handles Investor Relations. And let's dive in and talk about some of the recent Oshkosh trends, shall we?

Great. Thanks for having us.

Thank you for coming. So let's talk about maybe just get this out of the way. We are on a webcast. I always want to I actually didn't do this yesterday. And at the end of the meeting, the company person admonished me, and then provided an update. So would you like to provide any updates on how things have gone in the third quarter?

We're just here to talk about the overall business. So no updates on the quarter but thank you for asking.

I just want to give you the opportunity. So let's dive in then. The Access business seems like it's turning and starting to drive some upside for you. Just talk about what you're seeing in Access and sort of where you think we are in the cycle?

Yes. So as you know, we spoke early in the year and some of the investors in the room, I've spoken to you multiple times this year. When the year started on Access, really, I was thinking it was going to be flat to maybe even down. A lot of us were we're seeing data that was saying it might be negative year-on-year. So our call initially for the year was a flat outlook.

As we progress through the year, we certainly saw some of those early signs of strength flowing through, whether that's, I'd say, early in the year, we saw strength in dirt outside our sectors that were early indications. We've seen that now flow into higher CapEx announcements from the rental companies.

And so certainly, I'll switch on to a more positive outlook. And for those who don't know me, I'm always on the conservative side of things and maybe on the negative to pessimistic side of things. And so that's been a change in our outlook for the Access segment. We think that's going to be more positive than we were earlier in the year. And we do see that growth continuing in 2027. Despite the fact that we probably won't get an interest rate cut this year. So originally, our outlook was assuming we get an interest rate cut and that might broaden out nonresidential at this point. we see nonresidential quite strong based off mega projects driven through a lot of the NRCs. And we think that outlook will continue in 2027.

And what are you seeing from sort of large national accounts versus more regional or local type customers?

Certainly, we've seen a product mix relative to past years of products going into NRCs. And so these mega projects clearly are flowing through the national rentals. And then the IRC is really supporting some of that in supporting roles. If we get a broader build-out of nonresidential, whether that's local shopping malls or multi-residential units or some of the other stuff that had been stronger in the past years, then I think I would be confident that it's even more sustaining broader booms long-term favorable outlook.

Right. I thought that was a pun, the boom pun.

I'm not that good.

So the one question I get from investors around this is, there's a question about whether some of the strength that we're seeing in aerials might be folks trying to get ahead of price increases for 2027. Does that ring true at all with you?

It's not something we're aware of. That's not saying it's not happening. I'm not in the exact negotiations. There certainly are discussions on long-term prospects and outlooks, but whether that's getting ahead of pricing, I would.

Is it -- does it make sense to think that pricing will be up meaningfully in '27?

Well, certainly, we've got a number of cost pressures this year that we've been managing. We're doing a lot of that through cost reductions. But then as we've talked throughout the year, talking about price with continued cost pressures, we'll continue to aggressively go after cost, but we might have a conversation about price, too, as you see a lot of raw materials moving, oil obviously hit $100 yesterday. So understanding how we manage all those will flow through the price potentially for what we can't mitigate.

Okay. And let's just talk about the product a little bit. What's going on in terms of sort of innovation in aerials and how does that play through in terms of demand generation?

Yes. There's a number of areas of innovation. We talk about it as Pat's got the slide up here, airport of the future, neighborhood of the future, job side of the future. There's a number of areas where we think robotics can play a strong role with artificial intelligence and autonomy. At CES, we had a welding demonstrator, which you see on the screen there, but even more so things like connected technology, ClearSky connectivity, which all our products have, which allow our equipment to talk to each other and be activated.

We see a future whereby we're actually potentially selling services to the end customer, where we turn on and off machines or activate employees, but also it's innovation on the hardware side. So one of the big growth channels for the whole sector, not just us, but we participated in it as well, is microsized scissors. So smaller, narrower scissors that operate inside the maintenance of data centers.

That's been a real growth area for the overall industry. And then lastly, I would say there's product innovations like we had at the [indiscernible] -- with a 2-piece boom, which allows us to build a lighter boom casing, which allows us to carry a heavier weight in the basket. So both hardware innovation but also software and technology innovation.

Okay. Good. And just maybe the last one on Access. Your largest competitor seems to be going through some potential ownership changes as anything that you're seeing with respect to that in the market?

No, they've always been a strong number two. I think they continue to operate in the market as such.

Okay. Great. Let's move to defense, but you didn't see that coming. Port division with defense Transport division with defense.

No.

Maybe just to refresh the group here, sort of where are we on the postal contract in terms of deliveries and how far through the process and what are the next steps?

Yes. So for those who aren't familiar, we build the next-generation postal delivery vehicle. You can see it on the slide here. It replaces what we all know and love, which was officially called the LLV, Long Life Vehicle. It is certainly lived up to that nomenclature with the last one built in the mid-'90s. So the Postal Service is upgrading its fleet to a modern, safe vehicle, where postal delivery carrier can actually stand in the back and deliver packages whereas the original truck was designed for delivering mail and catalogs primarily. It has modern safety features.

I know they're radical to everyone in the room like air conditioning, airbags and ABS, but those are not in the existing vehicle. So really excited to provide this vehicle to postal carriers across the U.S. We've got more than 35 million miles driven on it.

And so you're seeing them more regularly in neighborhoods now, which is really exciting because even with investors, and we meet with a lot of investors throughout the year, they even get excited when they see them, and they tell us at conferences and tell us stories about how they run to the postal carriers and ask them all sorts of questions and how "as if we gave them talking points," which we don't, just for the record nor do we have the painted or stencil on the side of the truck, but they are a spectacular vehicle. So we are ramping production.

We've had -- I think we did our 5,000th unit earlier this year. I don't know exactly what number we're on now, but delivered thousands of them to the U.S. Postal Service. really pleased with how they're performing in the wild, so to say. And production is going well, not without its challenges, I have to say. Any manufacturing ramp-up is a learning event. And so as we increase pace, we learn more, but it's going well.

Good. I think I've sent Pat a couple of photos from the wild.

Not in my neighborhood.

They are getting out there a little bit. So you mentioned sort of a few challenges here and there as that's pretty normal with big ramps? Or where are we in the challenges? Are those behind us?

Yes, though most of them yes, we're still working through whatever you have this much automation in parts of the plant, it's still tweaking robots to make sure they're doing the right thing at the right time. We put in mitigation efforts to support the ramp up in the production. So I'm confident we'll get there, and we're pleased with the quality of the line and how we're managing that. So it's just a matter of dialing it in.

Okay. And I think we're due for a follow-on order at some point coming up, which may actually trigger a margin improvement. Can you...

Yes. So the way government contracting works, so this contract is for 165,000 units. We have an order for 51,500. So that's kind of the first set of orders. As we get additional orders, we then kind of account for that across the whole contract due to government accounting. And so as you get deeper into the contract, you start seeing the broader margin expansion that we expect for the whole contract.

So as we get orders, you'll see improved margin. And so we're expecting our first order this year. That's really driven by supply chain needs, making sure our suppliers understand their needs for the next production and having certainty. So you don't want your supplier to get a phone call from one of the big 3 or somebody out saying, "Hey, we want you to use your capacity for X, Y and Z and then we're kind of stuck in the future." So making sure we're managing the supply chain with the customer is really important. So we'll expect to get on the cadence of orders with one expected this year.

And that probably be fourth quarter?

That's our estimation. Yes, that's -- I don't know exactly when or the magnitude of it, but our anticipation at this point, just given fiscal years and so forth, my guess is Q4.

Okay. And there seems to be some change in governance at the Postal Service as well. Most of that, I think, is aimed at voting rather than vehicles, but is there any risk that, that upends any of this?

I can't -- obviously can't guarantee an order timing, but I think the need for vehicles is very clear. The existing vehicle I kind of talked about it earlier, but the bus service right now is spending $5,000 to $10,000 per vehicle per year in maintenance cost. And so I think both the economics and the safety and reliability of the new vehicle are quite apparent.

Okay. Good. So let's switch to actual defense now. Just remind us your -- a couple of your larger contracts, and I think you've seen some turnover there on the contracts, which have helped margins a little bit. So let's talk through that.

Yes. So as you can see, I got to look over the screen there. All right. So we built the two major contracts we have are the heavies and mediums. So the heavy is what's on the upper left to the medium is the lower left as you see the slide here. So in terms of the heavies, we signed a new contract in 2024.

So as a reminder to those who don't follow us super closely. When we hit an inflationary period, we were under fixed-price contracts as most government contractors, if not all of them were. And so the margin shrunk in kind of 2022, 2023, those contracts stick around for a while. And so we signed a new contract for heavies in 2024. We received orders under that. We started building those trucks in late 2025.

And so you kind of have a wind down of building under old trucks and a gradual increase of building on a new truck. So it's not binary like if you're building, let's say, automotive vehicles where you stop production, you start production. So how it shows up in the financials is more gradual. But we do start seeing that margin improvement from the heavies this year.

We then signed a contract for the mediums in 2025 with new pricing and we would start building those late this year. And so certainly, going into 2027, we see primarily building under the new contracts. And that's one of the drivers behind our 2028 guidance where we showed this segment going to a 10% margin overall by 2028, whereas last year, it was about 3.7%, I think was the number, a little bit less than 4%. And that's one of the largest drivers. It's not just growing the postal delivery vehicles, which we just spoke about, but it's also building under these new contracts.

Okay. So as you get toward that margin target, it sounds like most of the drivers are these contract changes across postal and defense. Is there anything you need to do internally to hit that target?

I just build the trucks.

Yes. Okay. Fair enough.

And before we leave, I'd be remiss because I just love the pictures without pointing out the ROGUE-Fires, which sits in the middle there. So we talked about the technologies in Access and the job side of the future. One of the exciting technologies that we have is autonomy and building autonomous capable products. So actually, the middle one there is ROGUE-Fires. It's a Marine contract.

We got another award for this year, fully autonomous JLTV platform, which in carry multiple payloads. So as we think about the future in this segment, autonomy plays a big role, and we want to be that platform of choice, whether that's as you see there in rod fires or the vehicle of that, which is the PLS, Palletized Load System A2, which is autonomous ready. And so really being that platform of choice, whether that's that or other products is one of our key missions.

Okay. And actually, I was going to kind of go there as well because I think you had a recent visit from our -- what are we supposed to call them?

Department of War Secretary.

Department of War Secretary. And there was some discussions around potentially restarting the JLTV line to talk about that?

Yes. So really excited to welcome Secretary Hegseth to our assembly operations 2 weeks ago. I want to say yes. It was really great to have him on site and see our production capacity and capabilities. I know you've visited our plant. The plant that builds these vehicles also builds our S-Series concrete mixer, which is in our Vocational segment. So a real commercial and defense application in that plant.

He also had the chance to drive the M-ATV, which is what he was in Afghanistan, but also drive our JLTV, which you can see in the lower left. Yes. Sorry. I might have rights and lefts mess up here, but I'm not paid for right and left, unpaid for numbers.

And so the JLTV, which we built for many, many years successfully performed spectacularly if nobody's ever driven in [indiscernible]. It is a far step above other vehicles in that space. But the Marine Corps has asked for a request for information earlier this year to support their needs. And so we did respond to that. We've also invested ahead of that so that we can go from kind of a warm line, which is not building JLTVs to servicing Marine Corps or in 10 months. So we were explaining that on the trip as well. It's great to host them.

So how can investors sort of handicap the potential for something like this?

Go to Polymarket. No. I joke, I don't support any of that. But I don't know, honestly. I would say, follow the news, we build a fantastic JLTV product, and we're happy to serve if we can. But handicapping it, I don't have any advice on that. I'm not a better gambler or -- yes. I don't even do fantasy football.

All right. Fair enough. Okay. So maybe the last bucket of things to chat about product-wise would be kind of vocational. And there, you've been doing some work to improve throughput, just bring us up to speed on kind of what you're doing and where you are with that?

Absolutely. So in the Vocational segment, our largest operation is Pierce fire trucks. It's the #1 fire truck brand in the U.S. It's over 100 years old. Fire trucks for those who don't know the fire truck industry. I mean everyone loves a firetruck.

That's the one thing I've learned in this role. It wasn't surprising to me because I love fire trucks before I joined Oshkosh. I was -- I'm a runner, and so I was running through New York yesterday. And it's just shocking to me when fire trucks come out of a fire department here, people stop and take videos of FDNY driving through the street just to show the power of the service that fire departments provide and the trucks they use are visualization of that. the Sales Director of Pierce joked with me once, and I used this joke repeatedly. So those who I see later in the day, I apologize because you will hear it again that if you've seen one fire truck, you've seen one fire truck.

They're that unique and customized. Now we have an array of less customized vehicles. But for the most part, when we specialize in and what people ask for is a highly customized fire truck. And what that means is the manufacturing processes were established decades ago. And really, without the industry largely expanding, they've stayed the same. And so what we were originally focused on was using high flow manufacturing processes and breaking bottlenecks in our facilities and investing $150 million to increase cell production throughput.

And that was based off work we done at McNeilus, which is our refuse brand. You can see a picture there in the upper left. Yes, I got that right this time. And taking those principles into fire trucks, which is great, and it makes sense, and you can model it all out, and we've done that. And I can see how we're going to improve our production throughput by 25% to 30%, which is what we are at our Investor Day in 2025 and the journey we're on.

What we didn't fully understand is the flow of material, in particular, fabricated parts. So if you look at that beautiful fire truck on the right, all that metal that you can see there, all those boxes, there are storage units, all those storage units, those are all fabricated in-house, as is all the shiny metal. And so if you have a step that's a foot, that's great, but some steps might be 1.2 feet or 1.3. And so all of those are bent and cut and welded in-house.

And so making sure the flow of those parts internal to the plant are working effectively as you speed up the plant. So that's really where we're focused now. The processes as we relocated them are broken bottlenecks, those are looking good. Now we're really focused on making sure the flow of parts can support same line speed. And that was the learning we had in the second quarter was just we need to really look at how do parts go within the plant throughout the plant.

So is it becoming a little bit less custom then? Is that the prices?

We'd certainly be happy. We have a Build My Pierce program, which takes it down from, like, whatever, 2 million options to $10,000 or something. That certainly could increase throughput. But if a fire truck wants a fully customized truck, we're still going to build it because the exacting standards of each fire department is different.

Some need high turning rates, some don't. Some need more onboard water, some need less. So it really varies truck by truck. So our job is to create a flexible assembly line that can manage that complexity in an efficient way. And the great thing about the investment and why we've been so comfortable with it because I've gotten this question a lot over the last year is Well, you've got a backlog now that's 3, 4 years, what happens when that normalizes, what happens at the industry starts slow a little bit. What's great about the process we're putting in is it's a very flexible line. And so when we need extra capacity, you can run it faster, when you don't, you can run super efficient. And so it's not just through bricks and mortar up, it's really redesigning how fire trucks have been built for the first time in probably 50 years.

So what are lead times now? And where do you want them to be?

Lead times are still extended. So if I was taking a custom fire truck order today, it would be probably 2029 or so. That's too long. It really needs to be 12 to 18 months. And so that's what we're working towards is building more fire trucks faster with the quality and customization that our customers.

Okay. And I think you're on track to increase production sort of 10% this year? Is that still...

It's our goal this year is by the end of the year, we had increased production 10%. Last year, we got a 10% increase in the second half of last year relative to the prior year. We're targeting 10% by the end of this year with the goal of getting 25% to 30%.

And how do you expect the margins to step up then as you go through this process?

So they have -- you saw that in the second quarter, they've taken a little bit of a dip as we've invested in the facilities as we've had some more assets in place, labor and otherwise to build fire trucks during the transition. Over time, we expect us to be solidly in that 16% to 18% margin range that we guided for 2028 for the segment.

Okay. And then maybe lastly, not leastly, refuse, maybe the one market that hasn't been sort of showing growth recently. Talk to us about sort of where we are in the cycle for refuse and how that played out?

Yes, really excited with our McNeilus brand, which is our go-to-market brand for refuse trucks. You can see our Volterra there in the upper left. This one actually faces me, I should be able to do this without looking, but anyway, so the Volterra is a fully electric vehicle designed around the driver with, as you can see in the picture, optimized visibility, but also ergonomics and the ability to step into it. We're really excited about innovations we launched in that sector around refuse electrification, adding technology that makes the vehicle safer, more productive and so really excited about that end market. But it is in a slower state this year.

We saw it come off a strong demand last year. The indications we have is that the end market, which is municipalities, I guess, the end market relates to us to generate garbage, but the people who contract the services are the municipalities are really taking a pause on ordering or signing new contracts, given inflation, given uncertainty around tariffs. And so without new long-term contracts in place, the waste haulers are pausing some of their purchases of trucks, which then affects us.

And so I think we'll be through it in the near future. I don't know if that's late this year. I don't know if it's next year. But the reality is the flow of the process, the creation of refuse and recycling hasn't changed at all. So the age of the fleets are still aged. And so at some point, that flow, and industry needs to come back. But it's down, call it, 20% to 30% this year relative to last year. So I think it will come back at some point. I just don't have exact timing on that.

And it's hard to find data on that cycle from our perspective on the as external folks. Where do you think we are in that cycle? Do we normally have more than a year of downturn?

It's a great question. I've looked for the same data, and I haven't found that out so I'm glad to see I'm not alone. All indications are it shouldn't be an extended one because, again, the drivers of the pause in demand are uncertainty around the tariff environment and some of the '27 model year engine upgrades, some of the EPA certifications and so forth. We're going to get through those. Certainly, the tariff environment appears to be stable-ish. And so I think we should see a clearing of this, call it, the next 12 to 18 months.

Okay. Good. All right. So that's a good round the horn on the businesses. Maybe we'll take a moment anybody would like to ask a question here. All right. I can keep going then. You started to talk a little bit about technology and sort of your tech stack and how you're sort of sharing that amongst businesses. But I think maybe it might make sense to delve in a little deeper there. How do you share that amongst the businesses? And what are the sort of attach rates? What are the responses you're seeing from customers?

Yes. Technology is one of the most exciting parts about this business. One of the things I love about commercial vehicles and the end markets we serve is that you don't really need to guess what customers want. I mean you sit with them, and they'll tell you what their pain points are. They can tell you, "Hey, I want my side liter be 5 seconds faster because then I can pick up x more cans per day."

They'll tell you their pain points about airport rescue firefighting. You can see a little bubble there with our ARFF truck. The electrification solves because if you have an electric it actually manages your pump, so you can pump and drive at the same time without having to manage the engine and the revs for that. And so we see a lot of opportunity with technology. And we've shared that to date on multiple fronts.

So electrification is one of those examples. We have an electric fire truck. There is a combination of electric diesel. We have the same on the RF truck, the airport firefighting truck. We have an electric refuse truck that I spoke about earlier. So electrification is one of those skills that crosses vehicles. In fact, at Eurosatory we had an electric JLTV, which we had as a demonstrator and took to Europe.

So that electrification is one of those channels. Autonomy and robotics is another one that I'm personally really excited about. We already have a JetDock. So we build jet bridges here in the U.S. primarily. And we have autonomous jet docking, which is somebody standing much like you are at a podium who has to handle a couple of switches to get the jet bridge to the plane. But JetDock 2.0 could allow that jet bridge to be monitored remotely and go straight to the plane. And so the ability not to set on a plane in here, I'm sorry, we're waiting for somebody to man the jet bridge is something near and dear to my heart, and I'm sure everybody who listens to this call.

So bringing technology on the tarmac, we think is a fantastic opportunity. And that's either autonomous technologies with bet bridges, but also as you see on this picture, and there's videos we've shown call with airport of the future, but bringing robots under the tarmac because I don't fully appreciate that when there's lightning you can't have people out guiding planes in and helping park the planes.

Well, you can have robots. And so what we've done is we've taken some of the defense technologies we have and identified applications in -- do you have -- yes, okay, good airport in the future has that robot fact here in the picture. And identified use cases on the tarmac where you can take that robotic technology, sensing technology and then bring it into jobs in the airport. So this example here, you can see on the screen, is perimeter detection because sometimes like deer cross a fence or other things cross-fences that show and the airport needs to know that.

But there's also things like there's a person who puts -- they're called cholks, those triangles that go in front of and behind the wheels. They have to put those in place. Well, you can have a robot do that. And so really excited to see that robotic technology go from, in this case, defense to airport, but also we invested in a robotics company, Nextera Robotics for job sites, and we acquired technologies called Canvas, which does a drywall sanding robot.

It's a job -- it's a tough job, but it's great for robots. And so bringing robotics to the job site, bringing it to the airport neighborhoods. What are the things that really excites me.

Okay. Good. One more chance from the field here -- we do have one. Hold on one second for the mic. Thank you.

On price cost in Access Segment next year. I'd be really curious to hear your thoughts on kind of the most important considerations there for you being successful in that? And do you see any challenge in the way you're going to after price with the NRCs versus IRCs? And is that typically -- is there typically a bifurcation in your ability to price between those two very important channels. And I'm curious if there are negotiations, that sort of thing involved with the NRCs and just kind of your degree of confidence going into next year?

Sure. So price cost is important for any company, especially in a inflationary environment or an environment where you're managing things like tariffs or raw material prices, not unique to us. And so the first thing any company has a responsibility to do is do whatever they can to offset the cost impact. And it depends on the driver of that cost impact. So we talked earlier in this year a lot about managing tariffs and that would be both through optimizing sourcing.

How do you import parts those various things, footprint actions, so where do you build, what you build. And that's not just unique to the U.S., by the way. So we localized boom lift into our Hinowa facility, which we have been importing from our Chinese plant probably 2 years ago. And so making sure, first and foremost, you're addressing cost. And so tariff engineering, tariff management is on sourcing. Negotiation is another one.

So aggressive negotiation on cost and make sure you're buying at best cost and that can be through scale across the company, and that could be through just understanding the best cost of design. Redesign, so making sure your designs are efficient is also your responsibility as a company and then production efficiency and kind of SG&A. So making sure you're efficient on your cost side first before you talk about pricing.

Then you do need to talk about pricing for what you can't offset. Obviously, that does differ. There are different prices at volume, as anyone knows who shops at Costco. You pay a lower price per item at Costco than probably anywhere else on hypothesize that might not be true on everything. But certainly, when you take home bulk cans of coffee. You tend to get a discount. And so that's true in our industry as well. And so we have those discussions ongoing their regular discussions. Nothing to talk specifically about 2027 on that. But it is something we work through to get price cost neutral by year-end this year, and then we'll talk about 2027 at the appropriate time.

Have you launched that Costco Boom Lift product yet?

Not yet. No. No. It takes up a lot of floor space at Costco. So I think it would be did have to sell it at the outside.

Yes. Yes. Anyway, let's not go down that rabbit hole. 1 minute and 30 seconds left. Should we talk about capital allocation quickly? Priorities, plans.

Yes. So thanks for -- so our capital allocation, we shared at Investor Day in June 2025, very focused on, first and foremost, maintaining an investment-grade balance sheet. That's important for capital companies like ours that invest. So maintaining investment-grade balance sheet first and foremost, and then investing in our core business. You heard about a lot of those opportunities today, whether that's investing in fire truck manufacturing whether that's investing in robotics and technology. But investing in ourselves is the single best return we have on our capital.

Additional capital, we're committed to a steady increase in dividends. We've increased our dividend for I think now 12 straight years by 10 percentage or more. And so having a steady growth in dividend is important to our shareholders. It's important to us. We then look at the remaining capital. We're always looking at what companies might be a good role in our portfolio or technologies, and we're evaluating our own portfolio as well. as well as we're looking at where our share price is and what our multiples are, to determine the next best use of capital. And so we've participated in share buybacks throughout this year. and last year as we think that's a good use of our capital for our shareholders.

We've also looked at acquisitions. Some of those have come to fruition like in 2023 when we acquired AeroTech or our acquisition of Hinowa followed us to localize [indiscernible]. So that's kind of what we look at the last part of our capital allocation, but investing in our core business, as we talked about buying ahead to support JLTV and other things, that remains [indiscernible] of capital.

Super. All right. That's right on time. Thank you guys so much. Appreciate the insights.

Thank so much for having me.

Greetings, and welcome to the Oshkosh Corporation Second Quarter 2026 Results Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Pat Davidson, Senior Vice President of Investor Relations for Oshkosh Corporation. Thank you, sir. You may begin.

Good morning, and thanks for joining us. Earlier today, we published our second quarter 2026 results. A 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 12 months.

Please refer now to Slide 2 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 and other factors that could cause actual results to be materially different from those expressed or implied by such forward-looking statements. These risk factors include, among others, factors that we listed in our release this morning and matters that we have described in our most recent Form 10-K and other filings we make with the SEC as well as matters noted at our Investor Day in June 2025. We disclaim any obligation to update these forward-looking statements, which may not be updated until our next quarterly earnings conference call, if at all.

Our presenters today are John Pfeifer, President and Chief Executive Officer; and Matt Field, Executive Vice President and Chief Financial Officer. Please turn to Slide 3, and I'll turn it over to you, John.

Good morning, everyone, and thank you for joining us today. In the second quarter, we delivered consolidated sales of $2.9 billion and adjusted earnings per share of $2.87. We continue to benefit from growth in our Access segment with strong order intake of $1.5 billion. Additionally, we have robust backlogs at our Transport and Vocational segments and we're focused on increasing production, which is foundational to delivering our 2028 goals. We are building momentum and remain confident in our ability to deliver on our Investor Day targets.

Within our Vocational segment, we are continuing actions to modernize our fire truck manufacturing and expand production to better serve strong customer demand and support long-term growth. Over the past quarter, we have implemented production changes to improve throughput. To support these changes, we are implementing new implant material flow processes that shift from reliance on individuals and experience to standardized modern process flows that will support our continued transformation to high-flow production lines. As a result of these changes, we expect to produce and ship fewer fire trucks this year than we previously planned. However, the work we are doing positions us well for 2027 and 2028.

As a result of our revised expectations for production this year, we now expect full year adjusted earnings per share in the range of $11. Across the company, we continue to hear a common theme from customers who are looking for solutions that are safe, intuitive, productive and maximize fleet uptime. We are investing in AI-enabled technologies, autonomy and connectivity that are shaping the airport of the future, the job site of the future, the neighborhood of the future and the battlefield of the future.

Please turn to Slide 5, and we'll continue to review some highlights since our last call. As expected, our Access segment delivered double-digit operating income margins with strong Q2 sales in a dynamic environment. We now expect full year Access segment revenue to grow compared to 2025, an improvement from our original expectation for a modest decline. Large infrastructure investments and mega projects remain important sources of demand, and our newest products, including micro-sized scissors and ClearSky smart fleet connected technologies continue to resonate with customers. We remain focused on managing the business with discipline, improving price/cost dynamics, driving operational productivity and innovating our products and services. These innovations will drive the job site of the future where we see tremendous promise in bringing autonomous AI-enabled solutions to construction sites.

Orders in the quarter were strong at $1.5 billion, resulting in a book-to-bill ratio of 1.1. We enter the second half of the year with good visibility, supported by $2 billion backlog the end of the quarter. Mega projects are continuing to drive demand for our Access equipment, and we are working to ensure we have the inventory and production flexibility to support the demand.

Turning to Slide 6 in our Vocational segment. Backlog and demand for fire apparatus and airport products provides excellent visibility and supports our investment in our manufacturing operations to drive long-term growth. We are making meaningful progress in modernizing our manufacturing operations and implementing the changes needed to improve material flow and assembly efficiency. These initiatives represent a transformation of our manufacturing operations for fire trucks. And while production throughput is improving more gradually than we initially expected in the near term, these steps remain the right actions to reduce lead times and better serve our customers.

Demand for OshKosh AeroTech remains strong as airports continuing investing in expansion and modernization. Once again, order intake during the quarter was solid, particularly for passenger boarding bridges with key wins in Chicago, Denver and Philadelphia. In addition, we continue to advance our vision for airport of the future, including testing an autonomous, AI-enabled ground support robot at Grand Rapids Airport in the quarter. Refuse collection vehicle sales were lower than last year as we previously discussed. Even amidst lower sales, the quality of our products has resulted in notable recent orders including a significant order with the Sanitation Department of New York. Overall, we believe the long-term outlook for our vocational segment remains strong. Our backlog and market position continue to provide an excellent foundation for future growth, and we are confident in achieving our long-range targets.

Please turn to Slide 7. In the Transport segment, we continue to ramp production of the next-generation delivery vehicle. We are excited to see more of our vehicles serving postal carriers and communities across the country. The fleet has now surpassed 35 million miles and feedback from both the United States Postal Service and its drivers remains positive, reinforcing the safety, productivity and reliability benefits platform.

Our Defense business also continued to build momentum during the quarter. Participation at the EUROSATORY exhibition in France highlighted the growing interest we are seeing from both existing and potential customers. As defense priorities continue to evolve globally, we believe Oshkosh is well positioned to leverage our engineering capabilities, manufacturing scale and proven mobility platforms to pursue additional opportunities in both domestic and international markets. During the quarter, we received orders from the U.S. and international customers including a $142 million order for the FMTV A2 program and a $92 million order supporting the United States Marine Corps Rogue Fires platform, which combines next-generation autonomy with the protection, mobility, speed and off-road capability marines rely on in harsh environments. These awards reinforce the confidence our customers place in Oshkosh Defense while providing additional visibility beyond 2026 for these products.

I'll hand it over to Matt to review our financial results and provide additional details on our outlook.

Thanks, John. Please turn to Slide 8. Consolidated sales for the second quarter of $2.9 billion, increased $183 million or 6.7% compared to the same quarter last year. The increase primarily reflected improved sales volume and pricing. Adjusted operating income was $258 million, down from $313 million in the prior year, primarily due to unfavorable mix and higher manufacturing overhead costs. which, in part, continues to reflect our investments for future production, partially offset by higher sales volume. Free cash flow for the quarter was $348 million, a significant improvement compared to $49 million last year. Our strong free cash flow reflected continued discipline in managing working capital, particularly related to inventory as well as higher customer advances. Our expectation for cash conversion remains strong for the year. During the quarter, we repurchased approximately 667,000 shares of our stock for $92 million.

Turning to our segment results on Slide 9. Access second quarter sales of $1.4 billion were up 9.4% from last year. The increase was driven by higher sales volume and improved pricing. As John mentioned, demand is improving. We delivered a book-to-bill ratio of 1.1 during the quarter, more than double the second quarter last year as robust Q2 orders followed strong activity in the first quarter. Access achieved a solid double-digit adjusted operating income margin of 11.3%, which was lower than last year, in part due to adverse product and customer mix. As expected, price/cost dynamics also remained unfavorable compared with last year, primarily due to tariff costs. As we previously discussed, even though tariffs were announced in the second quarter last year, we did not see the cost impact until later in 2025. For the year, we still expect to be price cost neutral.

Vocational sales of $967 million were relatively flat compared to last year, as lower volume, primarily Refuse and recycling vehicles more than offset improved pricing. Fire truck shipments were roughly in line with last year. Despite lower volume, the Vocational segment delivered an adjusted operating income margin of 13.5% as adverse sales mix and higher manufacturing overhead costs, including our investments in pure specialities, were partially offset by favorable price cost dynamics.

Transport segment sales increased $57 million or 12% to $536 million in the quarter, primarily due to higher sales volume. Delivery vehicle revenue grew by $155 million to $262 million, more than offsetting the decrease in defense volume. Delivery represented nearly half of transport segment sales during the quarter and delivery revenue grew more than 20% sequentially compared to the first quarter of 2026. As expected, Defense revenue was lower than last year. As a reminder, in the second quarter of 2025, we were still building domestic JLTVs with the last units built in May 2025.

Transport segment operating income was $16 million, down $2 million compared with last year, reflecting adverse mix as well as higher warranty and manufacturing overhead costs, which were partially offset by a favorable onetime item totaling $17 million related to the NGDV program. We expect Transport operating margin to grow in the back half of the year as we continue to transition out of past fixed price contracts, ramp up NGDV production and expect to receive an additional NGDV order.

Turning to our expectations for 2026 on Slide 10. As John mentioned earlier, we are updating our outlook with full year adjusted EPS now expected to be in the range of $11. While our outlook for Access demand is improving, as we have stated, the more moderate pace of improvement for fire truck throughput has reduced our expectations by approximately $0.50. As we execute fire truck production plans, anticipate receiving an additional order for NGDV, increase NGDV production and build on revised defense contracts, we expect that our results in Q4 will be stronger than Q3. We expect that this Q4 momentum carries forward into 2027 and beyond as we work towards our 2028 targets. We still expect free cash flow of $550 million to $650 million, unchanged from our prior guidance.

With that, I'll turn it back over to John for some closing comments.

Across Oshkosh, we continue to invest in technologies that make a difference to the Everyday Hero doing essential work in communities and create enduring value for customers. Whether through connected equipment, autonomy, artificial intelligence or electrification, we believe our Innovate, Serve, Advance strategy continues to position Oshkosh to shape the future of job sites airports, neighborhoods and battlefields of the future. To reiterate, we remain confident in our plans to achieve our 2028 financial targets.

I'll turn it back to you, Pat, for the Q&A.

Thanks, John. I'd like to remind everyone to please limit your questions to one plus a follow-up. Please stay disciplined on your follow-up question. After the follow-up, we ask that you rejoin the queue if you have additional questions. Operator, please begin the Q&A session.

[Operator Instructions] Our first question comes from the line of David Raso with Evercore ISI.

Trying to figure out the Vocational. It sounds like that $0.50 comment. Just to be clear, is there upside to access and Vocational was taken down more than $0.50, just making sure. I mean, it sounds like you obviously bumped up the total revenue. I just wanted to be clear because it kind of sounded like Vocational was $0.50. I assume it's more than $0.50 and Access has upside? I just wanted to clarify that.

David, thanks for joining. Yes, that's the right way to think about it fundamentally is with the more moderate pace of production, that more than offsets the upside in Access, which was the revision to the guide.

And related to that, the Access upside, I know customer mix is important, price cost is important. How are you thinking about the margins in Access from previously? Just how much can we think of the incremental profitability from the higher volume?

Sure. I mean, over the year, that incrementality should improve as we improve our price cost dynamics. That's the kind of the general way I would think about it.

Our next question comes from the line of Tami Zakaria with JPMorgan.

Question on Access. Can you remind us where the industry Access volumes you expect to be end of this year versus the prior peak levels. What I'm trying to understand is where do you expect the industry to end this year versus the prior peak?

Tough for me to say where the overall industry is going to end up this year. I mean I can give you some context on where we are. I mean the industry right now is being driven primarily by mega projects, mega projects from infrastructure to data centers, which we all hear about every day and many other big mega projects, which is really what's driving a lot of demand right now. And for the most part, that's driven -- that's served by the big national rental companies because they've got the big fleets in order to serve it. So it's a good thing. It's going to go on for a long, long time, as far as we can see right now.

The kind of Private, General or Nonres construction segments kind of just plotting along. There's a lot of different segments in that, and that's a huge marketplace for us. We expect that, that will start to improve at some point in the future, hard to call exactly when. Some metrics say it's going to improve by the end of the year, in the fourth quarter or some say, early 2027. But that's even going to just boost the demand that we're seeing even further because right now, it's just kind of plotting along. But overall, we're seeing a really nice improving demand environment for Access equipment.

Understood. That's very helpful color. And I apologize if I missed it, but could you comment on the 3Q EPS expectation versus the $2.87 you did in 2Q? I'm trying to understand what 3Q might look like versus 4Q.

Yes. So as we said on the call, 4Q, we think will be high relative to our normal seasonality. That's really driven as we both have on the slides and said on the script, driven by fire truck production, building under the new price contracts on Defense, NGDV production and then the expectations for an NGDV order. All of that we expect in Q4.

Our next question comes from the line of Stephen Volkmann with Jefferies.

I'm a bit of a slow learner. I apologize. So I was going to ask you if we could dive into access a little bit. And I'm trying to think about the 2 margin drivers that you talked about, the mix and the price cost. Do those get sort of sequentially better each quarter? Or maybe [indiscernible] '27, I don't know how should we think about those 2 mix driver -- mix and price cost driver?

Yes. Difficult to say exactly on mix. As John talked about, it's not exactly clear when we'll see broad-based recovery outside of mega projects. That obviously affects customer mix. In terms of price/cost, we would expect that to improve in part because once we have tariffs in the rearview mirror in terms of a year-over-year comp, that will improve our year-over-year price/cost. But also just through pricing activity as well as cost reductions as we've talked about on prior calls.

Great. And John, on Refuse cycle. Is this kind of a peak and we should expect a couple of years of something a little lower? Or is this a lull in the action as it were.

Well, Steve, the Refuse business has been kind of down in 2026. I mean we said it was going to be down. It has actually been down. In some industrial sectors, we're seeing customers remain cautious on CapEx until they see a little bit more certainty on the macroeconomic future. That's certainly been the case with customers in the refuse business. But the good news is that overall, it's a good market. Fleets remain age, and we all know that the generation of refuse and recycling remains unchanged. So we certainly expect that this business, even though it's been a little bit down in 2026, is going to return to a little bit more normal state maybe as we get into 2027.

Our next question comes from the line of Jamie Cook with Truist Securities.

Sorry, just a couple of follow-ups. Matt, again, on the third quarter versus the fourth quarter, given the items that you called out that are heavily fourth quarter weighted, it sounds like Q3 could potentially be flat to down relative to last year. I'm just wondering if that's the right way to think about it?

And then also, my second question is within transport. I think before you were saying that revenue is about $2.5 billion, which I'm assuming that's still the same given you didn't really clarify that. It just implies a pretty healthy ramp. So is that still the right way to think about it? And just your confidence on when we get the NGDV award and how material that is to the guide for the year?

Jamie, roughly, I think that's the right way to think about it in broad frameworks. In terms of the order, we're assuming that's in Q4. I do that just because that's when the fiscal years are for the government. It could be Q3. But for planning purposes, we're assuming Q4, and we have ongoing dialogues with USPS to make sure we have our supply chain ready to support their production.

Okay. But to the first comment, EPS in the third quarter could be flat to down, you're confirming that.

I think that's the right way to think about it with strong Q4 and where we are in our production cycle.

Okay. And then transport is still $2.5 billion for the year.

Ballpark.

Our next question comes from the line of Jerry Revich with Wells Fargo.

I wanted to ask, John, just on your comment on being on track for 2028 targets for aerial platforms, in particular. Can you just talk about how much of a step forward you folks expect to take in 2027 to bridge the gap we're running now versus the '28 targets and your level of confidence on price cost to get there?

Yes. So I'll provide some commentary on the market and where we think it's headed. So we feel really good about where the access market is right now. We certainly feel better today than we did in January, as you know. That's what we've been talking about. But we also feel really good about where it's headed. And there's kind of 2 things happening. Number one, I always say, pay attention to our backlog. Backlog is building. That's good, of course. And I would say we got to pay attention to utilization rates, equipment in the market and how much is it utilized. And the utilization rates are really, really strong. That's both our own data as well as what our customers are telling us. You've seen publicly traded customers already report really strong utilization. So you got utilization improving and really healthy, and we've got backlogs that are building. Couple that with the fact that the boom category is still aged.

So we have need for growth in boom equipment in the market, and we have aged boom equipment, so there's continued need to replace boom equipment. Those are all really healthy signs that point towards a strong recovery in the market. We think that, that goes at least through and beyond. With all the activity, mega projects are not going to slow down. And we have, again, the private nonres market that right now is kind of muddling along, but there's a lot of signs saying that at some point in the near future, that's going to pick up as well. So just the context here, we feel like we're in a good spot. We've done a lot of really strong work to position our manufacturing plants as well to be able to serve the market in the recovery that we're in.

And agreed on the recovery for sure. I'm just wondering your level of confidence on the ability to push price. It feels like you might need something like a mid-single-digit type price increases given the timing of tariffs and refunds this year and just general inflation. And John, I'm wondering, obviously, it's early for '27 orders, but what's your level of confidence in being able to price ahead of inflation given the backdrop you described?

Well, the short answer is, we're confident that we can do that. I'll give you a little bit more context. I mean we've been working for the last year on positioning our cost in the context of geopolitical tariff environments, really making sure that we're responding to that. We do a lot of tariff engineering. We think that we're going to get the fruits of that labor as the market continues to recover. But we always try to pay attention to cost first. How do we minimize the cost impact to our customer? That's always job one. we will have to pass some of it on, and we have done some of that, and we're confident that because we're so intensely focused on the cost side that as we pass along what we need to customers that, that will be accepted. And so we're confident that we'll continue to do that. And I think the history has shown that we have the ability to do that.

Our next question comes from the line of Mig Dobre with Baird.

It's Joe Grabowski on for Mig this morning. So my first question, you mentioned the fire truck shipments were roughly in line with last year, and you're making moves to improve the production flow. When do you think you'll start to see the benefits of those improvements that you're working on right now? I know you mentioned 2027, 2028. But is there a chance that we'll start to see some of the benefits later in this year? Or kind of when do you think those will kind of come through?

Yes. You should start to see it in the second half of this year for sure. I'll give you a little context. This is the most complex product that we produce, the municipal fire truck. And we're really transforming how we make it. We say we're going from bay build to high flow production lines, which is a big transformation in the manufacturing operations. And we're moving through that transition right now. We're really confident in the steps that we're taking. We've got the absolute best people on it. That includes expertise from third parties where we need it. We have done this before. We did it at McNeilus, and I can give you other examples beyond that, which we're all very, very successful. But what it's going to result in is a really resilient production flow for fire trucks where we can Sprint right now, we need to be sprinting because we've got huge backlogs. But when we're in normal sort of steady-state production, we'll be super efficient. And so we feel really good about what we're doing.

Got it. Okay. And then my follow-up question, -- if you could just update us on any impact on your facilities from the severe weather in the Appleton area yesterday.

Yes. It was a tough event for this area. I mean, luckily, we came out pretty good. We had people impacted in terms of homes damaged and things like that. And of the 7,000 people we have up here, we had one that was injured. So we're paying very close attention to that person. But operations are intact, a couple of power outages here and there, nothing material that would concern business performance.

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

I just wanted to go back to the fiscal year, I guess, '26 bridge. I just wanted to understand that a little bit better if you could provide any more color. Maybe just quantifying I guess, how much more kind of upside you see from an Access perspective in terms of the guide on the EPS front.

And then as we think about the segments, I guess, Transport had a $16.6 million onetime item. Was that contemplated in the guide? Or is that kind of an incremental factor that maybe doesn't repeat and would, I guess, imply a little bit more weakness in vocational. And then just layering on top of that, anything in terms of refunds or tariffs that was or wasn't included in the guidance. Could you just kind of quantify that as we think about and the remaining quarters.

You packed a lot into that question there, Angel, I might need [indiscernible] your follow-ups, got a lot in there. So all those things were contemplated in the quarter as we were looking for both the guide and the year, whether they happen in the second quarter in some cases or later in the year, were up for debate. But generally speaking, they were all contemplated. Yes, what else did you have questions on specifically in that. You packed so much into that question that generally speaking, the one-timers were kind of understood at the beginning of the quarter.

I guess I just wanted to understand those onetime items and refunds were already contemplated, I think, is what you're saying. So -- and just if you could size the refunds was, I guess, the initial question.

Yes. So on tariffs, remember what we talked about last quarter is we felt where we were with the 232 and other elements relative to our IEEPA rebounds, we were balanced for the year. We still feel that that's roughly the case. In the quarter, we had about $40 million to $50 million net impact on tariffs, all in line with our expectations for the full year. As we talked about last quarter, we had the first quarter about $13 million recovery. That increased. Some of it was our direct flow through to Q2. Some of that was customer. And so that increased to call it, roughly $20 million for the quarter. So all the numbers roughly in line with where we were expecting last quarter. So not a lot of surprises.

Got it. And then maybe just one on 3Q. I know you didn't provide a specific number, but you talked about kind of flat to down sequentially. Can you just talk about that at the segment level where would you kind of anticipate the potential to increase production, deliver more units versus where is it more about just more price cost and mix factors. Just trying to understand that and particularly as we go into the fourth quarter, kind of that ramp.

Yes. Angel, just to clarify, Tami's question was on a year-over-year basis, not on a sequential basis. So in terms of Q3, Q4, Q4 ramp, again, it's fire truck production, as John mentioned, that's a sequential Q3 and then into Q4. And then in Q4, we get into NGDV production, the additional order as well as when we move through the year, we build more on the new revised price contracts in defense.

Our next question comes from the line of Steven Fisher with UBS.

You guys had cited higher warranty costs in the Transport segment. To what extent is that related to the NGDV. And can you quantify it and maybe frame the potential for that to improve over time? I guess the bigger picture question here also is just on -- the Transport margins, I think you talked to Jerry, about 28 in access, but just curious how confident we can be at this point that this Transport segment still has double-digit margin potential.

Yes, Steve, thanks for the question. First of all, let me just clarify. The warranty was a onetime. It was on a defense program. It was an engine-related issue. The one time, that's all I'll say about it. I don't think it warrants more comments. The Defense business though is -- it's getting to a point where we're getting new contract pricing on really important programs, and we have NGDV getting to full rate production. And the expectation with us and our customers in the United States Postal services, there will be yet another order in the second half of the year, likely in the fourth quarter. And that gives us the ability to understand what their go-forward mix is and we can prime the supply chain and make sure that we can supply efficiently. And and that's part of the expectation for the fourth quarter. But that contract pricing, full rate production on NGDV and an order coming in with 606 accounting, that's what takes it to a much better margin level.

Okay. That's helpful. And then can you talk about some of the positive price versus cost dynamics within Vocational. Was that all price that was already in backlog? Or were you able to capture additional cost recovery as costs have been rising in general?

Primarily, that pricing is in backlog. Most of it is already defined. There are a couple of markets where we have shorter lead times that have kind of pricing here and there. But for the most part, that's all in backlog.

Our next question comes from the line of Chad Dillard with Bernstein.

Questions for you on your [indiscernible] business. So first of all, can you give a little bit more color on the orders and backlog trends in the quarter for delivery? And then secondly, I think it's hitting in the fourth quarter, but can you size of the cumulative catch-up adjustment that's embedded in your guidance?

So you're talking about delivery, right?

Correct.

Yes. So in the quarter, we're working off the large order that we received initially plus a supplemental order to that. So we didn't have any orders in the quarter. We expect an order in the fourth quarter. And we continue to work off that the order and mix that we've already received. But this is a fantastic program for us and for the United States Postal Service really enhances the USPS's ability to deliver e-commerce efficiently and effectively. As I said on the prepared remarks, they're coming to every neighborhood around you. If you haven't seen one yet, you will probably in the very near future. We feel great about the program. And again, the order that we expect to receive in the second half is part of our guidance in the second half.

Got it. Okay. And then what's the new shape of the fire truck capacity ramp? When do you expect to hit full rate production? And then can you just frame what that looks like versus your production rates today?

Yes. So we expect this year, it will be about a 10% increase, and that's a material amount of additional fire trucks coming off the line. But in total, we're expecting to get to 25% to 30% production rate increase. So we expect to be increasing production in Q3, yet again in Q4 and as we go through 2027. And that's all really, really important. It's why we talk so much about moving to transformational high-flow production lines that are much more efficient and allow us to sprint more because we need more fire trucks right now. But they'll allow us to be really efficient in the future in steady-state production environments. So it's -- we're continuing to drive more output on our fire truck production capability.

Our next question comes from the line of Kyle Menges with Citi.

Maybe just digging into Vocational a little bit more in the fire truck production ramp. I'm just curious what have been some of the main challenges to hitting the production targets and just your confidence level in those challenges alleviating over time?

Yes. So I hit on it a little bit in my prepared remarks. It's about material flow, right? Because when you go to a bay build to a more high flow production environment with different workstations and you're organizing production very differently. This is a very complicated vehicle. There's thousands and thousands of parts, both from our internal component plants as well as our many great suppliers that have to come together at the right time and at the right place. And when you reengineer all of that, we know what we're doing. We have done this before. We're not reinventing anything here. We have to go through a lot of very methodical work and make sure that it's right to get to the level of production that we expect. And sometimes when you're in the near term, it's hard to predict the next week what you're going to do. But it's -- we know that we're doing the right thing for the long-term health of this business. But material flow is probably a big thing to think about when you have to reroute everything that comes to the line.

Got it. That's helpful. And then just it would be helpful to hear a little bit color on the updated vocational outlook relative to your, I guess, last quarter expectations where you had effectively taking out $100 million to $200 million from the initial top line guide and then guided the margins to, I'd say, about 16% to 17%. Just curious what the top line and margin range could look like now for vocational for the full year?

Yes. We're not going to get into the specific details, but I think the way to think about it with the revised production plan, our long-term target remains 16% to 18% for vocational I think we'll be below the low end of that a little bit, but all headed in the right direction for 2027 and 2028.

This is a great business. I mean, we have great positions in the industries we serve. This is a high-margin business long term. It's a really good business.

Our next question comes from the line of Mike Shlisky with D.A. Davidson.

So you've got a lot of fire trucks. There are a lot of fire trucks still left to build on the backlog, but how a fire truck order is progressing today maybe compared to a normal or maybe average year? Is it still a pretty robust environment for a brand-new truck orders?

Yes. I think that the environment right now is fine. We look at the industry being in the 4,000 of units per year kind of the run rate. It peaked at about 6,000 unusual, right? That happened kind of coming out of the pandemic. But we think that a fire truck industry that has somewhere in the 4,000 of units a year, that's a healthy state. That's something that will be very good for us. I remember, fire trucks are aged out there. We might have had a big blip of orders, but the fire trucks are still aged. So we think this is a long-term healthy market.

Great. Can I also turn to the pipeline in defense. Obviously, lots of headlines around conflicts around the world. You're starting to hear about companies that don't -- not only participate in defense in a large way, being asked to by the federal government to kind of get themselves ready or prepare for new orders. Some of these might not be products that Oshkosh does directly, but I'm just curious as to your pipeline of orders and whether -- or sorry, your python contracts and what you could win going forward given the heavier amount of armed conflicts out there?

Yes. Thanks for the question. Well, we certainly see a lot of momentum in our defense business right now. I'm going to start with our leadership team. We've got a leadership team which has a combination of new leadership talent with existing leadership talent. And we're really focused on integrating our commercial capabilities because we're about 10% defense, about 90% commercial and we're able to take commercial technology and integrate it with our defense capability where it makes sense. That's something the DOW is really wanting us to do. I talked about some of the near-term orders that we've received, the FMTV A2 $140-plus million and the Rope Fire is almost $100 million. Rope Fire is really interesting. This is something that not -- it's very unique -- not everyone can do it. It's an example of why we do what we do, or we take a JLTV, we make it autonomous. We integrate a weapons platform on it, and it gives the marines versatility that they absolutely love on the battlefield. So when you look at our allies around the world, we're seeing continued momentum there as well, and we feel pretty good about where this business is headed right now.

[Operator Instructions] Our next question comes from the line of Steve Barger with KeyBanc Capital Markets.

John, in Access, I heard you say activities being driven more by the nationals right now. But you also said utilization rates are running high and fleet ages is extended. Do you have a view on when the independents could be back in the market in a bigger way?

I do. We think that maybe by -- as early as the end of the calendar year sometime in '27. It's been muddling along for quite a while. This kind of private nonres environment, which is a gigantic market that we serve has a lot of different subsegments in it. But when you look at where -- we pay attention to an aggregation of economic metrics that are directly related to nonresidential construction. And so when I make my comments, I'm really making them grounded in those -- the aggregate of those metrics that we look at, which says maybe by the end of the year, it will start improve. But right now, our guidance is built upon what we are seeing today, which is really based upon the big mega projects and the demand that those are pulling in terms of our equipment.

Yes. But either way, from where you started the year in terms of outlook to where you are now, it seems like there's positive momentum.

Yes, absolutely.

And then great to hear about that big New York order for McNeilus. Is that takeover business or a new relationship? Or is there any more back story on taking that sizable order in a generally quiet year for Refuse?

Well, it's certainly good news for us. It's kind of, I'll call it, an expanded win for us in New York. That's what I'll call it. Yes.

This concludes our question-and-answer session. I would like to turn the floor back over to Mr. Davidson for closing remarks.

Thank you, and thanks, everybody, for joining us today. We'll be at several conferences in August and September. We look forward to speaking with you. Take care, and have a good rest of the day.

Ladies and gentlemen, thank you for your participation. This does conclude today's teleconference. You may disconnect your lines at this time, and have a wonderful day.

Greetings, and welcome to Oshkosh Corporation 2026 First Quarter Results Conference Call. [Operator Instructions] 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 for Oshkosh Corporation. Thank you. You may begin.

Good morning, and thanks for joining us. Earlier today, we published our first quarter 2026 results. A 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 12 months. Please refer now to Slide 2 of that presentation.

Our remarks that follow, including answers to your questions, 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 and other factors that could cause actual results to be materially different from those expressed or implied by such forward-looking statements.

These risks and factors include, among others, factors that we listed in our release this morning and matters that we have described in our most recent Form 10-K and other filings we make with the SEC as well as matters noted at our Investor Day in June 2025. We disclaim any obligation to update these forward-looking statements, which may not be updated until our next quarterly earnings conference call, if at all.

Our presenters today are John Pfeifer, President and Chief Executive Officer; and Matt Field, Executive Vice President and Chief Financial Officer. Please turn to Slide 3, and I'll turn it over to you, John.

Thank you, Pat. Good morning, everyone, and thank you for joining us today. We continue to make progress on our long-term goals in each of our businesses. Customer engagement around our new products and technologies has been strong as demonstrated at CES and the many trade shows where we have participated in 2026. The actions we are taking across the company this year are foundational to delivering our targets for 2028, and we remain confident in the future we are shaping for those who do the toughest work in our communities.

First quarter earnings per share were modestly below the expectations we outlined on our last call, where we indicated EPS would be approximately half of the prior year's amount. For the quarter, we delivered consolidated sales of approximately $2.3 billion and adjusted earnings per share of $0.85. Performance in the quarter compared with our expectations was impacted by fewer fire truck shipments in our vocational segment, where a number of planned customer pickups were not completed even though we are still making progress on increasing production.

Our outlook for the company has not changed, and we are maintaining our full year consolidated guidance Demand across our segments remains solid, and we have good visibility for the remainder of the year. We are focused on execution and continue to expect improved performance as the year progresses. And we remain confident that we are taking the right steps to drive positive business performance, not just this year, but for the long term.

Please turn to Slide 5, and we will review some highlights since our last call. Demand in our access segment is improving, supported by mega projects, including data center-related construction. Orders in the quarter exceeded $1.5 billion, resulting in a book-to-bill ratio of 1.6. Customer engagement remains high, and we are entering the summer construction season with a backlog of $1.8 billion at the end of the quarter.

At the same time, demand continues to be uneven across end markets. While mega projects remain a source of strength, broader nonresidential construction activity continues to be impacted by macroeconomic factors. Against this backdrop, our focus on innovation and productivity continues to resonate with customers. At the ConExpo show in March, our JLG team showcased all new boom lifts and our new 26-foot micro-size scissor lift, all designed to improve productivity, serviceability and versatility.

Our new boom lifts directly address key customer needs by reducing machine weight and increasing basket capacity. Our micro-sized scissor lifts, which are seeing strong adoption in data center applications provide a safe and more efficient way to access confined spaces. We also highlighted advancements incorporating autonomy, including canvas robotics for drywall finishing and our robotic welding end effector both of which generated strong customer interest as companies look for solutions to address labor constraints and improve job site efficiency.

While we are encouraged by strong order activity and backlog, we continue to operate in a dynamic cost environment. We are actively managing the impact of tariffs through supply chain and manufacturing actions and we expect to maintain a competitive cost position as the industry leader. Overall, we remain confident in the long-term outlook for the Access segment and our ability to execute through the cycle as we manage our costs deliver attractive margins over time.

Turning to Slide 6. Demand across our vocational segment remains healthy with a strong backlog of $6.6 billion. In the quarter, we increased fire truck production year-over-year, although shipments were below our expectations. This was driven by a number of factors, including weather and travel-related disruptions. We are focused on modernizing and improving production flow and removing bottlenecks to improve lead times, and we are making progress. We expect further improvements in the quarters ahead, supported by increased process efficiency and targeted capital investments.

On the innovation front, we continue to see strong customer engagement. At the FDIC show in Indianapolis, Pierce showcase the capabilities and quality of our fire apparatus along with clear sky connected vehicle technology, which enhances fleet visibility, uptime, and coordination for fire departments in the field. At McNeilus, we launched our AI-enabled material contamination detection technology as part of our McNeilus IQ platform. This solution leverages artificial intelligence and advanced analytics to identify contaminants in real-time during collection, helping customers improve efficiency and sustainability. We expect to continue expanding our McNeilus IQ offering with additional technologies over time.

Oshkosh AeroTech continues to perform well. supported by strong demand from airports investing in expansion and modernization. Order intake in the quarter was solid, particularly for air cargo loaders and Jetway passenger boarding bridges with key wins in Reno, Orlando and Nashville. Our Jetway backlog now extends beyond 12 months, and we are investing in capacity to improve delivery times. Summing it up, we have strong visibility across the segment, and we expect to convert backlog into revenue as production throughput improves, and we reduce lead times.

Please turn to Slide 7. In our Transport segment, we continue to make notable progress executing on our key programs and advancing toward our long-term objectives. For NGDV, production is on track. The fleet has now surpassed 20 million miles and is operating in 48 states. Importantly, feedback from the USPS and their drivers continues to be very positive, reinforcing the productivity and reliability benefits of the platform as we ramp deliveries. As we look ahead, NGDV production will continue to build through the year with a greater contribution expected in the second half.

On the defense side, we are also progressing on our FMTV program. We are launching the production of low velocity air drop units with production expected to grow in the second half of the year. These units represent initial deliveries under the FMTV contract extension signed in June of 2025. Closing out my segment comments, we are executing our plans for transport and expect performance to improve in the second half of the year.

With that, I'll hand it over to Matt to walk through our detailed financial results.

Thanks, John. Please turn to Slide 8. Consolidated sales for the first quarter of $2.3 billion were flat compared to the same quarter last year as pricing, favorable currency and the impact of changes in cumulative catch-up adjustments in the transport segment offset lower sales volume.

Adjusted operating income was $96 million, down from $192 million from the prior year, primarily due to unfavorable mix which includes across segments, products and for access, channel mix with higher NRC sales compared with last year, higher manufacturing overhead costs, which in part reflects our investments for future production and lower sales volume.

In the quarter, we recorded a benefit for IEEPA refunds of about $13 million. Our estimate for the full year impact of Cape 1 is about $23 million. This reflects our direct payments and excludes payments made by suppliers, which would be subject to future discussions. Adjusted earnings per share was $0.85 in the first quarter.

Free cash flow for the quarter was negative $189 million an improvement compared to negative $435 million last year. The improved result is despite lower earnings and reflected more disciplined working capital management as we built for the summer season as well as higher customer advances. Our expectation for cash conversion remains strong for the year.

During the quarter, we repurchased approximately 300,000 shares of our stock for $47 million. In March, we also refinanced our revolving credit facility. The 5-year agreement has similar terms to the previous facility with a capacity of $1.6 billion at a slightly lower interest rate.

Turning to our segment results on Slide 9. Access first quarter sales of $943 million were roughly flat with the prior year. Access sales were better than we expected, particularly given the strong sales volume access delivered in the fourth quarter of 2025 in response to announced 2026 pricing. Compared to the first quarter of 2025, lower sales volume was partially offset by favorable currency.

As John mentioned, demand has remained robust. We delivered a book-to-bill ratio of 1.6 during the quarter, compared to 1.0 during the first quarter last year. Adjusted operating income margin of 4.1% was about where we expected for the quarter. The decrease in adjusted operating income relative to last year reflected mix price cost dynamics and the impact of lower sales volume. You will recall that Access is our segment most significantly impacted by tariffs.

Locational sales of $825 million were down from last year on lower shipment volume, partially offset by improved pricing. Sales volume reflected lower sales of refuse vehicles, as expected, and fewer deliveries of municipal fire trucks despite modest growth in our production compared with the same period of last year. As John mentioned earlier, weather and travel challenges impacted customer pickups, as they were not able to take deliveries of fire trucks late in the quarter.

Lower sales volume, higher manufacturing overhead costs partly reflecting our investments in peers facilities and adverse sales mix were partially offset by favorable price cost dynamics, resulting in an adjusted operating income of $94 million and a margin of 11.4% for the quarter. As John mentioned, we are focused on continued improvement in throughput for fire trucks and jet bridges in order to increase the pace of deliveries.

Transport segment sales increased $50 million to $513 million in the quarter due to higher sales volume and the impact of cumulative catch-up adjustments. Delivery Vehicle revenue grew by $166 million to $217 million and represented 42% of transport segment sales during the quarter. Delivery revenue grew more than 30% sequentially compared to the fourth quarter of 2025. As expected, defense revenue was lower compared with last year due to lower tactical wheeled vehicle and aftermarket sales volumes. As a reminder, in the first quarter of 2025, we were still building JLTV units with the last units built in May 2025.

Transport segment operating income was $4 million, up $3.6 million compared with last year, reflecting lower adverse cumulative catch-up adjustments and higher sales volume, partially offset by higher manufacturing overhead costs and adverse mix. We expect transport operating margin to grow in the back half of the year as we transition out of past fixed price contracts continue to ramp up NGDV production and expect to receive additional NGDV orders.

Turning to our expectations for 2026 on Slide 10, we continue to expect our full year adjusted EPS to be in the range of $11.50. We are facing conditions that are more challenging and dynamic than we anticipated 3 months ago, and we expect roughly 30% of our earnings in the first half of the year. The back half will be stronger, reflecting improved price cost and access, higher fire truck production reflecting our investments, building on the FMTV contract and for the NGDV both higher production and our expectation for an additional order. We still expect free cash flow of $550 million to $650 million, unchanged from our prior guidance.

At this time, we are not updating or reaffirming our expectations by segment as we continue to manage our business in this evolving economic landscape. In access, we are seeing promising order activity, as you can see in the strong book-to-bill ratio of 1.6, which may result in a modestly greater contribution from this segment.

In vocational, while our growth and margins are still expected to be robust, particularly for municipal fire apparatus, our first quarter delivery shortfalls and facility construction timing are likely to modestly reduce the contribution from that segment this year. Transport remains on plan. Our outlook for tariff impact has remained largely unchanged as EPA tariff recoveries are broadly expected to offset the additional cost of the 232 expansion.

As John mentioned at the outset, all the ingredients to deliver on our 2028 targets are in place or underway with new and refreshed products advanced technologies and increased production to improve lead times on extended backlogs, the plan to achieve 2028 targets is clear.

With that, I'll turn it back over to John for some closing comments.

Thanks, Matt. Summing it up, we expect continued improvement throughout the year as we execute on our plan. We are operating in a dynamic environment, including changes in tariffs and geopolitical uncertainty but we are actively managing those factors through pricing, cost actions and supply chain actions.

We are maintaining our full year adjusted earnings expectations in the range of $11.50 per share, and we remain confident in our progress towards delivering on our 2028 targets. Our confidence is grounded in 3 areas: strong backlog and demand continued production improvements at vocational and continued progress with our NGDV ramp in transport.

I'll turn it back to you, Pat, for the Q&A.

Thanks, John. I'd like to remind everybody, please limit your questions to one plus a follow-up. Please stay disciplined on your follow-up question. After the follow-up, we ask that you rejoin the queue if you have additional questions. Operator, please begin the Q&A session.

[Operator Instructions] Today's first question is coming from David Raso of Evercore ISI.

Hopefully, you don't hear the static when I'm speaking that I'm hearing back, please let me know.

No, you sound good, David.

That's good to hear. Just curious, the second quarter implied at about $2.60. I know you mentioned you don't want to give business segment guide updates. But can you at least give us a sense of where were you thinking EPS could be for 2Q? I'm just curious how much of the first half got pushed into the second half. And given some of the commentary around why vocational was a bit light, just curious why the catch-up wouldn't be a little bit quicker. So maybe the first part, what came out of 2Q? And if it was sort of weather related, why can't we catch up for that a little bit faster?

David, it's Matt. So the elements in Q2 largely haven't changed. Year-over-year, we were always expecting access to be a little weaker. In terms of vocational we said 2 things. One, obviously, we did have the shipments that would slip into Q2. But we're also seeing some delays in our facilities and so as we implement our production changes, the timing of some of that capacity coming on stream is pushing later into the year. And so that affects a little bit of the seasonality in Q2 as well.

David, I can give you -- this is John. I can give you a little bit more color. You mentioned that we didn't provide segment level guide. Just some color on what we're seeing. We see right now we're seeing a little bit better expectation on access equipment as we go through the year. You saw the big $1.5 billion of orders. So we're seeing favorability there.

We're taking a more measured approach at the same time in our Vocational business. Primarily, we're going to see really big gains in terms of of fire trucks for the year. But we're taking a little bit more measured approach there versus what we originally guided to. It all still leads us to the 1,150 number.

David?

I'm sorry, I'm still here. Just -- the follow up on that about transport defense talking about the rest of the year for the other segments, your postal revenue was generally where I was expecting, and it sounds like are we at that sort of full run rate, the quarterly run rate as the year goes on? And do we need that second tranche of orders to the cumulative accounting catch-up, do we need that set of orders to still hit your guide for transport defense margin? Just curious about that catch-up in the second order that's required.

Sure. So the calendarization of revenue and delivery does -- is expected to grow across the quarters. So we would expect higher revenue as we progress through the year as we continue to ramp up production. But in line with our expectations and the USPS delivery schedules. We are assuming there is an order in the back half of the year as well, and so that's implicit in our guidance.

The next question is coming from Tami Zakaria of JPMorgan.

Wanted to ask about the vocational segment. I appreciate the winter weather and the timing-related comments. But just stepping back, do you expect any pre-buy driven demand? Or is that embedded in your guide for the back half?

So we're not expecting significant levels of prebuy. That might happen in the back half, but we're certainly not counting on it. Just for those on the phone listening in, this is really about '27 model year emission standards and chassis. And so we're not counting on that in our guidance. Certainly, if it happens, we stand ready with capacity.

Yes, our view is, Tami, as if that happens, it will be upside to what we're currently expecting.

Got it. If I could ask a follow-up on that, how much volume uptick are you planning in the vocational segment year-over-year without any normalized volume uptick for the year?

It's really going to vary by segment, Tammy. So as we talked about before, we would see refuse vehicles down year-on-year without a prebuy, which is what we talked about on the last call. fire truck production. We are adding production throughput and efficiencies to modernize that line. So second half of last year, we were up roughly 10% year-on-year on our production We would expect this year to be up 10% as well, roughly on production. So continuing to add fire truck capacity there.

As John mentioned on the call, we're adding capacity in AeroTech that comes on stream more early '27 than late '26, but have plenty of capacity to support our sales projections there. So we're still -- we'll see growth in some segments. But on a year-over-year basis, we would expect refuse to be down setting aside any prebuy.

The next question is coming from Mig Dobre of Baird.

I'm wondering if you can give us a little more color on just this evolving tariff picture. If I understand correctly, you did record a $13 million benefit in Q1. But then now you're dealing with updated Section 232. So how does this flow through the P&L through the year? Do you have more of a headwind now you obviously recognize the benefits. So presumably, that gets unwound to some extent.

Mig, so there are multiple moving pieces in that question, obviously. So the IEEPA refund, we filed that. We put the accrual in Q1, it was about $13.5 million. It's $23 million for the full year. That's a portion of the IEPA. So obviously, our suppliers paid IEFA as well. So they should be getting refunds. As I mentioned on the call, we'll be having discussions with them on recovering those refund payments.

And then you've got, as you say, 232 expansion. Responding to that comes in 2 pieces. One, we do see EPO fully largely offsetting the negative impact from that and to the team and access, which is primarily affected is working diligently to mitigate that as well. Some of the best teams in terms of moving around production. We talked about that pretty much half of last year. And so they're working through mitigation plans there as well. So we think it's a negligible to 0 impact on the year between EPA and 232.

There's more IEEPA to come, Mig, just to make that point. There's more favorability to come in the future.

Okay. I guess my follow-up is on price cost. I'm sort of curious as to how you think this dynamic evolves through the year because obviously, your year is guided is very back-end loaded. And it does appear that cost inflation is actually ramping. So presumably, you're going to have more cost inflation to deal with in the back half than you do currently experience in your P&L. So what are some of the things that you're doing to address that to get us anywhere close to kind of the way you structured the guidance.

Yes. So I'll take that, Mig. It's John. Our price cost gets better and better as we go through the year. You are correct. We're dealing with a lot of -- with a very dynamic environment, both with tariffs and geopolitical conflict, which creates inflation. And we've got incredible work going on, on the cost side, but we also have some things that go on, on the price side. And as the year goes by, we get more and more benefit on both of those.

So, so far in the year, we've seen very little benefit on the price side. We get more priced Q2 onward and we'll get more cost reduction to minimize how much price we have to get from our customers as we go through the year. But it gets better and better as we go through the year, which is part of our confidence that the second half is going to be better than the first half.

The next question is coming from Angel Castillo of Morgan Stanley.

Just wanted to go back to the vocational segment a little bit. I was hoping we could unpack the margins in a little bit more detail. I guess you noticed some of the shipment slowdown and a more measured outlook in light of that. But could you talk a little bit about, I guess, any impact of manufacturing costs or mix on the business and just kind of your expectations?

And related to that, I guess, as we think about kind of anything you can provide in terms of bookends or qualitative thoughts. Just kind of help us gauge what margins now are embedded in the guide versus the 17% you had previously guided to for the year.

Yes. Thanks, Angel. So obviously, volume was a driver in vocational. I mentioned mix. That's really around the mix of segments. So as you think about a bridge as you have a mix out of fire trucks because of the shipments, then you're going to have some adverse mix effect. And then we have invested in additional capacity and throughput in pure specifically. And so as we don't deliver those fire trucks, then we have stranded cost, if you will, on the manufacturing side. So that's really how to think about vocational.

In terms of the full year guide, while we're not providing specific guidance by segment, we still see this as a very strong business for the year and the margins we would expect to be in the range of our long-term guidance in 2028, which is 16% to 18%. We originally guided 17%. It most likely will fall below that with some of the changes to our capacity timing, but below the 17% to be clear, but within the 16%.

That's very helpful. And then maybe a little bit of a bigger picture or maybe just more macro last going on in terms of geologics with Iran. Just how should we think about the Iran complex impact on your business? Obviously, always start to see any fighting. But just was hoping you could talk about the bigger picture dynamic of impact of any energy prices might have on your business, how that kind of flows through or not?

And then also on the flip side, have you seen any step change in terms of orders for defense vehicles or any kind of incremental opportunities for sales there?

Yes. First of all, the conflict, what it does is that it drives inflation. That's how it impacts us. So when you see inflation, you see steel up 25%. You see aluminum up more than that. We all know what's going on with oil, of course, is primarily an inflationary impact. By the way, these impacts are embedded in our guidance today. So they're all considered in our guidance. We know what we're going to do about it. We've got world-class teams that are working on positioning our footprint to make sure we keep costs as low as we possibly can.

On the defense side, our defense business is going well. We're going to -- we're shipping more as we get to the back half of the year on new contracts, which is a big change price, which is part of the reason we're more confident in the second half because of that.

We work really closely with the Department of Defense were noted as a high quality, very reliable delivery type of a business with our defense operations. There's not anything that's happened that's going to impact 2026 at this point. we're highly engaged with the Department of Defense to support their efforts.

The next question is coming from Jerry Revich of Wells Fargo.

John, I'm wondering if I could ask about what you're seeing in access on your telematics data in North America and in Europe, it sounds like utilization is tightening based on what we're hearing from the rental channel. Is that consistent with what you see in the data in North America and separately would love to hear what you're seeing on the data front in Europe?

Yes. Thanks for the question. As part of our -- when I said, I'll give you a little color on the segment level details, part of the reason that we feel better and better about the access business as we go through the year, we do triangulate the data that we get off of our machines together with what our customers tell us is happening with utilization, which ultimately leads to where they need equipment and when they need equipment, but it triangulates really well.

You've heard some of our publicly traded customers talk about it. Utilization is getting better. And it wasn't like it was coming from a bad place, but it's certainly getting a little bit better. And that's a positive sign for the access industry. And in the used market in Access Equipment is also a positive sign. The used market is healthy. And so there's orders for new equipment that's coming in. So by and large, that gives us a little bit more favorable outlook for access Jerry.

Super. And can I ask you on the USPS side, obviously, they're waiting on funding from Congress. Can you just talk about if production plan would be impacted at all if the order comes 3 months later, 6 months later, can you just update on the current production lead time?

We currently -- currently, I don't think it's going to affect 2026 because we've got orders on the books to produce 2026. But we expect the United States Postal Service, and they expect we'll continue to place orders on an annual basis as time goes by because we have to keep our supply chain with enough visibility to keep the supply chain primed. United States Postal Service understands that. We understand that. They want to -- the vehicles are doing extremely well. They want a consistent supply of vehicles for their for their required time lines. We're meeting their time lines today. So everything is going smoothly.

But in normal course, we expect another order this year. And I don't know that's dependent upon any congressional funding. It's really dependent upon the budget for the United States Postal Service. But this program is moving smoothly. And with A606 accounting, when you get an order, it actually impacts your margins, as you know. That's why the order is important.

The next question is coming from Kyle Menges of Citigroup.

Great. or the access segment, certainly, orders were a bright spot in the quarter. I'm just curious maybe where you're really seeing that incremental demand by region and perhaps bifurcating between the NRCs and the independents?

Yes. Thanks for the question. It's largely still driven by the bigger projects, we call them frequently mega projects. These are projects that are hundreds of millions of dollars in size as discrete projects are quantified. So I think data centers power gen and stuff like that. So that's still kind of the bulk of it.

NRCs tend to get more of that. So we're weighted a bit more to the NRCs. But that's okay with us. We've got great customers and we serve there to make this happen. But we're also starting to see a little bit of brightness in some private nonres end markets, not all, but some, and we expect that, that will continue to gradually improve going forward.

Helpful. And then just a follow-up on NGDV production. I think if my math is about correct, you might have been at around plus or minus 12,000 units of annualized production in the quarter. And I want to say the guide assumes that you get to the higher end of that 16,000 to 20,000 production run rate in the fourth quarter. Maybe just talk about how the ramp is going so far and your confidence level in getting to that higher end of the production target by 4Q?

Yes. Just to clarify, our guide assumes the low end of the range. So annual production going forward is 16,000 to 20,000 units. Part of that's dependent upon the postal services scheduled to receive vehicles will be at the low end of the 16,000 to 20,000 units this year. Production is going well. We're in line with postal service requirements. It's even with a couple of hiccups with snow and things in South Carolina that doesn't happen very often. But we're in line with our expected deliveries on contract and so we feel good about it.

And sorry, just to clarify, you said you'll be at the low end of that target for the full year or also in the fourth quarter?

For the full year.

Full year will be a low end of 16,000 to 20,000 units for the full year. Back half is better than the first half.

The next question is coming from Stephen Volkmann of Jefferies.

Can I ask about AeroTech, that was kind of flat year-over-year. It sounds like you have some orders to ramp that, I guess. Just give me a sense of what you're seeing in that business. How do the margins kind of relate to the rest of the segment? And what are you doing in terms of increases for capacity?

Yes. Thanks for the question. AeroTech is a great business for us. I wouldn't read too much into the shipments were kind of flattish in Q1. Q1 1 quarter. You saw our backlog continue to build in AeroTech. So this business is going to continue to grow. We've got great customers who want to continue to invest they are continuing to invest. The backlog is strong.

The margins, all I can tell you is they're double-digit margins in this business. And of course, we'll continue to grow our margins go forward. We're putting -- it depends on the specific product because we do jet bridges and we do ground service equipment, like cargo loading equipment and so forth, depends on the specific products. We're putting a little bit more bricks and mortar into the jet bridges because it's a really strong business for us.

The ground service equipment is also a strong business. We're doing more -- a little bit more 80-20 in that business to drive capacity improvement and throughput on the existing production lines.

Super. And then just quickly, Matt, the tax rate was a little lower in the first quarter. What's the full year tax rate now?

Unchanged from our prior guidance on the full rate -- full year rate tax rate.

The next question is coming from Tim Thein of Raymond James.

The question is on access and Matt, to the extent that perhaps there could be some upside to the 10% margin that you outlined initially. And I know it's not what you're going to in print. But to the extent there is more upside pressure on that part of the business. I'm just curious how the balance of the year is shaping up in terms of the mix within the backlog, specifically thinking about kind of the expectations as we go through the year with respect to price cost and kind of how that's interplay within the customer and product mix.

Yes. Thanks, Tim. So obviously, we're pleased with the quality of the backlog and this -- the book-to-bill of 1.6 is a very strong book-to-bill, which gives us greater confidence for the year shaping up to be a stronger access than what we had originally seen early on.

Obviously, price cost, we've talked about that being neutral for the year. That's still the plan, which means the back half will be stronger as you get cost reductions and pricing, as John described. In terms of the margin, we want to see that the year unfold a little bit more before we give specific margins, but certainly holding double-digit margins in this environment and is important.

Yes. Okay. And then the -- within -- one piece of locational, we didn't yet hit on, just on the garbage truck side, is that -- are the volumes for the year? I know you -- in the first quarter, and we've been anticipating this year to be a softer year. But just any revisions to how you see that playing out and how we think about the kind of the cadence of year-over-year revenue change as we go through the year for that piece of vocational?

Not really. I mean third -- starting in the third quarter, we started to see orders shop off. We've talked about that on prior calls. We see this year kind of being -- well, we see the full year being down, as we talked about earlier. First quarter, we were down about 25%. And I think 25%, 30% for the year is reasonable.

Yes, I'll just -- Tim, I'll add some color to that. It's similar to what we've been saying, what we said a quarter ago on the call, we expect it to be down in 2025. That hasn't changed. It's about the same. It's just cautious CapEx outlays by customers is primarily the reason. But I'll make a comment that we are investing in technology that customers really care about.

We launched the contamination detection technology in Q1, very positive initial feedback on that technology. The fleets remain aged. So long term, we feel really good about this market, a healthy market for us going into 2028. 26 is just not a year that it's growing much.

The next question is coming from Mike Shlisky of D.A. Davidson.

If I can circle back to the fire commentary. I guess maybe can you -- just looking at the overall inventories for Oshkosh, they actually were down a little bit, at least days of inventory over the prior year. You said that perhaps fire had some additional finished goods inventory.

Could you maybe help at least quantify in dollars how much fire inventory you had at the end of the year and what other areas of Oshkosh had inventory go down? And then also, it's already been May now, have people come in to pick up their fire trucks now that the weather, I assume has cleared up a bit here.

Sure, Mike. Sorry, I'm not going to break out inventory by segment. That would be a bridge too far. But I'll give you some qualitative color. So there are a few things. One, last year, we had substantial inventory as we were ramping NGDV as that production stabilized.

We've been burning down inventory there in access, we've done a really good job focused on inventory burning down both finished vehicle inventory but also some of our in process. And so that team has been doing a good job on inventory. They've also been doing a good job on receivables. And so the overall really strong working capital performance for all the segments.

In terms of May, yes, people have been taking advantage of the beautiful weather here in Wisconsin to pickup fire trucks.

Yes, we've had a lot more fire truck deliveries in the first part of Q2. As a result of that pent-up full on shipments due to the factors we mentioned. But there's been a lot of fire truck deliveries so far this quarter.

Great. And then my follow-up here is also on fire. Did the weather issues during the quarter caused any issues with people being able to order or configure a truck or test drive a truck with a range of late orders and again, people come in here in April, May, now that let us better to actually ordered some fire trucks.

Yes. No, that was not -- that's not a factor. Our order rates are still pretty consistent for us in the fire truck market. even with a big backlog. So that has not been an issue. The issue was widespread weather across the country. You saw it in the Northeast, you saw in New York City, there's a lot of places people couldn't get in and out of. And those types of disruptions matter when you have a very formalized delivery process for a fire truck where people have to come in, do their normal inspections before the product can be "shipped".

The next question is coming from Chad Dillard of Bernstein.

So a question for you on your vocational business and the sequential ramp. So it sounds like you're getting more deliveries. So fire trucks in May. So I'm assuming maybe seasonality is a little bit better than expected. And then just trying to think through the exit rate in the fourth quarter, given where your production ramp is. And then Secondly, can you comment on your 1Q fire truck backlog trends? Was the book-to-bill greater than 1.

Going by memory, I think about it this way. So Q2 will be sequentially much bigger than Q1. Q3 will be sequentially bigger than Q2 and Q4 will sequentially be bigger than Q3. And in total, we will have a very significant growth rate in fire trucks from 25 to 26, and we expect to continue the same in 2027. And when you look at the backlog and the health of the business, we are making real changes to our ability to produce fire trucks and throughput in our manufacturing plants, which are going to yield very positive results over the next couple of years.

Got it. That's helpful. And then just going back to that $23 million EPA benefit, any thoughts on what the claim process will be for suppliers? I guess, does that $23 million go out of the future date? And then the remaining $10 million for the rest of the year, like how does that layer in?

Yes. Let me help you understand. So $23 million is the full refund claim. Obviously, some of that was for material that was imported within this year. So it will have limited impact on the year because it just changes what's in inventory. Of the $23 million, $17 million really is associated with prior year. So that would be the good news of that $13.5 million we accrued in Q1. So the remainder of the $4 million, in essence, will be in the second quarter.

The suppliers follow the same process we do. So the Cape system opened. It worked effectively. It was very efficient. We started to get cash from it as already this week. I would expect our suppliers to do the same. It obviously is a discussion with our suppliers. And so that will happen as that happens naturally.

The next question is coming from Steven Fisher of UBS.

Just a couple of follow-ups on the tariffs there. What have you assumed, Matt, for the IEEPA replacement after the 122 tariffs expire in July I think that might be an element of your perhaps price cost in the second half of the year? And also, were there any USMCA dynamics that we should be aware of as part of these changes.

We're assuming the present tariff landscape continues throughout the full year. So we would assume the 122 tariffs basically continue and no change to USMCA. So fundamentally, we're assuming the present tariff landscape extends through the full year.

Okay. Great. And then a follow-up on the vocational side and the fire trucks. I think you may have said last quarter, correct me if I'm wrong here, that you had about $150 million of planned spending to improve the overall throughput and production, and maybe you'd spent about half of that. Just kind of curious where you stand on that. It sounds like you are making progress. And getting those sequential deliveries to improve over the course of the year and into next year.

But just curious, bigger picture on sort of the investments you're making and when we think we can be through that and more comfortable with the overall throughput of the business line?

Yes. Thanks. Good memory. So yes, it was $150 million. We were about halfway through that end of last year. we continue to make the investments throughout this year. We expect the bulk of that investment to be completed by the end of the year. As I mentioned, we had some availability of space and getting permits and so forth. That shifted a little bit more back end than what we had originally anticipated at the beginning of this year, but we would expect the bulk of those investments to be completed by the end of this year with most of that capacity on stream.

And I'll just let you know, Steve, we have our best people on this, and we have done this before in other segments, and we're already seeing results from the work that we've been doing.

The next question is coming from Jamie Cook of Truist Securities.

I guess 2 questions. One, John, just on the M&A front, you've been a little quiet for you. You know what I mean in terms of not doing deals in a while. And then I'm just wondering, too, if there's parts of your portfolio that are underperforming relative to your targets, which could be an opportunity for you?

And then my second question, just as it relates to the guide, and I guess it being more of a back-end loaded year, how would you characterize sort of what's in your control versus more macro? Because I guess from the call, it sounds like a lot more of it, it's just the capacity, I mean from vocational that's pushing things out. So to the degree, it's under control. My guess is people would get more comfortable with the back-end loaded guide, but just any color there.

Thanks, Jamie. Let me start with your first question, which is on the M&A front. We always talk about our always on process and always on means we are always looking at targets. And we're very patient and we're very picky about what we think makes sense. If you look at the deals that we've done, we like every single one of them. There's not one that we have any regrets about. They're all contributing to the health of our company.

But M&A activity can be a bit lumpy, and we are very focused -- so we've done some smaller technology deals recently. I think we bought Canvas and Canvas is a really important part of JLG's autonomy strategy. And we'll -- so you'll see us continue to do some things certainly on the technology front. And when we see the right opportunity, again, we're patient, we're a bit picky. It can be lumpy. We'll make another acquisition outside of technology as well.

Let me go back to the -- or let me go to the second half of your question, which is the second half of this year. What supports our view on the second half of the year. Number one is the access equipment business is continuing to gain a little bit of momentum. We feel good about it. We feel good about our price cost building as we go through the year. And so that's a big part of it. In addition to that, we continue to talk about fire trucks.

Fire Truck is a great business for us. fire departments need more trucks. We've got a big backlog. We'll continue to increase production every quarter as we go through the year, and that will materially impact the second half of the year. We've also got our NGDV ramp. It gets bigger in the second half than it has been in the first half, and we expect an order with A606 accounting and order boost margins on the program.

And finally, our FMTV contract starts to kick in. The new contract kicks in, in the second half of the year. That's materially higher pricing on that contract and that makes a nice boost to our business as well as FMTVs will have a big jump in pricing and margins. So those are the primary factors. If you look at that, a lot of that is within our control.

The next question is coming from Steve Barger of KeyBanc Capital Markets.

Going back to the AeroTech capacity expansions. After you do the bricks and mortar and the 80/20 actions, how much will capacity expand in percentage terms? How will throughput grow? And what revenue will the business be capacitized to?

I think that will be subject to a future conversation, Steve. It's a good question. We'll have more to say on that in the future. That capacity -- just a little bit of clarification, bricks and mortar is a strong term. We're not building new buildings, but we're expanding some work inside. We're upgrading some facilities, improving throughput, some production efficiencies, specifically around jet bridges that takes a little time. So we'll be talking more about that more around 2027 than 2026.

Okay. And then, John, just following up on the last question about second half weighting and what's in your control. And just extending that thought process to 2028, can you just reiterate why you see that path as achievable? And are you leaning at this point toward the low scenario for '28? Or do you think mid is still achievable?

No, we still would say mid is right where we expect to be. I mean, when you look at the demand in our end markets, and you look at our backlogs that we've already got, that's the underpinning of it. And then you look at the work that we're doing to rightsize our capacity to be able to deliver that. That's the confidence that we have in 2028.

The technology that we build into our products, which is right in line with what our customers really want us to do, whether it's autonomous operation or it's embedding AI or in some cases, still when it makes sense, electrification, that's all part of why we're so bullish on 28. We're defining what the future of these end markets should look like, whether it's an airport, a construction site, a neighborhood operation. We're really defining what the future should be, which is better than what it has been in the past, and that drives our confidence in delivering 2028.

At this time, I would like to turn the floor back over to Mr. Davidson for closing comments.

Thank you, Donna. Thanks for joining us on the call today. We will be meeting with investors at several conferences during May and June and have a good rest of the day.

Ladies and gentlemen, this concludes today's event. You may disconnect your lines or log off the webcast at this time, and enjoy the rest of your day.

Good afternoon, everyone. This is Tami Zakaria, Head of Machinery Equity Research at JPMorgan. We are delighted to have with us today team Oshkosh. We have John Pfeifer, CEO; and we have Pat Davidson, Head of IR. So John, I'll pass it on to you for an intro to Oshkosh.

Sure. Yes, I'll just do a brief intro to level-set everybody on who we are and what we do. This kind of gives at a glance a little bit about us. It says 2025 revenue at $10.4 billion. '26, we guided to $11 billion in revenue. But what we do is we are -- we make heavy-duty vehicles and equipment. It's vehicles and equipment that you see all around us. You cannot leave your house or your place of work without running into -- or hopefully not running into, but passing by a critical equipment that's doing work in our communities every day.

So if you go to the next slide, Pat, we have a representation of -- yes, this one, just how present our equipment is in communities. It's doing last-mile delivery. It's doing fire and emergency. It's doing environmental in form of refuse and recycling, service vehicles, records, ground-service equipment at an airport. Every time you fly and you see the ground service equipment, it's usually our equipment that's managing operations at the gate of an airport.

Access equipment is probably our biggest brand with JLG. It's present in communities all over the place, wherever people have to work at height, you typically see our equipment present in communities. So the meaning of this is we lead in pretty much every end market that we're in and communities that we all live in don't work if our equipment isn't present productively doing work that needs to get done in our communities. I think what's really exciting about our business is that we've got a pretty powerful purpose. We serve people in our communities that do the hardest work that there is to do.

And you think about a firefighter or you think about a soldier in our Defense business or you think about somebody working on the tarmac of an airport when it's a rainstorm or 10-below-0, these are people that do tough work. And we look at our mission as giving them the ability every year to work safer, to work more productively and to have more intuitive design of the equipment that they're using so they can get the job done and get it done well. The other thing that's exciting is that we're a technology -- we're an engineering and technology company at our core. We apply technology where it makes sense for those people to do work more productively and more safely.

So when we lay out our Vision of the Future, we talk about what does the airport of the future look like? What does the neighborhood of the future look like, and what does the jobsite of the future look like? And when we lay out what those futures are, it's really about applying technology and where you see our technology more and more is in the form of autonomous functionality, sometimes fully autonomous vehicles. So in the future on a job site, even in the present on a job site, even in the present at an airport, you're seeing more and more autonomous operation where we're able to do work that people don't want to do -- sometimes people shouldn't be doing them because it's a little bit too dangerous and getting it done more productively so that people can do work that's more fit for people to be doing. It's augmenting autonomy with people to get jobs done better in our end markets.

We also embed AI into lots of our products today, where we can use AI to detect and do welding at height versus a person having to do it or we can triangulate data at the gate of an airport to tell gate agents and people on the ground problems that might occur based upon machine learning and data that our system is learning so we can prevent those problems and make sure flights are on-time more often than they have been in the past. So there's a lot of technology that's allowing us to shape the future of this work.

We think that's really exciting, and it impacts people's lives who do that work, which is the most important thing about it. So we -- I'll finish with, we laid out our targets to 2028 last year. We said we'll grow to $13 billion to $14 billion in revenue. We'll increase our operating margins by 200 to 400 basis points. That would take it to 12% to 14% at the highest level. And we will deliver $18 to $22 per share with what we see ahead of us in terms of how we're growing the company in the different end markets that we serve.

With that, that kind of wraps up my intro, Tami.

That is a fantastic way to transition to the Q&A. We'll take questions from the audience here, but also we are taking questions online for this session as well. So for those who are listening in, feel free to type in your question, and we will get your question answered by John and Pat. So with that, I want to start with your 2028 vision. You have some financial targets laid out there. You shared these targets last year. Since then, tariffs, wars, many things not in anyone's -- any company's control have happened. How confident are you in those targets still? And what gives you the confidence to -- in those targets?

Yes. So we're -- I'm still just as confident today as I was in June when we laid out the targets. And sure, the last year has not been -- has had some unexpected disruptions. You talked about tariffs. We talk about wars happening. And when we look at our growth, I would say growth is rarely linear. So 2025 was probably a bit more of a hiccup year because we spent a lot of time in 2025 doing tariff engineering to minimize the impacts of tariffs to us or sometimes supply chain resourcing, if that was going to help us. And that was our primary focus.

But when you look at the totality of what we do between now and 2028, if you look at half of our business already today has the backlog to deliver what we're forecasting in 2028. And the other businesses, the trajectory of growth for the Access Equipment segment, for example, is most correlated with nonresidential construction. And right now, that business is in a bit of a trough. It came down in '25. We think it's going to kind of come down a touch in the first half of '26 before it starts to grow again.

When you look at that business and you look at our leading position in it, we know that there will be a point in time where it will start to turn and nonresidential construction will turn to not believe in that end market, and we do believe in that end market and would tell you that you don't believe in the American economy. And we are firm believers in the American economy, and we're firm believers that the end markets that we serve are going to continue to grow. Airports at a low double-digit growth rate right now. Access equipment will come back as construction starts to come back online outside of data centers, which tends to be where most of the growth is. So we're just as confident today as we were back in June of last year, even though we've been through a bit of a tumultuous period of time.

So let's focus on some macro issues ongoing right now. The war in the Middle East. Do you have any direct or indirect exposure? We've seen footage of drone attacks, bombings, airports getting hit. Either way, is there any opportunity or any challenges stemming from this situation?

Well, I think the biggest thing that we pay attention to, and I think anybody that manufactures anything has to pay attention to this and any consumer in our economy has to pay attention to it is we want this to end quickly. I don't know when it's going to end. I really don't. But we want it to end quickly because it's going to create and it already is creating and will continue to create problems with supply in our economy, 25% of the world's aluminum comes through the Strait of Hormuz. We all know 20% of the world's oil comes through the Strait of Hormuz, and I could go on and on and on with other things that move through that critical supply chain.

That will be very disruptive to economies, ours and others if it doesn't get resolved in a relatively expeditious way. So I think -- I have to be honest, I think that's the biggest threat to this whole thing is the impact to the economy that it could create. Of course, we're in the Defense business. We make Defense products. We make vehicles that are in use today as part of that conflict. But we don't look at that as an opportunity. That's more of just our duty in terms of what we do to serve the Department of Defense.

Rate cuts, I think we've had 6 rate cuts since September 2024. Remind us which of your 3 segments have sensitivity to the Fed rate? And more importantly, on the ground, what are you hearing from customers? Are rates low enough now to spur incremental activity?

So the simple answer to your question about what -- where is our most sensitivity, it's clearly in the Access Equipment world. And the reason it's in the Access Equipment world is because we serve, of course, the big customers that we have like United Rentals, Sunbelt now EquipmentShare, a big player. We serve those customers, and they're great customers. But there's also thousands of independent operators that are in that market that we serve. And they tend to be a little bit more sensitive to interest rates because they have to carry fleet -- and interest rates when they buy fleet matter in terms of when and what and how much they're going to buy. So that's the biggest sensitivity to it.

I think though, when I talk to our customer base and when I talk to even construction firms themselves, people that our customers are serving to put equipment where it's needed, whether it's a data center that's being built or just a small, private non-residential project, I don't think that, that's the thing that's holding them back today. I think the thing that's holding customers back are 2 primary things that I hear. I hear about labor availability in construction end markets, very hard to get labor to complete projects. And construction operators don't want to kick off projects if they can't complete it on time. They don't have enough people to complete it on time, their costs go up precipitously. So that's something that holds back.

The other thing is just uncertainty. There's been a lot of uncertainty over the last year, what's around the next corner. They kind of want to see that the environment is predictable over at least a couple of years to have the confidence to continue to renew and grow their fleet size. But the first thing about labor availability and construction end markets, that's why we're putting so much technology into our JLG brand and the access equipment market today because what our customers want is productivity. If we can make material improvements in productivity in the end market, that gives them a lot more confidence in starting projects and getting projects done effectively and efficiently. So you see a lot of technology on our JLG equipment today that's autonomous.

Staying on the macro theme, IEEPA tariffs got struck down. I think if I remember correctly, you spoke about $200 million of tariff.

Total tariff.

Total tariff pressure this year. With IEEPA gone, does that change your expectation?

Well, a little bit, and I'll have to explain. So the biggest -- the tariffs come in different forms, as we all know. The biggest impact to our company from a tariff perspective is Section 232 tariffs. So when you think about Section 232, it is tariffs that are meant to provide support for critical industry primarily. So steel is part of it, aluminum is part of it. Automotive parts is part of it. That impacts us more than IEEPA does. When you think about IEEPA tariffs, sure, it's a material amount to us. And when it was overturned, if you would just say, okay, it's overturned and nothing else is going to happen, you'd say, sure, that's a bit of a change for the positive.

However, they immediately implemented, as we all know, Section 122. Section 122 is a flat 10% tax rate. When you look at the totality of the impact of a 10% tax rate versus IEEPA, it's a little bit of a tailwind for us versus the IEEPA tariff, but it's only going to last until the end of July. And from all the work that we do in Washington, D.C., we know that they'll replace it and from what we understand with something that looks very similar to what the IEEPA tariffs were. So we're expecting the tariff landscape to look similar to what it did prior to the overturn of IEEPA. That's our expectation. I can't guarantee that, but that's what we're expecting.

Another topic comes up a lot in our conversations with investors is USMCA, which is, I think, expiring this year. From Oshkosh's perspective, what would be a desirable outcome for you?

So USMCA is really important to us. I think it is to most manufacturers in the United States. We have a lot of trade between Canada, the U.S. and Mexico between the 3 countries. The best outcome for us would be if they make Section 232 tariffs exempt within USMCA. That would be the best outcome for us. Simple answer to your question.

That is super helpful. Let's switch to Aerials. One of your peers is under -- has announced a strategic review of their business. You being the largest, how do you think about a potential sale of one of your peers? How could that impact you in terms of market share, pricing power down the line? How are you thinking about it?

So it all depends on who ends up owning that business, right? It's a good business. The Access Equipment market in North America is a good business. It really depends on who owns it in terms of what does it mean for us. So of course, we're interested in who the future owner of the business is. But we try not to get tied up in knots on that. We're the leader in the market. We're focused on our customers. We're focused on innovation for the product. If you went to the CONEXPO show a week or 2 weeks ago now, I guess it is, you saw our JLG brand there present with all the technology we're bringing to life whether it's autonomous welding at height and other activities that can be done without a human having to go to height or you think about -- we showcased another innovation with autonomous, robotic drywall-finishing.

That's a huge leap forward for construction operators. We put a lot of connectivity on our products to deliver digital insights to customers with a really strong uptake within our customer base. That stuff all matters. It matters to the construction operators using the equipment. And we're -- our intent is to stay focused on what matters for the end market and for the customers that use our equipment. And we believe that if we do that, we'll continue to be the leader in the market. But we'll see who ends up being the future owner of that business.

One question we get a lot from investors is, there is some chatter that some equipment dealers are stepping up efforts in rental. What does that mean for someone like Oshkosh? I would think it probably would be good for you. It would diversify your customer mix, maybe improve your pricing power with a more diversified customer base. But I want to hear your take on this. How would you welcome if the industry were to go in that direction?

I guess the best way for me to answer that question is we are the most present in the aerial-work-platform space. Our brand is the leading brand. It's the most recognized in the end market. It's a premium brand, and we work really closely with our customers. And if people that use our equipment, the end users of our equipment desire to buy from a specific channel, then we will be there to support that channel so that the end users of the equipment can get what they want to complete work when it needs to be completed. I can't really comment beyond that.

That's super helpful. Let's switch to the Transportation segment. NGDVs. USPS, we know, has a vast fleet of vehicles, and it's pretty old. Do you see opportunity for that NGDV contract to be upsized down the line should the USPS decide to renew more of its fleet?

Well, I mean, it's already pretty big. We're talking -- in terms of last-mile delivery vehicles, the United States Postal Service has more than 200,000 vehicles on the road every day, 6 days a week. We're contracted right now to replace most of them, 165,000 vehicles. And it will take us years to do that, and that was the plan with the Postal Service right from the beginning in terms of the pace of putting new vehicles in the market. And it's not just about how fast can we build vehicles. It's also about they have to onboard and deploy vehicles at a pace that they can afford to train people and put those vehicles into the market. So we decided that will happen over about a 10-year period.

But that replaces a significant number of their vehicles. Sure, there's been discussion about other opportunities beyond that. But right now, hey, just focusing on that 165,000 vehicles it's a big program. It's going well. We're ahead of pace with deliveries to the United States Postal Service, and we're continuing to run that plant as best that we possibly can. The drivers love the vehicles. They are a giant leap forward in functionality and productivity versus the vehicles they have been using for the last 40 years. So right now, everything is on track, and we intend to keep it that way.

And a follow-up question on NGDVs. I think it started off a little slower than you would have liked. What have been the learnings throughout this process? And what has been the feedback from your customer in terms of the functionality of the product? Is it being well received? What's been the feedback from your peers?

Yes. The feedback has been phenomenal from the drivers. We had -- it was actually one of our -- one of the buy-side analysts had one of the new next-generation delivery vehicles go by their mailbox. And so this particular person asked the driver, hey, how's your new vehicle? And the driver talked about all the different advantages of the vehicle, how easy it was to operate. And this particular person came back to us and it said it was as if you planted your storyline with this specific driver. And I just asked a random question when they were delivering my mail. So that's just evidence that the drivers really do love the vehicle, and it's so much easier for them to get their work done efficiently than technology that was developed 30 and 40 years ago.

So we're pretty excited about that. I'd say that we've really been driving hard on production output. And whenever you're in manufacturing and you create a brand-new plant with a brand-new product, you always want to go to 0 to 100% in like a week, right? And so we've gone through that curve of getting the product up to production. And it's a complicated vehicle and a 1 million square foot plant with 1,000 workers in it, a lot of technology in the plant. So it's never easy to do that. And sometimes you might hear the frustration that, hey, we're continuing to drive to get more production output. But we're pretty happy with where we are, and I think our customer is pretty happy with where we are.

And maybe it's a little too early to ask this, but I'm still going to ask, how do you think about the aftermarket opportunity down the line for this given this is your proprietary product and fairly complex in terms of engineering, even though it's easy to drive, it's user-friendly. So how do you view that as an opportunity?

Super important. And the first thing about the importance of it is that aftermarket is really important to our customer. Any customer that we serve, no matter what the end market, the postal service or any last-mile deliveries right there with it, keeping vehicles on the road productive is they care a lot about. So in order to make that happen, you have to have a really good structure to supply aftermarket parts to keep vehicles on the road immediately. And we've set up that structure. But when you think about this fleet of vehicles, we're talking about an enormous number of vehicles that are on the road 6 days a week up to 10 hours a day, 52 weeks of the year. That's a really tough duty cycle.

You think about stop start, stop start, stop start, stop start all day long every day of the year, except Sunday, that's a tough duty cycle. So that means there's a lot of service that has to happen to these vehicles throughout their life cycle. And the life cycle is designed to be minimum of 20 years. These vehicles probably themselves last up to 30 years. That drives a lot of aftermarket, and that aftermarket business is always a good business for us, the service provider, and we intend to be there with responsive service for the postal service as they need it at their VMF facilities around the country.

Let's switch to your vocational segment, vocational trucks. I think if I remember correctly, you have 2 years of backlog for fire trucks.

Closer to 3.

Closer to 3, even better. So if I were to -- is the -- should we worry about a cliff event after this backlog is burned? Or what is the normalized demand that you see for that segment?

So I don't -- we don't see this as a cyclical market. The only time we've seen cyclicality, I think, in this market was Black Swan events like the great -- the Global Financial Crisis or the Great Recession, whatever way we want to term it. And that was a real estate infused crisis where property tax values went down dramatically and therefore, municipalities stopped buying a lot of equipment. And that caused the market to have some -- have a downturn. But other than that, it's a pretty stable market. When you look forward into the market, you see that -- there's a lot of aged vehicles on the road. And you also see municipalities, not every, but lots of municipalities want to upgrade to the latest and greatest in their fleet. They want the latest technology in their fleet.

And every municipality wants their fire trucks to be a showcase of their community. They always star, not only to do critical work on a day-to-day basis, they always star in the 4th of July parade. So we see continued need for investment in fire trucks for the foreseeable future. Right now, we've got a 3-year backlog. We have continued healthy orders coming in even with a 3-year backlog. So what we're doing is we're being very prudent. We are increasing capacity. These are very complicated products to build. They are more complicated than anything else we make. They're more complicated than building any automobile that we're all familiar with driving.

The bill of materials is a mile long, and there's a lot of technology built into the vehicle at many different points of the vehicle. So when you say we're increasing capacity, which we are and we increase capacity about 10% a year, that's a lot of work to get another 10% of a very complicated vehicle off the end of the assembly line and ready to be delivered to municipality. So we're going to continue to do that, but we're not going to build capacity that's so big that we risk having unabsorbed capacity 5 years into the future. But we see demand healthy in this end market for quite some time.

Let's turn to the audience if there's any questions in the room.

So you actually hit on a point earlier with the USPS that -- and I think it pertains to almost all your lines of business. When you show up, you generally create a mixed fleet of aged equipment and new equipment. Is there an opportunity there for you for even managing around the aged equipment as you're creating a different level of value on Asset Management and Utilization with the new equipment?

In the aftermarket, are you referring to?

Well, in the aftermarket and just in the overall fleet management because that fleet probably isn't a smart fleet, but are there opportunities in there for you to upgrade it in some way to make it smarter through independent...

So there's 2 answers to your question. In the aftermarket, in terms of how do we support the aftermarket for these products, we've actually partnered with a firm that -- so we're -- we do kind of work with the firm that allows the postal service, ease of use in terms of how they service, whether it's a 40-year-old LLV that they call the old vehicle or a brand-new NGDV, it's seamless for them in terms of how quickly can they get the parts and how do they get those parts to service the vehicles. So that part of it, we have done collaboration with to make it seamless for the customer.

In terms of upgrading the old fleet, there's not much opportunity. We did look at it a while back, but there's these -- when you take a 40-year-old vehicle and say you're going to upgrade the technology on it, there's not a lot of opportunity to go on there, but the post office has done some upgrade to those fleet. The post office has put connectivity in the old fleets. They've done some work on their own to try to keep those vehicles current, and they've done a nice job at that.

On the first part of that, where you partnered with somebody, what role are you playing there? And are there other ways to play that role in other parts of the business for mixed fleets?

In most parts of our business, we tend to be the direct supplier to service centers for aftermarket support of our vehicles, and we have lots of distribution centers set up, and we've got lots of connectivity on our equipment in different end markets to make sure that it's real-time and rapid. Our desire with the United States Postal Service was to work with their current supply chain to make sure that it was seamless for the Postal Service, easy for the Postal Service and no added cost to the Postal Service in terms of how they're able to support vehicles. And that's the structure we set up because it was right for that specific end market.

As a reminder, those listening into the webcast, you can also submit questions online. I received a question -- this year's guidance is unique in the sense that your first quarter is starting off on a slower note. I think 10% of EPS expected in the first quarter. What gives confidence in the robust ramp through the rest of the year?

Yes. So we -- when you look at our 2026 guidance, we provided 2026 guidance of $11 billion in revenue in January -- in late January. We're still confident in that guidance as we look forward. When you look at Q1, it's more of a blip than an indication of the current run rate of the business. You'd say, well, why is it a blip? And why is it a little bit lower than we would normally like to see. A couple of reasons for it. We still -- 2 primary reasons are we had a big sell-in, particularly in our Access Equipment segment because we announced tariff pricing in 2026.

We have done a lot of work to mitigate tariffs. We talked earlier about a $200 million tariff impact in total. We've done tariff engineering. We've done supply chain work. We've done all sorts of work to try to mitigate a lot of that $200 million before we say, okay, do we have to push some on in terms of price. So when we made that announcement, lots of customers pulled in equipment into the fourth quarter because they want to make sure they were going to get it at the current price and not the new price.

So that pulled in some of the volume from Q1 into Q4 based on what our customers wanted to do. We still have some price cost lingering in Q1 before we get to a full-price level. And those 2 phenomena are probably the biggest reasons that we're seeing a little bit lighter Q1 than we'll see normally in terms of our run rate. And that's why we're confident in our guidance for 2026.

We have a few more minutes. I do want to touch on AI because I personally was blown away by some of the demonstrations you had at CES, the robotic-welding, the refuse trucks with cameras. For those who didn't get to witness some of these new products, share some examples. How are you incorporating AI in your processes and products? And which do you think in the future will set you apart from your competition?

Yes. And we're trying to move as fast as we can and as prudently as we can. So when we look at the AI landscape, we look at it in our own operations, and then we look at it in terms of what can we provide for our customers to make -- to provide what they really want, which is typically productivity and ease of use. So when we look at our own operations, we apply AI. We have -- we're moving towards digital twins of our manufacturing plants. We're getting them as connected as they possibly can be, where we can run different scenarios on how we can operate the most efficiently based upon what our SIOP processes are telling us is needed.

So that really helps us to drive efficiency, productivity and quality to a level we -- that you couldn't conceive of just a couple of years ago. In the end markets that we serve, we're applying AI. If you look at the robotic welding that we showed at CONEXPO, there is AI built into that. It's -- sometimes we use vision systems, sometimes we use other technologies, and we have VLMs that instead of a large language model, it's a large video or pictorial model where the machine knows what it's seeing and puts the weld based on what it's seeing in the right place and can determine as it's welding, whether or not the weld is good or bad.

And therefore, a human doesn't have to do it. We also build AI into our products. Another example would be on the tarmac of an airport. On the right-hand side of this chart there, you see a robot-looking device. That's the future-wing-walker, a future baggage-handling carts on the tarmac of an airport. In the future, you will not see somebody driving a baggage-handling cart. You will see a robot driving a baggage-handling cart. You'll see a robot as the wing-walker. The guys that stand in front of the airplane guiding it into the gate. That's an area that our customers want to make autonomous.

And we're also using data in our end markets. So we're real-time triangulating hundreds of data points, for example, at the gate of an airport or at a construction site, which tell a gate agent, somebody on the ground or a project manager, what is -- what the AI is learning about the data that it's seeing at a construction site and therefore, what the project manager should do about something that may not be going to plan. And those are all -- we're continuing to roll it out. We're learning every day about it. Our customers are learning, and it's exciting, but it's -- there's a long way to go and a lot of productivity to be had with these technologies.

That's all the time we had today. Thanks, John and Pat. I hope to see you next year. It's always a pleasure to host you.

Thanks, Tami.

I'm Kyle Menges, U.S. machinery analyst here at Citi. Joined by the Oshkosh team, Matt Field, CFO; and Pat Davidson, IR. I think it would be good just to get some quick overview, just how your portfolio has evolved over time, more balanced now between access, vocational and transport. Maybe that's a good place to start, just a high-level overview of the portfolio and the evolution.

Yes, thank you for having us today. So really, what Oshkosh for those who are not aware of Oshkosh Corporation, global industrial technology company, about 2026 guide was about $11 billion of revenue. We go to market in 3 different segments, Access segment, which is construction equipment. To put the relative size of these segments, I'll use our 2026 guidance to put these in a relative perspective. That segment is a little over $4 billion, $4.2 billion. It's a lot of equipment that moves people to heights to do jobs.

Then we have our Vocational segment, which is -- you flip on those slides, great. It's equipment that services our neighborhoods, largely fire trucks, refuse equipment, front-loading concrete mixers and airport products. For 2026, that's also a $4.2 billion segment. And then lastly is our transport segment, used to be called our Defense segment. It's constituted of defense vehicles, tactical wheeled vehicles as well as the next-generation postal delivery vehicle, which hopefully some of you have seen in your neighborhoods. It's there in the upper left, I guess, as you're looking at the screen. And that segment is our smallest, but still $2.5 billion as we've guided for 2026.

So really, 3 growing legs of the stool. Historically, we've been -- if you look at our revenue and operating income mix, we've been very heavily skewed towards Access historically. And what we've been explaining to a lot of investors, and we really talked a lot about our Investor Day was, a, the growth in Vocational and how that business has really come into its own, both with the acquisition of airport products in 2023, but also the growth in Vocational products to become a really solid second leg of the stool. But then the transformation of the transportation -- transport division and how some new contracts with the Department of Defense, Department War and the delivery contract really will transform that margin from what we guided this year to a 4% margin. Last year it was 3.7% to a 10% margin in 2028. So a really strong, stable portfolio of products.

That's a great overview. And Matt, you've, I think been in the seat of about a year now. Give or take. Would be great just to hear your high-level thoughts on what stood out so far during your time at Oshkosh. And what excites you looking ahead?

Yes, that's a great question. So when I joined Oshkosh, I knew about the quality of products. And when you build commercial products, they're such a fantastic business to be in because your customers rely on you to get their job done and to run their business, to be safe, to be productive, all those things. And that's a relationship built over decades, built over trust and reliability and all those things that make your tool to be effective, important and incredibly strong on those and incredibly long history. And so I was really pleased with that background.

What I didn't fully appreciate, and I think you see in the CES booth certainly last year, this year is the technology component that moves this business forward. And what people often see is electrification of whether that's postal vehicle, refuse vehicle or some of the fire apparatus. But what they don't often think of is how connectivity, robotics, how autonomy, how AI comes to play in helping people be more productive. And that's really where I think our opportunity to grow, differentiate stands and why our CES display won a number of awards, but also had things like longer dwell times than other people because people see these products in their neighborhoods. They don't necessarily think of Oshkosh, but they know a fire truck, they know a refuse truck. And then when they see technology coming to those, automating those jobs or transforming how the work gets done, they can envision it in their own personal lives, and that's really exciting.

And you mentioned the technology, maybe to the untrained eye could seem like a disparate portfolio, but how would you say Oshkosh really leverages technology across the portfolio?

So if you think about the technology stack historically, it was -- for us, it was a hardware stack. So we often used to talk about the tack force suspension. Actually, let's stick with that one for just a second. Great. So we do this as kind of how we fit into a neighborhood. So we used to talk about the tack force suspension. It was a heavy-duty all-wheel drive go over anything suspension developed for military applications, so a little military pool over there. Then they took it and put it on fire trucks because they recognize fire trucks needed to be just as durable, just as robust. And it evolved and then upgrades were moved back to Defense. So we have that sort of hardware transfer across the industries.

And that even went into the Ascendant aerial ladder, we were able to lightweight using lightweighting steel. But where technology is going is it's really in autonomy, robotics, AI, sensing cameras, perception, all those things. Well, to be able to scale that technology, there's no one business that can do it alone. And so it's great to have a portfolio of applications you can take this through. And I'll give you an example, and now you can go to your -- the next, future of -- we often talk about airport of the future, job site of the future, neighborhood of the future. We have a technology we had at CES that is a robot, and we talk about airport robots. So a lot of times, when you go to an airport and when you land, you'll see people out there with the little beacons and stuff. Those people are guiding the plane. And if there's a lot of lightning, they can't be out there, you can't dock your plane.

So what we were demonstrating was a robot that could be on tarmac doing many of those jobs. And then we had a little theater experience where you saw all that come together with an autonomous jet dock technology for what we call the perfect turn, which is much more efficient. But that technology in that one robot that actually came out of a Defense application that's in market today. And it was the same technology platform that we used to trial some autonomous refuse technology, which we had last year, we had a new development. And so really looking at how do we develop one autonomy stack, one sensing and perception stack and then take it into these different end markets, but with a common architecture, whether that's connectivity like ClearSky, which we had in the Access segment. We're now bringing more connectivity into Vocational or whether that's things like autonomous robots, and we find applications there.

Great. Let's get into the segments a little bit here. Maybe starting with Access. Certainly, in recent years, you've seen competitors building out capacity in North America. In your mind, how do you think the JLG and SkyTrak brands are positioned to continue winning across the AWP and telehandler space? And on top of that, one of your competitors has its aerials business up for sale. So how do you think that could also potentially impact the industry?

So JLG, which is the go-to-market brand and SkyTrak is the other one. JLG is named after James L. Grove, I think it is -- John L. Grove, sorry. It's before my time. And that equipment has been around. He invented the boom lift. And that brand is known for its quality, its reliability. We're in a finance setting. So it's pricing discipline, but that also has a real-world benefit, which is a strong residual value. And that's important because we sell to rental companies primarily. And so they want to know that back-end residual is strong.

So those principles create a strong foundation for the business as well as a strong relationship with the customer, which allows us to innovate and innovate quickly, whether that's with the microsized scissor you see in the middle there or other technologies we bring to market. But what will set us apart in the future is that that's not enough. We have to bring technology as well. So what you see on the lower left there is ClearSky Smart Fleet, which allows all our equipment to communicate with each other as well as allow users to understand the state of readiness, order parts easily and so forth. But that will evolve to providing end-user services.

So the example I was given, and I always repeat because I can envision it myself, is if you have a construction site with hundreds of employees and hundreds of pieces of equipment, not everybody is trained with the same equipment. And so you have to use a scissor lift. You have to go check out the key at the main office and then the person in the main office is checking, oh, Pat Davidson, he's trained on a scissor lift, okay, and he needs a scissor lift for his job, here's the key. Well, that's all known in a system. You can have a user just badge in and activate the equipment. It doesn't exist today, but it's something the team is working on. That type of technology will keep us at the forefront of being the equipment of choice for our customers.

And so that and then innovating, like I said, with things like microsized scissor other applications, innovations taking ag equipment, so developing a telehandler for the ag customer and demonstrating how a telehandler is superior to other equipment they have for the bar. That's the way we see that segment continuing to grow and thrive. I'm sorry, on the competitors. Yes, they've announced that they're for sale. Wait and see. We'll see how we go.

All right. Fair enough. Maybe we can touch on the Access guide for 2026 a little bit. It sounds like it's really large projects driving the strength, local markets remaining pretty muted. Just maybe talk about what you're hearing from customers and perhaps bifurcating across the independents versus the national players and just your confidence level also in Access maybe being in a better spot as we exit '26 and into '27?

Certainly, I remain optimistic. The nonresidential construction sector has been weak. You reported on others have as well. And really, what's been the shock absorber for that sector has been the data centers and mega projects that get so widely reported. You've seen office equipment, warehouses, even manufacturing coming off peaks. And that's resulted in a fairly weak industry, especially when you look at the independents, you tend to do more of the local projects. They were a little more resilient than I certainly expected last year. We saw them continue to play into the fourth quarter. We announced prices. I think they were a large driver behind our sales success in the fourth quarter, which has its own implications into 2026 that I'm sure we'll talk about.

But as I look ahead, I think we still see the mega projects playing the bulk of the work this year. The nationals play disproportionately on the mega projects because they are the big contractors. And then the independents basically supply some of the local contractors for those. But with more rate cuts, I think that's pretty uniformly expected now this year with more economic activity, hopefully, the rest of the economy starts to broaden out and grow. And that will be great to see, hopefully 2027, maybe 2026, but we're not planning for it.

Got it. And how to think about puts and takes of the margin guidance as well and maybe price cost as we progress throughout the year? And maybe putting a magnifying glass on price a little bit, just how are negotiations going thus far? And you've talked about positive pricing. Yes, it would be helpful to hear an update.

Yes. So we are pricing in 2026. The impact of tariffs is fully felt in 2026. It was kind of gradual throughout 2025. So we had the announcements in April. But really, you saw it start to hit the income statement a little bit in Q3, much more in Q4. Now we're fully into having all our costs, having tariff payments and so forth in them. So really to offset that, we have 2 levers. First, and we talked about this on the very first call when tariffs were announced, is it's our responsibility to address as much as we can on both the tariff engineering, but then the cost side. And shout out to Mahesh and the Access team, not that they're dialed into this, but even so, I'll call it a shout-out, they initiated cost reductions starting in 2024 to try and improve the resiliency of that business.

And so that's really a 2-year project. So the more we get down the pipe, more costs are coming out of that business. And so we'll have more out at the end of the year than we have now. So that's one element to offset it. And the other element is pricing. And so we have had constructive dialogues with our partners in the rental companies and everyone agrees kind of the cost drivers, and then we just work through how the pricing will materialize. And what we did say on the call is for the full year, we will offset -- we'll have favorable price cost. But as you say, it won't be necessarily balanced across the year.

Yes. Makes sense. Maybe we can shift to Vocational, which I mean, is already hitting the 2028 margin targets.

Right in the heart of it.

I think the main question that I get from investors and would love to pose it to you is just maybe breaking it down a little bit between the F&E, refuse, AeroTech. Should we be worried at all that we could be at or near the peak in any of these end markets?

So I don't want to say peak, I think there's long fundamental drivers over the long term. There will be some ups and downs, but they generally have longer sign waves, if you will, to their cycles. For fire, let's just talk that one first. we're still working through an extended backlog that extends into 2028. So priority #1 there is build more fire trucks. It's that simple. We're investing $150 million. $70 million of that is already committed or spent to increase capacity. We said we would increase capacity roughly 25%, 30%. And so a lot of those investments are coming in this year, a lot were put in place last year.

So really pleased with the growth there to address fire demand. And the earlier we can deliver fire trucks, the better that business is to healthier it is. But it's going to take a while. For those of you who have never toured a fire truck factory, it's more art than science. It's not like my background, which is automotive, high volume. And so really, you're doing a lot of small actions within a plant to improve throughput and productivity. So that's going to be a multiyear journey with a lot of growth prospects ahead because not only do we have the existing demand, we have a very aged fire truck fleet. And so a lot of demand for years to come, we think, there.

On the airport side, AeroTech, we build jet bridges, as you see in the upper right, we build ground support equipment. We've talked about the robots that we're developing as well. We just had someone stop Pat. Pat has been around in this industry for a while. Somebody stopped him. Actually in our room, popped in and said, "Hey, my jet bridge was broken at Miami. Can you call up AeroTech?" We have a very strong jet bridge business. And you look at any trend on air travel, cargo, transport, it was a dip with COVID, it's right back on the line we saw for growth. So I think there's tremendous opportunity to continue to grow there as we refresh and grow our airports, but also grow cargo and then potentially expand internationally. So great business, long-term potential.

Refuse is the third big business there. That one has had tremendous growth over the past couple of years. What we're seeing right now, and you can see it in the orders we had at the end of the third quarter in some of our fourth quarter sales, but also orders, you're seeing a bit of a pause. That's really coming from -- if you think about the refuse business, we all generate waste. That's the driver of the refuse business. Everyone is generating as much or more waste as they did before. So I guess thank you. Then there's the municipalities, which provide the contracts then there's the waste haulers and then there's us. So what we're seeing is those municipalities with all the tariffs in place, pausing on some of those longer-term contracts.

They don't want to get locked into long-term contracts at peak pricing because with 232 tariffs, 232 heavy truck tariffs, there's just uncertainty into what that pricing dynamic will be in the near term. So you're seeing some pause in the municipalities. Instead of doing a new 5-year contract, they'll do month-to-month or what have you. Well, when that's the case, what you have with your waste haulers is they're not buying new trucks, they'll age their fleet until they have that certain long-term contract and they'll refresh their fleet to service it. So I think there, we're seeing a bit of a tepid period. I want to say it's offpeak in that sense. I just think we're in a bit of a pause. That might be 12 months. I don't know, it might be 6 months. But at some point, that will turn back on because the one thing I know is where we started this story about refuse, no change there and nothing changing the age of the fleet, which is already old. So I'm really confident in the long-term trends in all our Vocational businesses and where we're headed towards 2028.

Awesome. That's helpful. Maybe we can touch on AeroTech a little bit more, acquired it in 2023, could still be a bit overlooked by investors. Yes, I mean, really strong positioning in North America. Good comments on potential international expansion, interesting. And then it would also be helpful to hear about 80/20 work that you're doing right now in AeroTech as well.

80/20. Sorry. Yes. So we've historically done 80/20 work in the Pierce business. We did that 5, 6, 7 years ago or so. And that allowed us to streamline our lineup and think really about that business, which started that margin transformation journey in that business. And Mike Pack, my predecessor, led that when he was in this segment. And now he's the President of the Vocational segment. So as we look at the AeroTech acquisition, again in 2023, $800 million sizable acquisition. Same time I joined, we brought in Ranjit, who's running that division. He's really been focused on how do we integrate that business more holistically as a business, how do we get more operational efficiencies.

Some of that is 80/20, which they are now leading for the company this year in terms of where are the high-margin businesses? What are your high-value customers? And how do you restructure some of the businesses that are less performing that really have been overlooked for years. While JBT was a responsible owner, they certainly weren't overinvesting in the business because they were looking to sell it for a period of time. So it's a great series of businesses that is, I would call it, underloved. We've got the right leader in spending a lot of time on it. We think there's tremendous growth through both 80/20 initiatives around what products we're offering, how do we go to market with those, but also the autonomy stack, whether that's autonomous jet bridge, whether that's the software stack improving the turn of the aircraft or whether that's future robotics on the tarmac.

Great. Before I go to transport, maybe a quick question on the F&E side. You talked about you're doing everything you can -- what should I call?

Fireside. Fire & Emergency division, we combined it with the Commercial business to make Vocational. Fire -- is the preferred term.

Got it. All right. Maybe just quick on that. I know you're doing everything you can to increase throughput. I think you've mentioned trying to get a 20% to 30% efficiency increase in that business. Just what sort of time line do you think that will occur over? And when do we get the backlog down to a "normalized level"?

Yes. What you saw in the second half of last year where volume was up about 10% roughly. This year, you see volume growth with our revenue guide of $4.2 billion, so continued volume growth. In our 2028 targets, we talked about getting the backlog where right now, you're talking maybe 36 months, 3 years or so getting that to 18 months. Really, we'd like to get it closer to 12. So you're talking in 2028 down to 18 months and then after that, working it down more towards 12 months.

So again, the reason is because of the nature of the production, it's a very slow progressive change to throughput and production efficiencies. So you can't -- one, I don't want to commit a bunch of capital to just build a whole new factory that we might not need in 10 years' time. But two, it's such an art to build these things that you have to be methodical because you need high-quality units. And some of them are very unique. You might build one of these trucks every 10 years, 20 years in some cases.

And that 10% volume growth that you saw last year, is that in fire? Or is that just total?

Municipal fire apparatus.

That was municipal fire apparatus, there we go. And then shifting gears to transport. I know the NGDV production ramp has taken a little bit longer than initially anticipated, which is weighing on the 2026 guide a bit. Just can you elaborate on progress you've made there? And maybe what's caused the ramp to take a little bit longer? What do you think you can do to reach full rate production? When do you think you can reach full run rate production?

Sure. So first of all, it's worth saying the product is spectacular in the field. Really pleased with the performance. Those postal delivery carriers who are using it, rave about it. We've got over 10 million miles driven. And this year, we've said we're steadily increasing production. And we've always said capacity was 16,000 to 20,000 units a year. On the call, we said this year, it would be closer to the 16,000. So you're at the low end of that. So if you're steadily improving production, hitting the low rate of your annual capacity, I'm pretty comfortable with where we're headed and we're delivering consistent with what postal service needs.

We were hoping for a faster ramp, I'll be honest. We were expecting that. I think what we found -- well, I know what we found is that when you have a new plant building 16,000 to 20,000 units a year, with as much robotics as we have. Not all the robots work when you turn them on at full rate production. And so what we've done is rather than push it hard and fast and have a lot of problems, we're taking a much more methodical approach through it. And what you find when you ramp from X to Y is now those robots that were working effectively sometimes will hit each other. And so you need to fix that or a bolt loose or G, X, Y and Z. And so you focus methodically through body shop, paint shop and kind of work those.

And every station, we track all our stations, every station has demonstrated its capability to run at rate, but the variability across the stations, they're not all hitting consistently at rate. And so the great news is the problem is within the 4 walls of the plant. And so it's a matter of consistently knocking those down and improving our run rate over time, which is why we're taking a very systematic approach as opposed to planning for a much faster ramp, which is what we kind of had originally thought of as a more automotive style as opposed to an operational kind of commercial ramp.

And it's fine if you don't want to comment on this, but just thinking about the ramp starting in Q1 to Q4 where you exit the year? Or is it going from like a 14,000-unit run rate to 19,000 or 15,000 to 18,000.

I'd have to annualize that. Certainly, we would be exiting closer to the 20,000, the high end of the 16,000 to 20,000. Beginning of the year, I'd have to think through what our -- because we talk about daily units, so I translate that to an annual, and it's going to break my head.

That's helpful. Okay. But you think exiting the year, we will probably be at above towards the higher end of that?

Yes. That's right.

Got it. And then another question, too, on transport margins. Just how to think about -- how do we bridge from margin today to the 2028 target?

Yes. Great question. So one of the big improvements -- so when we did Investor Day, we talked about growing revenue and transforming the margin. So we've historically been a roughly 10% operating income margin business. That's roughly what we guided to this year. We ended last year at 9.6%. For 2028, we're talking about 12% to 14% OI margin. A big driver of that actually is the transport segment. So last year, it was -- there we go. Real-time slide. So in last year, we were at 3.7% margin. In 2024, it was a 2.5% business. This year, we guided to a 4% business.

There's basically 3 building blocks to go from where we are at 4% to that 10%. One is FHTV. It's our heavy truck contract. So as with all aerospace and defense, and this room seems to be aerospace and defense today, with inflation and fixed price contracts, those contracts got flat to underwater or underperforming fairly quickly. And you saw that in our results in the last couple of years. So building the heavy under the new contract at the end of last year, and you saw a margin pickup in the second half versus the first half. The mediums, which is the other big contract we build, we start building under that new contract second half of this year. So first half, we're still building some lower margin units and in the second half, that improves. And so those 2 already signed contracts, those building blocks are in place.

The third piece is NGDV ramp. And that's really in 2 pieces. One, it's getting to full rate production with quality. But then two, it's building out that additional order backlog towards that full 165,000 unit contract we have. So we've got 51,500. As we take on more orders, then that margin profile improves, too, because with those initial production units, they're obviously going to have lower margin, you're building them at lower rate, you're finding issues, you're just like fix it, build them, which is always what happens in launches. But because of how contract accounting is, that gets pooled. And so for that first 51,500, that's going to have a lower margin pool than the full 165,000. So as you take orders in, it gets more normalized to the margin we expect over time. And so that's the other driver that you'll see over time between now and 2028 as we get more orders. That margin normalizes into the range we would expect, you get the new contracts in Defense and then you get into that kind of 10% margin. So very comfortable with the path to 2028, but it's not going to happen this year.

Got it. And I am curious on NGDV, the margin. You don't have to say what margin is on NGDV today and where it's going in 2028. But is there some sense you can give on like the basis point spread on just NGDV margin today, where it will be in 2028?

We're not going through that.

I tried. That's fine.

You tried.

And then just in Defense specifically, just how should we be thinking about top line growth exiting 2026? Is it pretty safe just given that you have these long-term contracts, is it pretty safe to assume that Defense should be growing top line in 2027 year-over-year?

2027, difficult to say, but certainly by 2028. So to put it in context, our guidance for this year is $2.5 billion, about half Defense, half delivery. 2028, $3.1 billion, half Defense, half delivery. So they both equally grow from about $1.25 billion to $2.5 billion -- I'm sorry, to $1.5 billion. So moderate growth for both of those. One of the other elements people didn't fully understand this year because it is difficult to understand is last year, we had a lot of exports for Defense. And so our revenue for last year was $1.6 billion. That comes down to roughly about $1.25 billion and then it grows back up. So we did have a number of exports last year. Happy to have them, but they are a little bit more lumpy.

Got it. And then my last transport question here. You did tease a last-mile delivery concept vehicle at CES this year. So would love to hear more about this, conversations you're having now with potential customers, what the appetite seems to be? And then how long do you think it might take to actually come out with this product?

Yes. So once we won the NGDV contract and people started to see that, there was a lot of appetite for an integrated delivery vehicle. So there's -- for those of you who are not familiar with how delivery vehicles generally are structured, you have 2 types of delivery vehicles. You have ones that you and I can drive and then there's ones that require commercial drivers like the CDL. If you think of our NGDV and the Amazon Rivian, those are what's called Class 2. Any of us could drive them. If you think about it as a FedEx truck or a UPS truck, those are heavier trucks, you need a commercial driver's license for those.

So we've had great dialogues with the delivery companies because what they see with NGDV, what they see with our other products, whether that's military vehicles or refuse vehicles, is the ability to build custom integrated vehicles that have great durability and reliability because the NGDV is designed for a 20-year life, which none of us get out of our normal day-to-day drivers. And so we have had a lot of interest. And so what the team got really excited about is what are those future opportunities. And we had a video at CES, which had what looked a lot like that bigger kind of -- I'm going to call it, a UPS truck because that's what I grew up seeing in my neighborhood. So it really depends on what our go-to-market is in terms of how that materializes and the timing.

If you took the NGDV, did some minor modifications because of that design, because of that front end, you probably have to do some crash. That takes a little while, but it could be a couple of years, a little bit more than a couple of years maybe because you're going to have to recash, recertify and all that stuff. It's very complicated. If you do a ground-up body on frame, which is what those heavier ones are integrated, it might be a little bit longer than that because then you are really ground up. Our engineering team is very efficient. But I think those would be normal standard timings from my experience in automotive, nothing super secret sauce there. It's just what anyone would probably quote you on some of that. So it really depends on the range of those options, but we are really excited about, one, our capability to build a unified platform and top patent platform that works together with safety metrics, but also with the demand we see.

Maybe that's a good place to pause and see if there's any questions in the audience.

While the screens up unless somebody has a question, I just want to touch on the middle left there, middle right, apologies, left and right have always been a problem. That's our ROGUE Fires. So when we talk about the future of Defense and we talk about tactical wheeled vehicles, one of the important things is autonomy. We talked a little bit about it in the airport. But what I find really fascinating is as I think about the future for Defense, I think the future is largely autonomous. And so technology like that allows you to be payload agnostic and position a vehicle where it needs to be for what it needs to do. And that could be exportable power for technologies that require exportable power. That could be rockets is the word in here. It could be satellite information, antennas. It could be all sorts of things.

But you can position things without people in arms way. And so we're really excited about that line of products and the equivalents, the one above it is a PLS A2, which is autonomous-ready PLS palletized load system, really exciting name. So I think autonomy in that space is going to be a really great future. I just had to say that. And by the way, the one on the lower right there, that one can be dropped from a plane. So that's fine. Certainly some cool products, very cool stuff. That gave you all the chance to think of questions.

I have one on front here.

There's one right here in the front.

So GPS jamming, GPS in that environment is a big issue, particularly for autonomous vehicles. So how are you tackling those challenges? Is that something that you're getting from another supplier? If it's available now? Or are you developing something in-house?

I'm out of my depth on that question. You'd need one of the engineers here to answer that. To the best of my knowledge, I'll just say, I think, generally speaking, that technology is from the government. We are not the people who do that stuff. Generally, the government agrees who's going to do that, and then that's a directed supplier for us. That's my understanding. I could be wrong on that, but us -- but well, so for instance, in this. Okay, where we're focused is the systems and the software that make it autonomous.

In that case there, the ROGUE Fires uses an outside company as the autonomy stack that the Department of Defense, Department of War contracts with and installs that software. We do the drive by wire system. We do the software that does the braking. We create the autonomy platform within the truck and then they decide how they want to activate that with the layer above that. And we think that's our core competency is the resilient truck that can do anything. It's how things work together, and it's the controls of the vehicle within the vehicle. The one above it, a similar thing. It's autonomy ready, so it's drive by wire as opposed to a hydraulic or electric steering column. But it's not fully autonomous. You can actually see the cab and the steering wheel in that picture that one below obviously has either. So that's how we think about it. Good question.

Any other questions? All right. I think I have one more just on capital allocation. Would just love to hear about your appetite for M&A, in particular, you've mentioned doing bolt-ons, acquisitions. Just do you envision that still being the focus? And then also just how you're thinking about share buybacks, reinvesting in the business, divided and all that stuff?

So at Investor Day, we did a slide that talked about our capital allocation priorities, and they're unchanged. First and foremost is a healthy business with a healthy balance sheet. Remaining creditworthy is critically important to me. Secondly, it's funding our business. There is no better return for our shareholders than investing in our business. Every -- Mike might disagree, but nearly every dollar he asks for, he gets to grow capacity. He may not enjoy the process, but we all recognize it's critically important. The return on that asset is very good.

And then comes returning cash to shareholders. So we've steadily increased the dividend for 12 years, including an 11% increase this year to our dividend. We think a steady, reliable dividend is important for a cash flow positive company. And then the last 2 uses of capital are share repurchases and M&A. And in Investor Day, we had share repurchases first. I still think that would be a good use of capital. We bought $278 million of shares back last year. That was up. It's like, I think, our third largest year maybe of share repurchase in the last 10, 15 years. And given where our multiple was, we felt that it was a good use of capital.

With that said, we have an always-on M&A pipeline. We're always looking to see if there's something for bolt-on or to support our existing businesses, whether that's something as large as AeroTech, which was $800 million or a lot of the other ones were smaller, AUSA, Hinowa, you're talking a much smaller kind of bolt-on. That's really, I think, our sweet spot right now is that kind of space of acquisition that augments our business going forward. But right now, where our multiple is, even though I'm pleased with our performance this year. Our multiple still is below where we think it would be. So share repurchase is still on the table.

Great. I think that's a good way to end it. Thank you guys for joining us, and we'll wrap it there.

Thank you for having us. Thanks all for joining.

Greetings, and welcome to the Oshkosh Corporation Fourth Quarter and Full Year 2025 Financial Results Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Pat Davidson, Senior Vice President of Investor Relations. Thank you, sir. You may begin.

Good morning, and thanks for joining us. Earlier today, we published our fourth quarter 2025 results. A 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 12 months. Please refer now to Slide 2 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 8-K filed with the SEC this morning and other filings we make with the SEC as well as matters noted in our Investor Day in June 2025. We disclaim any obligation to update these forward-looking statements, which may not be updated until our next quarterly earnings conference call, if at all. Our presenters today are John Pfeifer, President and Chief Executive Officer; and Matt Field, Executive Vice President and Chief Financial Officer. Please turn to Slide 3, and I'll turn it over to you, John.

Thank you, Pat, and good morning, everyone. I want to thank our over 18,000 Oshkosh team members that work together to deliver strong results in a dynamic external environment. Before we review our fourth quarter and full year highlights, I'd like to talk about the CES show in Las Vegas earlier this month. This was the second year of showcasing our products and technologies that serve everyday heroes by making jobs safe, intuitive and productive. Our vision for the airport of the future, the job site of the future and the neighborhood of the future incorporates robotics, autonomy, AI, connectivity and electrification, which we highlighted at our booth. In particular, visitors to our booth saw our concept for a welding robot that utilized a JLG boom lift coupled with autonomous scissor lifts, AI software and sensing technologies.

This concept highlighted our strategy to shift from providing equipment that enables jobs at height to offering equipment that executes jobs autonomously. We believe this technology is also applicable for a wide range of AWP use cases. In addition, we demonstrated how a modular airport robot platform can serve multiple roles on the tarmac to support the airport of the future. We have trialed a perimeter detection robot at airports and are optimistic about our ability to commercialize this technology in the coming years and expand it to other applications. Lastly, through an immersive theater experience, we demonstrated how our equipment and technology, including the autonomous Jet dock, modular runway robots and iOPS software work together in any weather to deliver the perfect turn for airlines, airports and travelers.

Our industry-leading technology also received third-party recognition at the show, winning two Best of Innovation Awards, one for JLG's robotics on the job site and another for our hybrid electric Volterra ARFF. We were also named as Innovation Honorees for our JLG boom lifts and our McNeilus Volterra electric refuse and recycling collection vehicle. As the show was happening, we were delighted that our racetrack-inspired Collision Avoidance Mitigation System, or CAMS, was awarded a CES Picks Award. The Picks Award recognizes and celebrates brands at the forefront of innovation, honoring standout products and creative solutions. CAMS is the first purpose-built technology to anticipate collisions for firefighters and others on active roadways. Following a strong response to our showing this technology at CES last year, we have been field testing the AI-powered solution with fire departments in large cities over the past year, and the feedback has been powerful.

We are working on scaling this safety platform to support everyday heroes such as EMS crews at accident scenes, police officers managing traffic or responding to calls and even tow truck operators assisting motorists. The awards we received at CES as well as the resoundingly positive response we received from show attendees demonstrate how our investments and innovation are creating safer, more efficient workplaces for America's everyday heroes. We are excited about our next-generation products and are confident they will lay the foundation for long-term profitable growth as we transform industries and help our customers achieve their goals. Please turn to Slide 4 for some highlights for 2025. For the year, we posted revenue of $10.4 billion, leading to adjusted operating income of just over $1 billion and adjusted earnings per share of $10.79. As we have discussed on prior calls, the team pulled together across the company to respond to the evolving tariff landscape, effectively managing our costs and supply chain throughout the year.

We also continued to make strategic investments and strengthened our leadership team to execute on our 2028 goals as laid out at our Investor Day in June. Please turn to Slide 5 for a discussion of Q4 highlights. For the quarter, we delivered adjusted operating margin of 8.4% on revenue of $2.7 billion. This led to adjusted EPS of $2.26, in line with the guidance we provided last quarter. Strong performance in both our Access and Vocational segments led to our solid finish to the year. Turning our outlook to 2026.

We see a general continuation of recent economic conditions, which includes expected lower capital investments at certain of our industrial customers, notably in our Access equipment and Refuse businesses. Without an improvement expected in nonresidential construction in 2026, our outlook for the year is for adjusted EPS in the range of $11.50. Our EPS growth compared to 2025 reflects strong performance in the vocational segment, reflecting our higher production throughput for fire trucks and the continued ramp-up of our NGDV in the Transport segment, partially offset by our expectation for weaker market conditions in the Access segment.

Matt will provide additional details on segment performance and our 2026 outlook later in the call. Please turn to Slide 7 for segment highlights. Our Access team managed through challenges to finish the year on a high note with fourth quarter revenue of $1.2 billion, roughly equal to last year and higher than the third quarter as we benefited from strong demand in advance of 2026 price increases. As you will hear from Matt shortly, we believe that our strong Q4 sales will have an impact on Q1 sales. Orders were strong at more than $1.7 billion, leading to a book-to-bill ratio of 1.5 as customers continue to move toward more traditional seasonal ordering patterns. We are pleased with this performance, and we continue to work with customers on their plans for 2026. Our backlog is $1.3 billion, which we believe is reasonable in this environment. JLG products serve many end markets in our communities, but the primary driver for demand is nonresidential construction.

While we continue to see underlying strength supported by data centers and infrastructure, many other construction sectors remain soft, and we, therefore, expect revenue in the first half of 2026 to be down compared to 2025. We believe that elevated fleet ages and improving economic conditions in the second half of the year will provide momentum for 2027. As I mentioned earlier, we generated tremendous excitement with our technology and vision for the connected job site of the future at CES. Customers, analysts and attendees recognize the value of our innovations, positioning JLG to build on its market leadership. We look forward to the ConExpo show in March, where we'll be announcing new products and demonstrating our boom lift with robotic end effector concept that was such a hit at CES earlier this month.

Turning to Slide 8. Vocational delivered another quarter of growth, leading to full year revenue of more than $3.7 billion, up nearly 13% and a robust adjusted operating income margin of 15.8%. Our fire apparatus business continues to lead the way with sales up about 17% for the year. We made good progress on throughput with fire truck deliveries up nearly 10% in the second half compared to a year ago. We continue to execute our plan to reduce lead times with expected capital investments of about $150 million to support improved throughput across our 3 key locations with about $70 million spent to date. The Airport Products business continues to grow with sales up about 13% in 2025, and we remain confident in our outlook as we see strength in both air passenger and cargo traffic over the long term.

Airports and airlines are investing in critical infrastructure and embracing technologies like those we showcased at CES. This provides outstanding opportunities for us to grow this business. Before I turn to our Transport segment, I want to briefly touch on our refuse and recycling vehicle business. We're excited about the refuse contamination detection and service verification technology that we displayed at CES, which we plan to launch in the first quarter. This technology uses AI and onboard edge computing to identify 14 different types of contaminants so customers can identify contamination in their waste streams in order to reduce the amount of recyclables going to landfills. While we have seen a moderation of near-term demand, we believe in the long-term growth of this business and our opportunities to bring technology to solve customer problems.

Our backlog for the Vocational segment of more than $6.6 billion provides excellent visibility as we expect the segment to deliver meaningful revenue over the coming years as we improve production throughput as outlined at our Investor Day. We expect our investments in production will reduce this backlog over time as we build units to meet continued robust demand for our products. Please turn to Slide 9. We made significant progress on transforming our transport business in 2025. You will recall that we changed the name of the segment to reflect the growing importance of the delivery business and the expanded opportunities we see for this segment. About 6 months ago, Steve Nordlund joined Oshkosh as the segment President. Steve's outstanding experience and fresh perspective are shaping both the direction of delivery as well as our defense strategy going forward.

We continue to increase NGDV shipments during the year and are delivering in line with or ahead of USPS expectations. We surpassed the production milestone of our 5,000th unit and are pleased to share that the fleet has exceeded 10 million miles driven. NGDVs now operate in nearly all 50 states, including Alaska. Postal workers continue to praise these vehicles, which include modern safety equipment and productivity enhancements that improve their working conditions and are a significant upgrade to the decades-old vehicles being replaced.

On the defense side, several key contracts that we announced in 2025 will be important for 2026 as we build and ship units for programs to support the U.S. armed forces. In particular, both the FMTV and the ROGUE-Fires programs are essential for our nation's security, and they will become more meaningful in our defense results as the year progresses. And just a little over two weeks ago, we announced a follow-on order for JLTV units for the Dutch Marine Corps. We expect to begin delivering on that order towards the end of 2026.

With that, I'll hand it over to Matt to walk through our detailed financial results.

Thanks, John. Please turn to Slide 10. Consolidated sales in the fourth quarter were nearly $2.7 billion, an increase of $91 million or 3.5% from the same quarter last year, primarily due to improved pricing in the Vocational segment and higher sales volume in the Access segment. Adjusted operating income was $226 million, down about $20 million from the prior year, primarily due to unfavorable product mix and higher manufacturing overhead costs, partly offset by lower incentive compensation costs and higher sales volume. As a result, adjusted operating income margin of 8.4% was down 100 basis points from last year.

Adjusted earnings per share was $2.26 in the fourth quarter, resulting in full year 2025 adjusted EPS of $10.79, slightly above the midpoint of our most recent guidance on full year 2025 sales of $10.4 billion, which was also in line with our most recent guidance. During the quarter, as we said on the last call, we stepped up share repurchases to approximately 912,000 shares of our stock for $119 million, bringing our total share repurchases in 2025 to $278 million, more than double the prior year. Share repurchases during the previous 12 months benefited adjusted EPS in the quarter by $0.06 compared to the fourth quarter of 2024. Free cash flow for the quarter was strong at $540 million. For the full year, free cash flow was $618 million or 96% of net income. This was above the high end of our most recent guidance due to improved customer advances and lower capital expenditures. This is a strong proof point supporting our Investor Day target of cash conversion in excess of 90%.

Turning to our segment results on Slide 11. The Access segment delivered fourth quarter sales of $1.2 billion, up 1% over last year. Adjusted operating income margin of 8.8% reflected unfavorable price/cost dynamics, including about $20 million of tariffs and adverse product mix, partly offset by higher sales volume. As we expected, the impact of tariffs was largest on the Access segment during the quarter. Across all segments, the impact of tariffs was approximately $25 million, in line with our prior call. We believe that the announced 2026 tariff-related price increases for Access products contributed to stronger sales performance in the fourth quarter compared to our most recent guidance. Our Vocational segment achieved an adjusted operating income margin of 16.2% on $922 million in sales in the quarter. Sales increased by $42 million with improved pricing partially offset by lower sales volume.

Lower volume in RCVs was partially offset by improved volumes in municipal fire apparatus and airport products. Vocational adjusted operating income increased to $150 million as a result of improved price/cost dynamics, partially offset by unfavorable product mix within municipal fire apparatus in the quarter. Transport segment sales increased $33 million to $567 million in the quarter. Delivery vehicle revenue grew by $130 million to $165 million and represented approximately 30% of Transport segment revenue during the quarter. Delivery revenue grew 13% sequentially compared to the third quarter of 2025. As expected, defense vehicle revenue was lower compared with last year due to the wind down of the domestic JLTV program. Transport segment operating income margin was 4%, up from 2.8% last year, reflecting the net impact of changes in CCAs and improved pricing on new contracts, partially offset by NGDV ramp-up costs.

Fourth quarter operating income margin was down sequentially from the third quarter due to the nonrecurrence of the onetime sale of the JLTV-related IP license to the U.S. government. Turning to our expectations for 2026 on Slide 12. We remain on our plan to deliver strong improvements to revenue and operating margin by 2028. For next year, we expect sales to be approximately $11 billion on a consolidated basis, which represents growth in the mid-single digits. We are estimating adjusted operating income to be a little over $1 billion, and we estimate that adjusted earnings per share will improve to approximately $11.50. Our sales outlook assumes roughly flat nonresidential construction activity, in line with many external projections.

While we expect lower sales in Access, we expect to grow both sales and adjusted operating income for the Vocational and Transport segments. Also, it's worth noting that we are assuming that the present tariff rates remain in place throughout the year. The rough magnitude of these tariffs is estimated at $200 million or about $160 million higher than 2025. While we expect full year results to reflect improved performance, we anticipate that the first quarter will be the lowest quarter of the year as we would traditionally see from seasonal factors. We expect the strong fourth quarter 2025 customer response to pricing actions at Access will also adversely impact Q1 volumes. As a result, we believe our adjusted EPS for the first quarter could be about half of last year.

Building on John's earlier comments, we believe our second half performance will be more favorable across the segments than in the first half. For the full year, at a segment level, we are estimating Access sales to be approximately $4.2 billion with an adjusted operating margin of 10%, reflective of softer market conditions in North America. We expect to fully offset the impact of tariffs by year-end. We project vocational sales will be approximately $4.2 billion, about equal to our Access segment with expectations for adjusted operating margin of approximately 17%, supported by a continuation of favorable price/cost dynamics and volume growth from improved production throughput. For Transport, we expect sales to be approximately $2.5 billion with expectations for operating margin of approximately 4% as we continue to transition out of past fixed price contracts and ramp up NGDV production.

Performance in this segment is anticipated to improve throughout the year as we grow revenue on NGDV deliveries, receive follow-on NGDV orders and build units under the new FMTV contract. Our estimate for corporate and other costs is $180 million, and tax rate is approximately 24.5%. We expect to invest approximately $200 million in CapEx, and our estimate for free cash flow is approximately $550 million to $650 million or about 80% of net income. We are announcing a quarterly dividend of $0.57 per share, which reflects our expectation of strong long-term cash flow generation and our Board's confidence in our ability to sustain profitable growth while continuing to fund our investments in innovation and to expand U.S. manufacturing. We also plan to continue repurchases of shares throughout the year.

With that, I'll turn it back over to John for some closing comments.

Thanks, Matt. We just delivered a solid fourth quarter to complete a great year, and we remain confident in our long-term growth opportunities driven by our people, innovative products and strong businesses. We believe our guidance for 2026 continues to support our plans to achieve our adjusted EPS range of $18 to $22 per share by 2028. We appreciate your continued confidence in Oshkosh and look forward to answering your questions. I'll turn it back to you, Pat, for the Q&A.

Thanks, John. I'd like to remind everyone to please limit your questions to one plus a follow-up. And please stay disciplined on your follow-up question. After that, we'll ask that you rejoin the queue if you have additional questions.

Operator, please begin the Q&A session.

[Operator Instructions] Our first question comes from the line of Jamie Cook with Truist.

I guess just two questions. One, John, on the Access guidance or the aerial guidance for the year. I think it's implied down 6% or 7% relative to United Rentals who came out, and I think their CapEx guide was up modestly. Cat's retail sales in North American construction were up double digits. So there just seems to be a disconnect between you know what I mean, like what's implied in your guide versus what we're seeing from competitors or peers or customers. So just color there, is there -- I guess, so color there.

And then my second question, just on the transport margins. It sounds like you're ramping as you expected. I think implied sales are up 20%, the margins of only 4%. I know there's some pricing that needs to happen on the defense side, but just color there, how we think about margins as we exit the year, understanding you said things should get better as the year progresses.

Yes. Great, Jamie. Thanks for your questions. I'll take the first one. I'll probably pass the margin question on transport over to Matt. Starting with our Access business and your question on our outlook. First of all, I want to make sure I state that we think we're taking a balanced approach to 2026. The market is unfolding right now kind of what we all hear about on a regular daily basis in terms of what's going on, meaning really strong big mega projects in data centers, power gen, some large infrastructure projects. So that does drive demand, and that's very positive.

On the other hand, you've got private non-res construction, which is a huge segment of nonresidential construction, which is still under some pressure. And we just -- we read the stats and we look at the outlooks for these markets. And long term, we feel really good. Eventually, we'll see some of these delayed starts start to come back online. And when that does, that will be really good news. But right now, we've taken a balanced approach on that. When you talk about United Rentals and what they reported today or last night, I guess it was, versus a lot of other businesses that are out there, they're not all the same. If you're highly -- if one of our customers is highly exposed to these big mega projects, then that's one story.

On the other story, you've got a lot of independent rental companies that are more exposed to the private non-res, which is still under pressure. And that kind of is what leads into our balanced approach on the market and what we're seeing in 2026. For example, manufacturing construction is still under pressure, and that's a big sector of nonresidential construction. We kind of need to see that turn a bit. And if we do in a future call, we'll let you know.

Matt, I'll turn it to you on the transport question.

Jamie. So first, let me just say we remain confident in our 2028 outlook for the Transport segment. Our guide in 2026 reflects a number of factors. There's pricing for new contracts, as you mentioned, with FMTV new pricing coming on in the second half. We'll see steady production increases for the NGDV. We do anticipate further NGDV orders to come throughout the year. And then there's a couple of things that are maybe nuances worth noting. One is we do have lower defense volume in 2026, largely on export orders and then some investment in new product development, cost reductions and so forth, normal engineering that steps up over the year. That's what results in the OI of 4% with the back half a bit stronger than the first half. But again, remain very confident in our 2028 outlook.

Our next question comes from the line of Jerry Revich with Wells Fargo.

John, I know you have excellent telematics data from your fleet. Can you just tell us what you're seeing in the U.S. and European market for your products? United Rentals spoke about good utilization for your equipment categories. Curious what you're seeing.

Yes. We've got a lot of machines out there that are connected, Jerry. I mean, in the hundreds of thousands, like a lot of equipment that's connected. We've got really good insight into the health of the equipment that's in the fleet, and it is -- we see it as healthy. And same in Europe. The European fleet is relatively healthy, too. So that's good news, right? And the used market is also pretty healthy right now as we see it. The prices in the used market, the amount of supply that's in the used market, it's in a healthy state.

So we -- that's all good news. And I think we're all kind of looking forward and saying, okay, we've got a lot of non-res under some pressure, but we've got big mega projects that are growing at a healthy rate. And we're kind of all looking for the data to tell us that there's an inflection point. And right now, we don't know exactly when that's going to happen. We just know that at some point, it will happen. And that gives us the reason for our balanced outlook on 2026 for Access Equipment.

Super. And Matt, can we just unpack the first quarter versus the fourth quarter because the guidance implies a really meaningful earnings acceleration. So in Access, it sounds like you're expecting under absorption because of the pull forward of price increases, but maybe we could just unpack that and talk about margin expectations in Access in the first quarter and the transport headwinds that you mentioned, it sounds like those might be heavier in 1Q than 4Q. Can we just maybe quantify those points just to build the comfort with the earnings acceleration?

Yes. So our first quarter, as we mentioned on the call, we expect that about half of last year. Most of that decline is in the Access segment year-on-year in terms of the growth. And so if you think about that, we had a strong first quarter last year ending kind of flowing through from 2024. This year, we did see very strong sales in the fourth quarter as we just reported. We think that will have a moderate impact in the first quarter.

We also have some adverse price cost. While we did announce pricing, we do have a full boat of tariffs. And in the back half of the year, we'll start getting some of the cost reductions that we kicked off a couple of years ago, which progressively increased throughout the year. So that's the large driver of kind of the year-over-year EPS at roughly half of last year.

Our next question comes from the line of Mig Dobre with Baird.

Sorry, I'm going to have to stick with Access Equipment, too, because I am a little bit confused here in terms of how we're thinking about the first quarter. Can we be specific in terms of what you guys are thinking in terms of year-over-year revenue decline and margin? And my follow-up, as you think about the full year guide, right, I mean, if we're recognizing that the order intake that you had in the fourth quarter, maybe, as you said, pull forward some of the demand because of the announced price increases, where you're guiding the full year revenue at $4.2 billion, frankly, is still higher than what your order intake was for 2025. So to me, in that guidance, you do imply that things are, frankly, getting a little bit better as the year progresses. What's your visibility related to that? I mean, are you hearing that from your customers in terms of how they're deploying CapEx? Or are there some other assumptions that you're baking in?

So I'll take first quarter and kind of how to think about that and then hand off to John to talk about some of the backlog and how we see the year developing. So again, for the full year, we're $4.2 billion, as you mentioned, that's about a 6% to 7% decline year-on-year. We think on a year-over-year basis, that will be higher in the first quarter. Again, first quarter last year was very strong coming off Q4 2024. This year, we are seeing a relative weakness in part because of the pricing we announced for 2026, which resulted in strong sales in Q4. And so we would expect to see the revenue decline year-on-year, first quarter higher than what we have for our full year guide.

Yes. And with regard to how the year is going to progress, Mig. So we did -- in the fourth quarter, our orders were $1.7 billion. Our book-to-bill was 1.5, and we have a backlog of $1.3 billion. So I always pay attention to -- we always pay attention to our backlog and how it's continued to progress. And I always indicated that our backlog is typically, we say should represent 3 to 6 months of demand, and that $1.3 billion is right in the middle of it when you look at our guide. We do look at the first half being under a continued pressure because of some of the nonresidential activity that we see.

We also saw heavy shipments in the fourth quarter, which may impact the first quarter a little bit, as Matt just indicated and you indicated with your question. When you look at where our backlog is and that backlog also shows when customers need equipment because the shipment dates on every order we take, that's what leads to our guide of the $4.2 billion, which is down a little bit year-over-year, but kind of consistent with our balanced outlook on where we are with the market.

Okay. Lastly, if I recall, we were looking at $300 million of revenue quarterly at a full run rate for NGDV. When do you expect that you'll be able to hit that?

Well, I want to -- thanks for the question on NGDV. We continue to make really good progress with this program. And as I mentioned, we're more than 10 million miles and the customer with -- of delivery with these units. The customer is delighted with them. When you look at our performance, we are at or ahead of U.S. Postal Service delivery requirements right now. The Postal Service is very happy with the deliveries we're making. And we have a formal schedule that we have to meet, and we're at or ahead of that formal schedule.

So when you look at our revenue for the full year, we've always said that we will do between 16,000 and 20,000 units a year on this program. And in '26, we're right at the low end of that range. We're in that range on the low-end side of it. So we continue to do well with production. Sure, we'll produce more units in the second half than the first half. But we're running fairly well with this program, and our customer is very happy with it. If you look at our guide for the transport business, kind of thinking about the revenue side of it, about half of that guide is NGDV or delivery units to give you kind of some numbers. And it's a little bit more on the back half than the first half.

Our next question comes from the line of Steve Barger with KeyBanc.

This is Christian Zyla on for Steve Barger. Just on Access, were there any other industry or customer-specific ordering dynamics in Access that you don't think would recur as we head later into the construction season? Or was it really primarily just the pricing pull forward on top of a regular ordering cadence from your customers?

Christian, it's Matt. So certainly, we -- I wouldn't say there's anything unique. I would just say we had a strong sale into independents in the fourth quarter. We think that will reverse out and the year will normalize. For 2025, in general, we saw relative strength in independents. And I think we all expect that, that will normalize more through 2026.

Got it. And then maybe a slightly different question. Just at CES, you guys showcased a delivery vehicle for non-USPS. As your team put together the concept, just kind of what drove you to pursue that plan? Was it the market size or unit economics that you like? Was it the financials or kind of the cross synergies? Just any thoughts on that concept?

Yes. Thanks for the question on CES. I mean, all of the above based on what your question was. I mean, we -- when you look at our NGDV that we developed in the United States Postal Service, there's a lot of technology on that vehicle. It's the most advanced last-mile delivery vehicle ever put into the market. It provides so much benefit for the operator to be productive, but underscore also safety, safety for people around the vehicle and safety for the operator. And so at CES, we wanted to showcase that we have the capability to continue to deliver this type of a vehicle for other segments of the delivery market.

These are purpose-built vehicles. They're not modified COTS vehicles, which you tend to see a lot in the delivery market or body on chassis, which you see a lot in the delivery market. These are purpose-built vehicles with technology on them to drive productivity, safety and economic performance for the fleet operator. And we wanted to showcase that because we've always talked about future opportunity beyond NGDV. So that was the intent of it.

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

Just wanted to maybe get a little bit more color -- sorry to keep harping on the Access side. But have you said exactly, I guess, how much pricing you anticipate to get in 2026 within your sales guide? Could you just kind of talk about that in a little bit more color just how much is kind of embedded right now at this point in your backlog and not just for Aerials, but for each segment?

Yes. Thanks, Angel. I'll take the question. It's a great question, of course. So when we look at our pricing plans, of course, we've been through a dynamic period when you look at our -- the cost side of the equation, it's been headlined by tariffs, tariffs and tariffs in that dynamic environment. So we go to work and we went to work in 2025 doing a lot of tariff engineering work to try to do everything we can to take the cost of tariffs and mitigate it. And a lot of that has to do with engineering, reengineering. Our sourcing teams work hard on where we're sourcing what product, and we try to localize or move product when we need to.

So we've done a lot of that work, and we'll continue to do that work. We try to minimize the impact to our customers, but you can't eliminate all of it. So eventually, you have to pass some through in price. So we've done that. And we believe that the price increase is reflective of something that our customers can manage as well as something that allows us to stay whole throughout 2026 on the price/cost equation. So that's the gist of it.

That's very helpful. And maybe just following up on that point of localizing costs. And one of the big kind of questions we've been getting is just what happens to kind of the bill of materials or just materials costs in general, whether it's from commodity price inflation or memory chips and other things that we're seeing out in the market. So could you just comment a little bit on what's kind of embedded in your guidance in terms of just broader cost buckets? And in particular, for extend maybe on the access side, if you could just kind of unpack how much is maybe of the cost or the margin potential dynamics here is tariffs versus materials versus mix of independents or any other kind of buckets here?

Yes. Angel, thanks for the question. So on the cost side, I'll give kudos to the access team, which really kicked off a cost reduction initiative going all the way back to 2024, and that progressively has results. And so they're continuing to identify cost savings throughout this year. So cost savings are kind of grow cumulatively quarter-over-quarter. So we'll get more in the back half of this year than the front half of this year. With those actions, with other actions, I'd say, overall, we're seeing largely flattish costs set aside tariffs.

And so the team is really doing a great job to manage the cost equation of this and offsetting as much of the tariffs as they can through those initiatives. In terms of mix, we've historically seen a higher mix of IRCs. I can't be explicit about how that impacts the financials. But traditionally, that's been 55% NRC, 45% IRC. We think that will shift kind of more normalized to those levels in 2026.

Our next question comes from the line of Tim Thein with Raymond James.

I just have one. Just on the vocational segment, can you maybe give some comments in terms of the backlog there and how that's kind of influencing the revenue -- what you expect in terms of the revenue composition in '26? I take it that the RCVs will -- are likely to step down just given comments on some of the public waste haulers. But maybe if there's some further handholding you can give there in terms of split across F&E and AeroTech, et cetera?

Sure. Yes. Thanks, Tim, for the question. So vocational continues to be a great story, a great business for us, will be for many years into the future. The backlog across the business is really healthy. When you look at the backlog at one step down from that, which is your question, the fire backlog is still really healthy. We've had a big backlog. We're continuing to increase capacity, increase output, yet we continue to see healthy order rates. I mean customers want our products. So the backlog is really, really healthy in the fire market. It's the same in the airport market with our airport and AeroTech business, healthy business conditions, healthy order rates, customers are continuing to invest. You see the stats on both passenger and commercial demand for airport. It's really good.

There is some pressure in the environmental business with refuse and recycling. The business in total is very healthy. And our customers are very healthy in this segment. There's just a little bit of a reluctance right now to place a lot of CapEx. That's just temporary. We see the long term being fantastic as we had indicated in our Investor Day through 2028. It just could be a little bit of a lull in CapEx, so some downward pressure on that business in 2026. But long term, it's fine and the vocational business will perform exceptionally well even with that blip in 2026. So we feel great about this segment. The segment where we really showcase our technology that makes such a big impact for our customers, and that's one of the reasons it's so healthy.

Our next question comes from the line of Kyle Menges with Citi.

I was hoping we could just go back to the transport margin and just how to think about the transport margin ramp throughout 2026. And then, Matt, you still sounded confident in hitting the Investor Day target for transport margins in 2028. So it would be helpful to hear some color on just how to think about the bridge from transport margin of around 4% in 2026 to meeting the Investor Day target by 2028.

Yes. Thanks, Kyle. So as I think about going from the 4% that we guide this year to the 10%, all the building blocks are there. It's just a matter of timing. And so what we've talked about is new price on new contracts. So we're building under FMTVs -- sorry, FHTVs now, which you see in the performance in the second half of 2025. We'll build under the medium contracts, the FMTV second half of '26. NGDV ramp, so we'll continue to increase our production progressively throughout the year. John mentioned that about half of our revenue for next year, so the $2.5 billion is NGDV, which is right what we said we would be in the long-term guide of $3.1 billion.

So you're starting to see those elements come in with us seeing more of that in the second half, obviously, than the first half. So you will have some launch costs that we pick up in the first half. The other thing just to note is that with that half of the revenue being delivery, then you can see some of the defense decrease year-on-year from the export orders. And we would expect defense volume to pick up into our future guide a bit as well relative to 2026. So that's kind of how to think about 2026. Again, all the building blocks there. It's just a matter of timing for them and then the second half being stronger for the reasons I mentioned earlier.

Yes. And we remain really confident on this business going forward and on the recovery of its margins. We're very confident that, that will continue to progress as we head towards 2028.

Helpful. And then a question on AeroTech. Just how do you think you've been able to extract some margin synergies? And what's really the potential to squeeze out some more margin from that business? And I think you guys have hinted at doing some 80/20 within AeroTech. So it would be helpful to hear just what some of those 80/20 initiatives look like.

Yes. Thank you for that question. The AeroTech business is a great business for us because of the market that we're in and the synergies that we get between our core synergies and the capabilities of AeroTech, and that's what you see. So the market is healthy. We're continuing to drive technological innovations within that market segment. You already see our autonomous jet docking and autonomous cargo loading being deployed right now in production, so to speak, meaning at gates.

There's a lot more technology to come. Technology really helps customers be more productive. And when that's the case, it also helps our margins, of course. But we do, on the other hand, have operating synergies, and we do 80/20, similar to the way we do it in some of our other businesses, which has dramatically helped us transform margins over the years. And there's opportunity there for us to continue to get margin through improvement in operating performance.

Not to say that there's anything wrong with the operations of AeroTech, there isn't, but you can always make operations better. You can always do that. And if you ever don't have that mindset, you're probably in trouble. But this is a great business. We expect margins to continue to expand because of technological synergies and continuing to be better and better with operations through our 80/20 philosophy. So thanks for that question.

Our next question comes from the line of Steven Fisher with UBS.

Just on -- within the vocational side of things on the fire side, just curious how much of a surprise was this municipal mix in the quarter relative to kind of what your expectations were at the start of the quarter? And what's your baseline expectation of mix in '26 versus '25?

Steve, so what we see in the fire business is some quarters, you kind of have a mix of products that has a bit of a lower margin as you kind of work through the one-offs and so forth. What we've seen in prior quarters is more batches. And you've seen us talk about those even on the call, where we have 13, 15 trucks being delivered to a department. In the fourth quarter, we had a few more snowflakes, I guess, I'd say, than we would have in other quarters, and that resulted in a little bit of adverse mix. I don't see that being anything sustained. It's more of a periodic thing. And over the year and kind of over the long arc, it really gets lost in the shuffle, but it was something we saw in the fourth quarter specifically.

Okay. That's helpful. And then just coming back to the Access segment to the cost elements. Just curious how much visibility you have to the costs for this year at this point? How locked in are you for what you expect to produce? And then I think, John, you mentioned you expect to be whole on the price versus cost. But just on the second half of the year, in particular, is price versus cost expected to be positive for that second half?

Yes, Steve. So we have good visibility into the cost at this stage for the year. We think we're in a stable of an environment as we've seen for a while in terms of tariffs at least. And we've got good visibility into our raw material prices as well as our cost reduction initiatives. So we feel we've got a good handle on the cost for the year. We do anticipate price cost to turn positive in the back half of this year. That's one of the drivers of some of the better performance in the second half and is a bit of a drag in the first quarter as we work through some of those cost reduction initiatives throughout the year.

Our final question comes from the line of Chad Dillard with Bernstein.

I was hoping you could quantify the incremental tariffs in '26, split them out by segment. And then also, you talked about taking price increases to cover them. In the event that [ IEPA ] gets overturned, I guess, how do you think about that? Are you able to maintain the margin? Or do you revisit the pricing discussions with your customers for '26?

Thanks, Chad. So as I mentioned on the call, full year impact is about $200 million. That's roughly $160 million higher than last year. I think of that as mostly in Access, so about 3/4 is in Access segment to put some ballpark numbers on that. If there is anything overturned, our assumption and certainly our planning assumption is that something equivalent will go in place. So our guidance assumes that the present tariff rates sustain throughout the year. I think that's a probably fair assumption based off everything I've read. But as the situation evolves, we'll adapt as we did in 2025.

Got you. That's helpful. And then I was hoping you could bridge your incremental margins in the vocational business. They're pretty sizable. So I was wondering if you could split it out, how much comes from price realization versus volume. And then secondly, with 17%, you're kind of at that midpoint of your long-term guidance. So I guess what's stopping you guys from taking that target a bit higher now?

Sounds like a CFO. So we're at 17%. We're really pleased with that margin. It's a good step forward. And what you see in that growth, and I won't be explicit about the breakout between volume and price cost, but volume plays a larger driver in 2026 than it did in 2025 as we bring on more capacity. John referenced the amount of capital we're investing into our assembly plants for fire capacity. So we start to see that come to the floor in 2026 relative to 2025.

Price cost, we do see still favorable in 2026. And then we do have some investments that help us support our business growth, and that's really what drives the 17%. But that's a great margin. It is right within the sweet spot of the 16% to 18% we guided in 2028 with revenue growth in the 2028 guide relative to where we are in 2026. So really pleased with the progress we're making in that segment and pleased with the performance we're seeing.

Yes. I'll just say that we're expecting to be at 17% margins, which we'd all look at and say that's good compared to our '28 guidance. So we got a lot of good things still happening in this business, a lot of good things on deck to come. So we feel good about it.

Mr. Davidson, I'd like to turn the floor back over to you for closing comments.

All right. Appreciate it, Christine. Thanks for joining us, everybody, on the call today. We will be meeting with investors at several conferences during February and March. We're also looking forward to another ConExpo show, as John mentioned earlier during his comments on the Access business. If you're interested in learning more about our company and our construction equipment leaders, consider a trip to Vegas in March for the show last held back in 2023, right, three years ago. So it's a great opportunity to gain exposure to our industries and hear about the new products and technology. Have a good rest of the day.

Ladies and gentlemen, this does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation, and have a wonderful day.

Okay. Good afternoon. I'm Steve Fisher, UBS Machinery, Engineering Construction and U.S. Building Materials analyst. We are thrilled to have the management of Oshkosh Corporation here. We have John Pfeifer, the CEO; and we have Pat Davidson from Investor Relations.

Just to give one disclosure before we get started here as a research analyst, I'm required to provide certain disclosures relating to the nature of my own relationship and that of any company we express a view on this call today. These disclosures are available at ubs.com/disclosure, or you can reach out to me after this session, and I can provide them to you.

With that, John, Pat, thanks very much for being here. Really appreciate it.

John, as we come here to the end of 2025 and reflect back on the year, can you discuss kind of some of the biggest successes and the biggest challenges of this year? And then I'll just -- if you have any other opening comments you want to make about the company and where we are.

Yes. So I mean, I'll get right to your question, 2025, I think, for all of us has been a really interesting year to say the least. I'll start with the positive. In June, about 6 months ago of 2025, we went to Wall Street and we kind of outlined what we expect to see from our company going forward over the next 3 years, and we laid out a guidance through 2028. And we said that, hey, our revenue will grow to $13 billion to $14 billion. Our operating margins will increase by 200 to 400 basis points to 12% to 14%. We said that our EPS will nearly double the $18 to $22 and talked about the cash flow that we'll generate. And that was -- we laid out why that's going to happen. And we talked about the dynamics in the end markets that we serve, of which there are many. And we primarily talked about the technology that we're bringing to market and how that really helps accelerate change for the customers that use our product.

So we serve people in lots of different end markets who are people that do really hard dangerous work. And without these people in our communities, our communities can't operate. And you see on the slide some of those end markets from construction to firefighting, to last-mile delivery, to refuse and recycling and on and on and on. And what's important there is that where we are with technology can really help improve the productivity and the feasibility for both the actual person doing the work as well as the fleet owner and the service provider of that work. So when we look at that, that's what -- and what we're doing with technology in those end markets, that's what gives us the confidence in those 2028 numbers.

If you look at 2025 back to your original question, I think we would all understand that the thing in 2025 that was probably the toughest to deal with is the tariff and the geopolitical climate. It's caused us to really have to look at our supply chains and our manufacturing footprints and say, okay, how do we do tariff engineering to be able to mitigate as much of this tariff climate as we possibly can. We started in a pretty good position because we're a quintessential American company with American manufacturing footprint. Nearly everything that we sell in the U.S. is made in the U.S. But we do have global supply chains, and we've had to go to work to make sure that we're doing the work required to mitigate the impact of the geopolitical reality that we're in. And we've made a lot of progress. That's the good thing. And so we feel a lot better now than we felt, say, on April 1 when we all saw what was going on with Liberation Day. So I think that's a little bit of color to your question.

Yes. Terrific. Maybe we can kind of start with the high-level strategy and portfolio. Obviously, we've seen in the recent quarter, a competitor kind of changed their strategy around portfolio. How do you feel about Oshkosh's portfolio at this point? What's your vision for the portfolio over the next few years?

We like to be in businesses that really have end markets that appreciate and value innovation that we can bring forward via technology. So we talk a lot about -- on this slide, you see the airport of the future. We're the biggest in ground support equipment, and we are doing an enormous amount of work to drive autonomous functionality to drive intelligent products and AI into how the gates of an airport function to make it more consistent and quicker every time. And our big airline customers love that kind of work because they want their assets to be utilized as much as possible.

And the job side of the future, we supply an enormous amount of equipment on every job site in America and making those job sites more productive. It's inherently chaotic on a job site making them more productive through the use of intelligent products, the use of autonomous functionality and effectors being able to do work versus people having to do work in difficult areas is a huge step forward for job sites in our end markets. So that's where we're really focused in our portfolio. We like end markets that really value that kind of innovation. And if they are, then we're happy to invest. If they're not, we tend to say that's not an area for us to be.

And so does this make you think about sort of expanding the portfolio from here? Are there a number of areas that you see those opportunities to deliver that value?

Sure. We're always looking at expanding the portfolio, but we're pretty careful about how we do it. We -- you've seen us make some recent moves in Europe, but also in the airport market, where we expanded our position in the airport markets. When we expand our position somewhere, it's usually because -- or not usually, it's always because we believe it's a really good fit with our technological capability. Our portfolio makes sense because when we take autonomous functionality or intelligent products features or electrification, it makes -- we can take that across a variety of different end markets. And when we see the opportunity like we did in airports to apply autonomous functionality or apply intelligent products features, it made a lot of sense. The synergies are there long term to drive real improvement for the customers in that end market. So that's what we look at when we look at expanding inorganically.

Terrific. How much of a goal is it or should it be to reduce the cyclicality of your business? And do you think about cyclicality at the overall company level or at the individual segment level?

Well, we think that our -- one of the benefits of our portfolio is that we do have a couple of businesses that are cyclical, as you know. And we think that the totality of our portfolio certainly provides a benefit because when you see a market downturn in one of our cyclical businesses, usually it can -- it's buoyed by the businesses that are not cyclical. However, we look at cyclicality on an individual business-by-business basis. And when we manage it day-to-day, month-to-month, year-to-year, it's business unit management and what the expectation is that if we're in a cyclical business, that in a downturn, that business is going to generate strong margins even in a downturn as well as when the market is healthy and growing. And I think we've been able to prove that we can do that, generate strong margins in the downturn. And if we can do that, we tend to be very happy with the business. And if we can't do that, then we question whether or not we should be in that marketplace.

And one of the things that I think we get questions on occasionally is the -- I guess you would call it program concentration, and we've seen it with JLTV. We've seen it with NGDV, and you have these programs that can be very big and meaningful to the positive, but they can also create a little bit of just sort of concentration risk. So how do you feel about the program concentration? And is there -- does that just come with the territory in this type of business? Or is there a way you can kind of manage that over time?

Well, I mean, ultimately, when we're developing product, we want it to go through as many channels and to as many customers as possible because that gives you the best resilience. But that's not always possible, right? There's only one Department of Defense. There's only one United States Postal Service. And so sometimes you have to develop a product for a specific customer that becomes a big, huge program unto itself. Now that also means that you'll see us take what we have developed in that NGDV there, and we'll be able to leverage that in the future for other programs as well. So there's -- it becomes a big program, and that's very good because those big programs are very healthy in terms of the value that they create. But they do also parlay us into other things that help to grow our business and our revenue.

Fair enough. I wonder if we could come back to those 2028 targets that you mentioned before and you gave some initial color on why you have the confidence in that. Maybe you can just elaborate on that a little bit more at sort of some of the individual metric levels? What gave you the confidence to get to some of those double-digit margins and in that particular time frame? And I know it's only been 6 months or so or less. Any sort of indications on sort of reinforcing that or any other new questions that you have in your mind?

Yes. We're completely confident in what we laid out to 2028. And I can -- I'll talk about it in total, what we're doing as a company with innovation for all the end markets that we're in, and we measure it in terms of a vitality index. And how -- what impact to the new innovations that we bring to market and make because that's the intent, actually make a difference for the person using the equipment as well as the fleet owner driving productivity with the fleet. And when we do that, we're confident that we're driving value and we're driving towards those numbers that we laid out in 2028.

So I'll start with our vocational segment. Vocational business is vehicles designed for a specific purpose. So think about fire trucks, airport ground service equipment, refuse and recycling, premium concrete placement vehicles, we have big backlogs in these businesses. In some cases, 3.5-year backlogs in these businesses because of the products that we have and the problems that they help to solve in the end markets that they're suited to solve. So we see real clarity in terms of our ability to get to those 2028 targets that we laid out. And you see us deploy unique technologies in these end markets where whether if it's a refuse and recycling collection vehicle that's now fully electric that makes no noise that drives better productivity, and usability for the operator, or it's an autonomous cargo loading piece of equipment that helps FedEx be much more productive on the tarmac. That's all part of what's driving demand for these end markets and driving those big backlogs that we have.

Then if you go to the access marketplace, well, access is similar in terms of its innovation capability. We're developing very specific products that are needed to support data centers which you see in the middle of that program to ag markets on the right-hand side of that to normal construction that we've been serving for a long time on the left-hand side of it. The innovations that we're bringing to market continue to solidify our lead in this end market. And when we see the dynamics about what's happening with construction not only the big stuff we all hear about with regard to data centers and power generation and government infrastructure, that's certainly driving a lot of long-term fleet utilization, but we look at the age of the overall fleet and how much fleet has to be replaced over the next 3 to 5 years, that gives us total confidence in what demand is going to be for this end market for us and those -- what leads to that 2028 target.

Then you have our last segment, which is the transport segment, which is the core Oshkosh defense products and the NGDV for the United States Postal Service. This is a business that's going through margin transformation as we've gotten contract price complete for new contracts for the defense side of it. You can see in the middle picture on the right-hand side here, that's an autonomous family of carriers. It allows the -- that -- in that case, allows the Marines to position a naval strike missile, specifically autonomously to help them be more nimble in what they have to do to execute their missions. The United States Postal Service, this is in full ramp mode right now, will be at full rate production and shortly, that drives a significant revenue growth for us over the next 10 years, not just to 2028, but over the next 10 years for that platform, which is the largest fleet of vehicles in the world. So that went on a little bit long there, but that's what gives us the confidence that we'll get to those '28 numbers.

Sounds great. And we can follow up on some of those areas in subsequent questions. I guess shifting gears a little bit to tariffs. You mentioned earlier in our discussion that made some good progress in kind of mitigating impacts. What would you say are the biggest remaining uncertainties from the policy side of things as you sit here today, trying to digest and understand all the tariffs. And what do you think could still change from here?

Well, what I'll say is the thing for us that becomes the biggest challenge from a tariff environment, you have IEEPA tariffs and then you have Section 232 tariffs primarily. And the Section 232 tariffs are difficult for us because there are tariff on raw materials. And it ends up -- not only do you have a tariff on raw material, but that pushes up the market price domestically. So steel in the U.S. market is twice the price that it is outside the United States market. So you don't have the luxury of saying, okay, there's a 232 tariff, I'm going to bring all that volume to the U.S. Well, the U.S. is now twice the price of the raw material outside the U.S., so you have very little ability to maneuver, and that's where you have to say, okay, there is some of this cost that has to be passed on to our customer. And we try to minimize that. But -- but the IEEPA things, we have a lot of tariff engineering that goes on and the 232 tends to be more permanent for us.

So when you sit back and think about some of it has to be passed along to your customer, trying to manage it, how challenging do you think it will be to be price/cost positive in 2026?

Well, we're going to work hard at it. I can't -- I think that in some of our end markets, we'll be able to be price/cost positive and some of the end markets will make a lot of progress, and we'll provide that guidance when we get to January of 2026 for what we expect in 2026.

Fair enough. Okay. Shifting to some of the segment specifics. In terms of vocational, you have, you mentioned before, 3.5-year backlog for certain products, and there's a margin narrative in this backlog, and I'm assuming that 3.5 is not for the whole vocational segment. It's for certain segment lines within that, right? So how long can that margin narrative last for the overall segment? And then what's next after that?

So when you hear about margin in the backlog, it really comes from two different areas. It comes from, hey, catching up from inflationary impacts that have happened since 2021 because we have big backlog. So sometimes -- so we're shipping product today in the fire truck market that we took the order on in 2022. And that's when we say, hey, the inflation price increase from 2022 is just being realized in 2025. So when we talk about price in the backlog, that's part of it.

The other part of it is, we -- as I talked earlier, we continue to deploy more and more technological features on the vehicles that we produce. Customers, in most cases, want those technological features because it helps them be more productive. In the case of a fire truck, helps the firefighter be safer. So that -- those also come with better margins. Customers are willing to pay for those types of advantages and that pushes up the price point but gives them a better capability when they put the product into the marketplace. That's also part of what's in the backlog.

Okay. So I guess when we think about the various components of vocational, would you say there's an organic growth cycle somewhere within there, other than these -- I mean, adding innovations that drive demand is what you're kind of talking about? Or do you think this segment will kind of be ripe for M&A to kind of take it to the next level over the next 5 years or so?

Well, I think definitely, we'll have an M&A opportunity in this segment. But if you look at, for example, the airport markets, we're the leader in ground support equipment. It's everything from jet bridges to cargo loading to tugs that move airplanes around the tarmac and other products on the tarmac of an airport. That's in a growth mode. There's a lot of investment that's continuing in airports, not just here in the U.S. but around the world, expansion, aging fleets that have to be replaced -- that investment is all going to continue to drive really healthy growth rates in that part of this vocational segment for a long time.

I think when you look at the refuse and recycling collection business. That's a great business for us. It's an opportunity for us to deliver better capabilities to our customers. But that's probably a business that kind of grows normally around the level of GDP, but it's a very resilient business, doesn't have big peaks and valleys to it. So there's a combination of both in this segment.

Okay. And you said there will be more M&A. What does the pipeline look like at the moment? And what's -- if there's anything standing in the way of deals at the moment, anything -- is it tariff uncertainty? Is it just timing of finding the right transaction, all of the above?

Well, we have an always on process. So we are always looking at potential targets. We're a very careful acquirer. You've seen us make acquisitions over the past few years in a few specific areas of our business. But we're -- the always-on process means that there's always a couple of targets that we're looking at very closely. And M&A can be a little bit spotty and unpredictable. And when we have the opportunity to make the right investment with the right partner, then we go ahead and do it. And I think you'll probably see us do something in 2026. We're typically a programmatic acquirer, not a big bang acquirer. We like programmatic acquisitions that help us grow our business in areas where our technology can make a difference as opposed to we're going to do a gigantic multibillion-dollar deal. We think programmatic is a good way to go. But we're always looking at acquisitions in different parts of the business that we think are attractive based upon the synergies that we can offer.

Great. And rounding it out with AeroTech, you were talking before a little bit about it. I remember back at CES, we were talking to some of the AeroTech folks about how they were really just getting integrated into the business and a lot of synergies were still ahead. Can you talk about how the synergies are developing there and what we might see from that in 2026?

Yes, it's pretty exciting what we see in that market. When I think about synergies, of course, you got -- you've got synergies that are around supply chain synergies with regard to the cost base, and we've got synergies around how we operate. That's all good stuff. It's all very, very important. But the real meat of the synergies comes from what we can do with the product or the channel to market. And the product synergies here are significant. When I -- I've talked about autonomy being big in the airport markets. We want the gate of an airport.

We make most of the jet bridges that we all use to get on airplanes when we go to the airport. We want the jet bridge to be so simple that the gate agent just pushes a button and its seconds before the jet bridge is at the door of the airplane. We don't want it to be a stressful experience that sometimes gets stuck, takes too much time. People are waiting. It takes the airline too long to get people on and off the airplane. Cargo loading is the same. Even the tractors that move baggage around the tarmac will become autonomous in the future. It's a perfect case for us to make autonomous. It helps the airport be more -- and the airline be more productive. So there's a lot of opportunity to continue to apply our technology in this end market.

When we look at airport of the future, we have an AI product that we call iOPS, which essentially takes hundreds of data points real time at the gate of an airport and it's learning all the time about what's happening at the gate of that airport, and it knows when certain data points are aligned, it might look at 15, it might look at 30 data points and it knows when they're aligned in a certain way that something is going to happen. And it will be able to alert a gate agent or somebody on the ground. Look, you need to do this to prevent a 10-minute delay of the aircraft. That is the kind of innovation that we're really investing in to make a big difference in how our customers can operate more efficiently in this case at an airport. So that's where I see the real synergies. The real synergies are with what can we do with the product to help customers operate better.

Right. Very exciting. Maybe on the transport segment, in terms of the ramp-up of the NGDV, I think you said before that you'd be ramped up to full rate production shortly. I guess the -- what's the confidence that you'll be able to achieve that full rate production by year-end? And will you be at full rate production basically for all of '26, I guess, is the question?

So I'll start with -- we're making lots of vehicles right now as we sit here. I will start with -- the Postal Service absolutely loves these vehicles. It is the most advanced last-mile delivery vehicle ever invented. It's the only purpose-built last mile delivery vehicle. So it is a fantastic product. It's delivering in nearly every state right now as we sit here. We are continuing to ramp production. Every week, we get more units than the week before. I'm still targeting the team to get to full rate production by the end of the year, but I have to be realistic. It's December 2. This can push into 2026.

The post office knows exactly where we are with regard to the ramp. We will get to full rate production sooner than later. And this is a program that's going to be in production for at least 10 years as we go forward. So it's material for the United States Postal Service, helps them transform what they do. But it's a very high-volume somewhat complex plant with a lot of automation. So there's no specific thing other than the normal production ramp issues that have to be ironed out as you work your way to full rate production. But we will be in full rate production in the fairly near term.

And building on that, you've talked about wanting to expand that into the last mile delivery how much of a focus is this for this business on a sort of an active day-to-day basis, finding new customers? Are we closer to any new deals there?

Well, we have -- we know that we have a lot of opportunity because we talk to a lot of service providers in the industry. Right now, we continue to stay with our engineers because it takes a lot of engineers to develop a vehicle like this. We're totally focused on the NGDV production. But we also know we have a lot of opportunity to expand beyond it. And when we're ready to talk about something specific, we will. But right now, I mean, this alone provides significant growth for the company.

Sounds good. And on defense, can that business be a growth driver?

So the defense business is going through a margin transformation. If you look at the business, it's been through a period where we went through significant inflation from '21 through about '24. We had fixed firm price contracts. Those contracts have now been renegotiated where we're now getting price caught up to the realities of that inflation. That changes the margin profile between, say, mid-'25 and the end of 2026, where we'll start to get the full benefit of those contracts and the price changes. We've also got new contracts internationally. The top right side of that picture is a vehicle that we developed based on the JLTV chassis for the Dutch Marines. And that's an example of international opportunity with everything that we all know is happening in the world.

And on the right middle, that's -- I talked about it earlier, that's a vehicle we developed for the Marines. It's an autonomous vehicle. These -- those specialty programs are also helping transform the margin of that business. So when you think of our core Oshkosh Defense business, we're working on transforming the margin first, and that's what we have in plan to 2028. It's not a big growth driver, but it's a margin driver. And then beyond that, we'll start talking about growth again.

And so on that path to getting the margins in that segment to 10%, I believe, is the 2028 target. I mean clearly, defense is going to be a big piece of it. I mean, how do we think about the balance of the defense contribution versus NGDV? Is it sort of...

So the NGDV will be a little bit more than half the revenue and the defense -- core defense business will be a little bit less than half the revenue as we get those 2 -- continue to execute those 2 sides of the business.

Got it. Okay. Moving on to Access. I think you mentioned before that part of the confidence in the '28 goals there is really about seeing what the replacement needs are for the fleet. Remind me what you've factored in for kind of cyclical dynamics there. I think it was basically not much of a cycle.

So we're in a down cycle right now as we speak. So when we -- and we believe, as we look forward, some really good demand drivers in the Access Equipment world, data centers and power gen and those types of things. But we also have a situation where you kind of your mainstream nonresidential construction, think about private nonres projects that are still on hold. So that part of the market is still a little bit suppressed. We believe that the market will come out of its downturn at some point in 2026. We don't know exactly when, could be mid, could be late '26. But as the market starts to recover from that, we are expecting it to expand through 2028.

Okay. And I guess more near term, my sense is you mentioned that we're in a downturn now. The overall level of construction activity still remain -- other than the resi piece, nonresidential construction still remains fairly elevated and steady. Do you think -- and what we've sensed from the rental channel, a lot of the local and midsized players in those markets that have been a little bit more pressuring the demand for rental equipment. Do you think that is sort of bottomed out over the course of 2025? This is the kind of the sense that we've gotten the utilizations in the market are kind of balanced out a little bit.

Well, we pay -- and the thing that we pay most attention to is what the utilization rate is of equipment that's in the market, the fleet of equipment. And the fleet of equipment that's in the market is the utilization rate of that is relatively healthy. And we look at the used market as well because that can be an indication of the health of the market and the used equipment market is healthy. There's not an abundance of used equipment on the marketplace. So we start there and then we look at what the construction metrics are. And we know that because of the age of the fleet, where it is in terms of average fleet age that's in the market, that their fleet replacement is needed, along with fleet growth that's needed to support some of these end markets as they continue to grow.

Right now, I think we have at least a segment of our customer base that's kind of in a wait-and-see mode in terms -- before they start to put more capital deployment to work. They're a wait and see mode on interest rates. They're in a wait-and-see mode on how does tariff -- the tariff environment impacts certain end markets that they serve equipment to. And we're at a point in time where we think that, that's going to start to change as we get into mid to late 2026.

Great. I'll ask one more question here, and then I'll turn it over to the audience to see if there's any questions. Obviously, AI remains very, very topical. Just curious your perspective on what does it mean for you as a revenue opportunity and as an operational factor and efficiency driver going forward?

Yes, it's both. And we're investing in both areas. So I talked on the -- a little bit on the product side, which we think about first and foremost. I talked about that iOPS product for the airport markets. I talked about ClearSky for making job sites more efficient. We're putting a lot of work into those products. They're already deployed. We're learning. We're continuing to improve them. So using AI at the level of where our equipment is used to make it more productive is a big part of our AI plan. But then we have our own manufacturing plants, and we have our own supply chains. When we look at our own manufacturing plants, which you have when you walk into any manufacturing plant or even in process that goes way beyond our manufacturing plants, you have silos of data. And in many cases, those silos of data have been created for decades.

You have MES systems and its manufacturing execution systems in the plants. You've got ERP, MRP engineering databases. And what we have to do is we have to take all that data that's in different silos, and we've got to release it and clean it to where AI agents can access it real time to be able to start to deliver significant insights that allow us to be more productive and with every year that goes by. So what you do is we start -- you have to start somewhere. So you start with the first data set and then you start adding data sets to it over time. We work on finding the right AI partners because we can't do all the work ourselves. We have a lot of good data scientists, but we have to have the right partners depending on what it is that we're trying to do. But it's a challenge of being able to make the data, which is many times legacy data, accessible in a clean way by AI agents, and we're working very hard on that, and we're making a lot of progress, but that's going to unlock significant productivity for us as a company.

Fantastic. I will see if there's any questions in the room for Oshkosh. Okay. If not, John, I'll give you the last word here. Any message you want to leave with the audience?

Well, for us, it's all about driving growth through innovation, which has been part of my talking points as I've been up here on stage. We see a lot of opportunity to continue to drive innovation to drive significant value for our customers, which is what leads us to the numbers that are on the page, and we feel incredibly confident in our ability to continue to execute this.

Terrific. Thanks so much for being here. Thanks, everybody.

Greetings, and welcome to the Oshkosh Corporation Third Quarter 2025 Results Conference Call. [Operator Instructions] As a reminder, this conference is being recorded.

It is now my pleasure to introduce your host, Pat Davidson, Senior Vice President, Investor Relations for Oshkosh. Please proceed.

Good morning, and thanks for joining us. Earlier today, we published our third quarter 2025 results. A 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 12 months. Please refer now to Slide 2 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 8-K filed with the SEC this morning and other filings we make with the SEC as well as matters noted at our Investor Day in June 2025. We disclaim any obligation to update these forward-looking statements, which may not be updated until our next quarterly earnings conference call, if at all.

Our presenters today include John Pfeifer, President and Chief Executive Officer; and Matt Field, Executive Vice President and Chief Financial Officer.

Please turn to Slide 3, and I'll turn it over to you, John.

Thanks, Pat, and good morning, everyone. We continue to successfully navigate a dynamic external environment with resilience and a strong sense of purpose to serve our everyday heroes with high-quality products that are safe, intuitive and productive. We do this with a strong mission of service for our everyday heroes like firefighters in our communities. We proudly sponsored the 13th annual 9/11 Memorial Stair Climb in Green Bay where more than 2,000 people raised over $120,000 for the National Fallen Firefighters Foundation and honored the brave firefighters that lost their lives on 9/11.

We also demonstrated our commitment to our communities as over 1,200 volunteers came together for OshKosh's eighth annual Feed the Body, Feed the Soul event. These volunteers packs 224,000 pounds of rice in just 12 hours to support individuals and families facing food insecurity across Eastern Wisconsin.

Turning to our financial results on Slide 4. We delivered an adjusted operating margin of 10.2% on revenue of $2.7 billion in our third quarter. This led to adjusted earnings per share of $3.20, an increase of 9.2% over the prior year. These results reflect solid performance across each of our segments. Despite lower revenue, we maintained a double-digit adjusted operating income margin year-over-year, reflecting continued strong performance in our vocational segment, improved returns in our Transport segment and a resilient double-digit margin in our Access segment. Our adjusted EPS grew compared with last year, reflecting our operating performance and taxes.

While I am pleased with the resilience demonstrated in our third quarter results, we are updating our outlook for the full year to reflect the demand environment we have been seeing starting mostly in the third quarter. We are revising our 2025 adjusted EPS guidance to a range of $10.50 to $11, which reflects slightly lower revenue expectations for both Access and Transport segments. I want to emphasize that end market activity in our Access segment is healthy, but we are seeing customers be more cautious in the near term regarding new equipment purchases as a result of tariffs in the current economic environment. Matt will provide additional details on segment performance and our outlook later in the call.

Please turn to Slide 6 for Q3 highlights. In September, we continued to demonstrate how Oshkosh is shaping the future of airports by showcasing our advanced technologies at the International Airport Ground Service Equipment Expo.

And in Washington, D.C. at the AUSA Defense Conference just two weeks ago, we introduced our Family of Multi-mission Autonomous Vehicles, FMAV. Autonomy was a key focus at both events.

At the GSE Expo, we displayed our full range of ground support equipment and showcase the flexible autonomous robot that can serve multiple roles on the tarmac. We also launched the new Tempest-si Deicer designed to easily navigate congested ramps while providing improved visibility and more intuitive controls for operators.

At AUSA, OshKosh featured three production-ready variants from the autonomous vehicle portfolio, that's FMAV, highlighting our ability to deliver autonomous payload agnostic platforms.

Please turn to Slide 7. As I mentioned earlier, access equipment end market activity remains healthy as we see in equipment utilization percentages. That said, customers are being cautious with CapEx spending. I'm proud of our team's execution, delivering double-digit adjusted operating margins despite this environment. While overall demand in the current environment is lower than in 2024, construction activity for data centers and infrastructure has continued to drive demand. We believe that additional long-term tailwinds related to lower interest rates, project deferrals, aged equipment and manufacturing reshoring will support a broader pickup in construction activity.

In the near term, the team remains resilient and is working to mitigate the impacts of tariffs across our business. As we have discussed previously, we are aggressively pursuing cost levers to offset the impact of tariffs. We are also having initial discussions with customers regarding the impact of tariffs on pricing with the expectation that we will raise prices in 2026 to keep pace with input costs.

Our success is driven by designing and building world-class products to meet the needs of our customers. This quarter, we introduced our new AG619 mid-sized ag telehandler aimed at the heart of the market, which we revealed at the World Dairy Expo last month.

And in Europe, we launched the innovative LiftPod, providing low-level access for commercial customers needing a safe, portable and stowable solution to support a wide range of projects at height.

Turning to Slide 8. In the Vocational segment, we continue to advance initiatives that support increased production of fire trucks. This is a multiyear process as we seek to improve production efficiency by addressing bottlenecks associated with building highly customized, complex trucks.

At the same time, we continue to support firefighters with our stock pumpers and Build My Pierce product offerings, which improved lead times by simplifying configurations. In recent quarters, we've seen an increase in the mix of orders for Build My Pierce pumpers, which should further support our efforts to streamline production and reduce lead times.

We finished the quarter with strong orders for vocational as the segment recorded $1.1 billion in the quarter, led by orders for Pierce fire trucks and our AeroTech products. Of course, we remain focused on increasing throughput, and we expect to bring the backlog down over the next few years as we discussed at our Investor Day in June.

Finally, for the segment, I want to recognize the team that supports our McNeilus Volterra ZSL refuse collection vehicle, which won the coolest thing made in Tennessee 2025. This product is a game changer for the refuse collection industry as the first fully integrated electric vehicle designed with the operator in mind to deliver world-class ergonomics, purpose-built performance and a zero emission quiet driving experience in neighborhoods.

Please turn to Slide 9. As I previously mentioned, we showcased autonomy at the AUSA Defense Conference. Earlier this month, we announced an order from the United States Army valued at $89 million for the modernized PLS A2 autonomy-ready heavy tactical truck designed for load handling, another example of innovation that is already available in our products today, not years in the future. We continue to advance core programs to support U.S. and international customers, including building FHTVs under our previously announced contract extension. We have also monetized JLTV related technology through a onetime license of select operational software IP to the Department of Defense that occurred during the quarter. This further demonstrates our commitment to our government customers by providing cutting-edge technologies to support mission-critical requirements and fleet sustainment.

Lastly, we continue to ramp production of the NGDV this quarter and are targeting line rates that support our annual production goals. As with any new product launch in a new assembly plant, challenges are to be expected, and we've seen this across the vehicle industry worldwide and the team continues to work with urgency to ramp production while maintaining quality. We now have over 4 million miles driven by postal workers, and we remain excited about the rollout of this much-needed productivity-enhancing vehicle.

With that, I'll hand it over to Matt to walk through our detailed financial results.

Thanks, John. Please turn to Slide 10. Consolidated sales for the third quarter were nearly $2.7 billion, a decrease of $53 million or 2% from the same quarter last year, primarily due to lower sales volume in the access segment partially offset by higher vocational and transport sales volume and improved pricing.

Adjusted operating income was $274 million, down slightly from the prior year, primarily reflecting lower volume. Adjusted operating income margin of 10.2% was roughly in line with last year on slightly lower sales.

Adjusted earnings per share was $3.20 in the third quarter, $0.27 higher than last year. Adjusted EPS was favorably impacted by about $0.30 due to lower tax expense resulting from the resolution of a multiyear U.S. federal income tax audit.

During the quarter, we again stepped up share repurchases, repurchasing approximately 666,000 shares of our stock for $91 million, bringing year-to-date share repurchases to $159 million. Share repurchases during the previous 12 months benefited adjusted EPS by $0.05 compared to the third quarter of 2024.

Free cash flow for the quarter was strong at $464 million compared to $272 million in the third quarter of 2024, primarily reflecting working capital changes, including customer advances and inventory.

Turning to our segment results on Slide 11. The Access segment delivered resilient adjusted operating income margins of 11% on sales of $1.1 billion. Sales were $254 million or nearly 19% lower than last year, which reflected weaker market conditions in North America and higher discounts.

Our Vocational segment continue to deliver strong sales growth through higher volumes and improved pricing as we deliver our backlog, achieving an adjusted operating income margin of 15.6% on $968 million in sales. Sales grew $154 million or nearly 19% from last year, led by improved throughput from municipal fire apparatus and robust growth in airport products.

Revenue in Airport Products was up 17% compared to the last year, demonstrating our strong Jet Bridge and RF businesses. The nearly 200 basis point increase in adjusted operating income margin for the segment primarily reflected improved price cost dynamics.

Transport segment sales increased $48 million to $588 million. Delivery vehicle revenue grew by $114 million to $146 million and now represents approximately 1/4 of transport segment revenue. Delivery revenue grew 37% sequentially compared to the second quarter of 2025. As expected, defense vehicle revenue was lower compared with last year due to the wind down of the domestic JLTV program. This was partially offset by higher international sales of tactical wheeled vehicles and onetime revenue from the license of JLTV related intellectual property to the U.S. government for $25 million.

The transport segment delivered an improved operating income margin of 6.2% compared to 2.1% last year, reflecting the software IP license, improved pricing on new contracts and favorable mix offset by higher warranty costs. The onetime licensing agreement, which was contemplated in our guidance last quarter, represented a roughly 400 basis point improvement in operating income margin.

Please turn to Slide 12. Turning to our outlook for the remainder of 2025. The macro backdrop and end market activity have remained broadly resilient. Access customer orders, however, reflect a more judicious approach to spending, as you heard from John.

Our team continues to execute well amidst a dynamic government policy and international trade environment. As John mentioned, we are updating our 2025 full year adjusted EPS guidance to be in the range of $10.50 to $11 on revenues of approximately $10.3 billion to $10.4 billion.

As you can see on this slide, we have further moderated our expected adjusted operating income margin in the Access segment to reflect our sales outlook and in the Transport segment for our present expectations for NGDV production. Our cash flow outlook of $450 million to $550 million, up $50 million from our previous outlook, reflects lower capital expenditures as we maintain rigorous spending controls. We also plan to continue with share repurchases through the balance of the year at a modestly higher pace than we did in the third quarter.

With that, I'll turn it back to John for some closing comments.

Thanks, Matt. It's clear that 2025 has proven to be a dynamic year, including the tariff landscape and sustained higher interest rates. Our updated outlook reflects the impact of these conditions on our customers and in turn, on the demand for our products, notably in the Access segment. Even so, our team has shown strong focus and agility by managing through these conditions while delivering solid results. This performance reinforces our confidence in managing the near-term while supporting our long-term growth objectives.

Earlier this year at our Investor Day, we shared our vision to roughly double adjusted EPS to a range of $18 to $22 per share by 2028. Each quarter represents a step toward that goal and we're encouraged by the steps our teams are making today to lay the groundwork for nearly doubling EPS by then. We appreciate your continued confidence in Oshkosh and look forward to updating you as we advance our strategy and create long-term value for shareholders, customers and team members.

I'll turn it back to you now, Pat, for the Q&A.

Thanks, John. I'd like to remind everyone to please limit your questions to one plus a follow-up. Please stay disciplined on your follow-up question. And after that, we'll ask that you rejoin the queue if you have additional questions. Operator, please begin the Q&A session.

Our first question comes from Mig Dobre with Baird.

Maybe we can start with Access a little bit. And I'm sort of curious your perspective here as you're talking to your customers, obviously, not only for business covering Q4 but into 2026, you hinted at the fact that prices are going to go up which makes sense given tariffs and whatnot. What is your sense for where demand seems to be shaken out because we have seen some that are increasing CapEx at least optically, it looks like there is some signs of stabilization in that industry. I'm curious if that sort of gels with what you're hearing or your salespeople are hearing is they're contemplating in 2026.

And maybe more broadly, what should investors be thinking, just as a general framework for the segment next year? It look to me like production is likely to be down in the first half of '26, but perhaps you think about it differently.

Well, I'll answer that, Mig, it's John. So thanks for your question. We're not guiding today, but I can give you some context on what we see ahead for sure. We'll guide -- we're in discussions with all of our customers about what 2026 looks like. So we'll have a lot better clarity for you when we get through the fourth quarter, but I'll give you context.

First of all, we don't know if at this point in time, if production is going to be down in the first half of 2026. I honestly don't know that. What I will tell you is that we feel -- when we look at the market going forward, we all customers are not the same. This is a vast customer base. We've got thousands of independent rental customers, and we've got a group of big national rental customers and you've heard some positive things from the big national rental customers of ours.

There is still a bit of hesitancy in the very near term. When I talk about the very near term, I'm talking about Q3, Q4 in terms of with the current environment, how much equipment do I want to take in the here and now. But when we look forward to '26, and we see what's going on in the market, we talk about long-term demand drivers a lot. You hear about mega projects. Constantly, those are real and they are ongoing and they do drive a lot of equipment. But we're starting to also see some free up in terms of the commercial construction activity.

So there's been -- [ nonres ] has had a lot of commercial construction kind of on hold or pause. Some of -- a lot of those projects are starting to get cleared through the -- into the planning phase. That's a very positive sign for the market going forward. So we'll get through this year, which has been one of the most dynamic years that anybody in business has ever experienced. We'll manage it really well. We'll continue to deliver strong margins even through this dynamic period of 2025. And as we get into 2026, we'll give you some guidance in January. And we think that the market long term looks very, very healthy as we've been saying for a while.

Understood. My follow-up, maybe to put a finer point on the tariffs, give us a sense here for how the tariff picture has changed for you, maybe quantify the cost. And then as you think about next year, and again, I'm not asking for guidance, I'm just asking for your strategy, how do you think you'll be able to mitigate these tariffs, if any at all?

So tariffs for this year, it's kind of $30 million to $40 million is what we see for the full year. Most of that being in the fourth quarter. So we would estimate that to be about $20 million to $30 million in the fourth quarter. Obviously, as you look into 2026, you'd project a full year impact as that -- as those are implemented and feathered in. What you don't see in the fourth quarter is the pricing John talked about and you highlighted in your questions. So there be some pricing that would occur in 2026 against that. So that's how I think about tariffs for next year and how are they kind of feathered in this year.

The next question comes from Stephen Volkmann with Jefferies.

So the follow-on, just to Mig's question, actually, is it reasonable to think that you can offset this tariff headwind during 2026? Is that sort of the plan? Or will it take longer?

Steve, so as we've talked about on prior calls, our approach to tariffs is really multifaceted. First, it's negotiating the supply chain. Second, it's what we call tariff engineering, and that can come in many forms, and that could be sourcing, it could be how we import. It could be the classification as we run into and other classifications. We look strongly at each part we bring in and make sure it's classified in the right way so that we get the right tariff treatment. And then only then do we start talking about pricing. So it would be preliminary for me to speculate on how much would be offset next year. But certainly, the goal is we mitigate as much as we can on the cost side and then we look at what pricing we need to discuss with our customers.

John, is there anything you want to add?

I just want to make a point to say that we do, do a lot. We've got a lot of really great work happening with our teams, supply chain first and foremost. There's engineering manufacturing teams. We do a lot of work to offset the impact of tariffs, and we've had a lot of success doing that.

Our MO when we look at tariffs is we want to absolutely minimize the impact of tariffs on our customers. That's our first goal, minimize the impact to the customer. And we'll -- we've been pretty good at doing that.

Now you can't mitigate everything. So that's why I said in my prepared remarks that there'll be some price increase in 2026. We believe that the landscape will be calmed down enough to be able to assess what any price increase needs to be. But our MO is to get through this without impacting customers very much.

Got it. And then if my math is right, I think you're sort of implied to incremental margins for vocational in the fourth quarter, like 40%, which is obviously impressive, especially with tariffs. How should we think about that going forward? Is that a reasonable assumption for a while? Or is that something special?

So yes. So fourth quarter, the math would imply exactly as you said, about a 40% incremental. For the year, our guidance is about 33% actually. So it's really impacted this year as higher production throughput, higher volume. We've had a good mix with strong sales in airport products. Again, it'd be preliminary for me to speculate what the incrementals are. Our 2028 guidance, which we provided in June will be a little lighter than that on an annualized basis, but certainly strong results out of vocational. Thanks for highlighting.

The next question comes from Jamie Cook with Truist Securities.

I guess just two questions. One, John, as you think about the competitive landscape within access equipment, in some of the market share movement you've seen between you and your peers. Do you feel like with Section 232 and tariffs, like are you in a position to gain share just based on your manufacturing footprint relative to some of your peers?

And then my second question, if you could just quantify or talk through more some of the discounting that you noticed in the access market, quantify it and to what degree, given the tariff situation, does this ease, I guess?

Yes. Sure. So I'll -- thanks, Jamie, for the question. In the Access equipment world, what we're doing is we're executing what we call a local-for-local strategy. Now we've always been predominantly a footprint of U.S. manufacturing for U.S. sales in the U.S. in our Access business. So that's good. We started with a strong position. We're continuing to execute that and do more and more of that in the U.S. but also in Europe. It's that overarching strategy allows us to manage the tariff landscape as best we can and minimize the cost that we incur. So yes, we think that, that helps us a lot versus the competitive environment, particularly against competitors that are outside the United States for sure.

But JLG is the leading brand in the industry. We've got fantastic innovations that continue to come to market. our intent is to continue to focus on our customers, how can we drive improvement for them. And that ultimately is what drives long-term share. And that's what we're intently focused on. So that's what I can tell you about that.

So -- and Jamie, just adding to your second question and your follow on. So the team practices very disciplined pricing. You've seen that in prior cycles, you've seen it in prior quarters. That's also supported by a strong service network. And that, in the end results in a very strong residual on our JLG equipment, and that's important for rental customers. And so what you saw in the third quarter is about a 3%, 4% all-in discount level, which we think is very reasonable given the external environment we have. Obviously, we've not gotten into pricing for tariffs in the third quarter with the limited impact, and that will really be a factor in 2026 versus 2025.

The next question comes from Tami Zakaria with JPMorgan.

Good morning. Thank you so much. question from me on the warranty costs, which seems to be an item headwind in the quarter. Are you able to elaborate on that? What's driving it? And how to think about it for the rest of the year?

Tami, so that's really a onetime item we had in the third quarter as we're working through the units that we've built, specifically in the defense sector for vehicles in the kind of supply chain shortages, '21 '22, where we identified issues that we need to repair as we built with kind of interim parts and so forth. So we took that charge in the third quarter. We think that's behind us.

Yes, Tami, I want to just emphasize, that's a core defense product. It's not the postal vehicle. It's core defense. We are a quality-focused company. We're known in the Department of Defense for quality. When we see that we have an issue, we wrap it up and we address it as quickly as we can with the customer. Again, as Matt said, this is not an ongoing issue to expect going forward.

Understood. That's very helpful. And one question on Access. I remember, I think earlier in the year, you talked about taking some pricing -- doing some price investments. Did that -- is that still the case? Do you expect that to continue through the rest of the year? Or anything changed there?

Can you clarify that, Tami, I'm not sure if I got exactly what you were referring to.

So my question is on Access pricing, aerials pricing for the year. The way it's playing out, do you expect positive pricing this year as some of these tariffs have come in? Or are you going back to your customers and giving some discount? Any comments on pricing and how that's trending in the Access segment would be helpful.

Okay. I'm sorry, I got it. Go ahead, Matt.

Yes. Thanks for the clarification. So as I just mentioned, this year, really, given the weakness we see in external demand, we've seen a negative pricing environment in access. Obviously, with tariffs hitting in the latter part of this year and mostly next year, we would talk about a different pricing environment into 2026.

The next question comes from Mike Shlisky with D.A. Davidson.

In Access, it seems like a lot of the client taking -- just digging a little bit deeper into the numbers, a lot of the clients in third quarter came from telehandlers, it was down like, I think, a little over 40% on the sales line. And you're actually expending capacity there. Could you maybe just take the Access discussion one step deeper and just tell us a little bit about how that's going, what's happening there compared to the core aerials?

Yes. The difference is Cat. We've talked about it for a few quarters that we've had a long-term agreement with Cat. That agreement is no longer in place, and that's the primary reason you see the change in telehandlers. JLG telehandlers including the Skytrack models, they're doing great, they're not losing share there. And then you look at the aerials, we're in a situation where the market is down because of nonresidential private construction being down, but this is -- it's a temporary phenomenon. And long term, we see very strong health in the market, and we're really pleased with how we're able to perform with resilience during -- you see in Q3, for example, our revenue and access equipment is down nearly 19%, and we're at healthy double-digit margins. That's exactly the way we expect to operate, and that's what we're doing. And we'll continue through this and the market will grow as we go forward.

Great. And then just talking about peers real quick. Have you seen any impact over the last few weeks at peers from the federal government shutdown, especially any local effects on fire fighter assistance grants or other state owned government systems that the federal government provides to fire departments?

Mike, it's Matt. So in terms of federal government shutdown in the near term, we've not really seen a material impact. If it extends much longer or significantly longer, I guess, we may have some contracts affected as we do sell directly to the government in some cases, think about our products and so forth. So there would be some knock-on effects if this extends for an extended period of time. Not huge numbers, but certainly something that I would watch for.

The next question comes from Kyle Menges with Citigroup.

I think NGDV sales of $146 million in the quarter was a little bit below your expectation. And it sounds like fourth quarter is going to be a little lower than initially expected. So just curious what's driving that? What have been some of the challenges in increasing capacity? And then I don't want to put words in your mouth, but I got the sense from the prepared remarks, perhaps a walk back of the earlier guidance to get to annualized full run rate production of, I think, 16,000 to 20,000 units by year-end. Like is that still feasible in your mind? Yes, I would just love to hear an update on that.

Yes, I'll start with the 16,000 to 20,000 units as an annualized number. And so let me start from the top. I'm going to start with talking about the product, the NGDV or the new postal vehicles, an amazing product, the feedback that we continue to receive with now over 4 million miles driven in delivery operations by postal carriers is really positive. As I said on the call in my prepared remarks, this is a brand-new plant with a brand-new product and highly automated processes, it's a fantastic plant. We have made progress, you can see the revenue growing there, but not to date at the pace that we want it to be at. So we're working really hard. We've got great people in place that are working on continuing to drive production increases until we get to full rate production. We expect to grow revenue sequentially and believe we will exit 2025 in a good position to support our plans for the United States Postal Service and a really strong 2026. So that's kind of the state of the program but -- for you.

Got it. And just curious, I guess, when you would expect maybe now to hit that full annualized run rate production? And then my follow-up was just going to be on the lower CapEx guide, it looks like you brought it down $50 million. So curious what drove that.

Yes. So I'll start by the full rate production. We continue to target full rate production by the end of this year. I want to say that's not without challenges, of course, as I just mentioned previously, we have constant communication with the United States Postal Service to the highest levels. We're doing everything we can, but our plans are to get to full rate production by the end of the year.

Matt, do you want to talk about the $0.50?

Yes. The reduction in CapEx reflects twofold. One, stricter spending controls in this environment, but then two, just timing of spending.

Our next question comes from Angel Castillo with Morgan Stanley.

Just wanted to go back to some of the discussion around Access. Could you just clarify, I guess, is the greater cautiousness that you talked about from your customers reflecting itself purely in just kind of the low ordering or the low book-to-bill this quarter? Or are you seeing any kind of order cancellations or delivery push out here? And just if you could add a little bit more color as part of that, kind of how the behavior maybe differs between the nationals and independents?

Yes. So first, Angel, thanks for the question. We had a 0.6 book-to-bill. That's a normal book-to-bill for a third quarter, if you look historically. That said, the market has been a little bit softer compared to last year, as I already mentioned. I want to emphasize that end market demand in this -- here is healthy. The equipment utilization is healthy in the market. Used market is healthy. That's all really good signs. What we're seeing in the dynamic market with continuously shifting tariffs, prolonged higher interest rates, that's caused a lot of customers to say, hey, the market is healthy, but I just -- in the very near term, I'm just going to kind of hold back on my CapEx until I get a little bit more clarity as to how this is going to evolve, see the Fed continue to drop rates, things like that. That's really what we feel is happening in the market.

That's helpful. And maybe just related to that, I know it's still early for fiscal year '26 and a lot of moving pieces here, but given just your ongoing kind of discussions with customers, whether on kind of the near-term environment for next year, can you just talk about the magnitude of the price increases that are currently being discussed for next year? And whether that kicks in kind of January 1? And just kind of overall discussion of that -- those negotiations because I guess, if I'm not mistaken, on the discounting part, it seems like discounting may have stepped up from 2% to 3% to 3% to 4%. So if you could just kind of help us understand perhaps the trajectory of that versus the kind of increases expected in Jan 1?

Yes, I'd be preliminary to talk about pricing for 2026. On a quarterly basis, it's really what you see there is some seasonality in how we go to market.

The next question comes from Tim Thein with Raymond James.

Great. Just a lot of dialogue here on Access, but maybe I'll ask another one. Just with respect to your expectations, John, for order activity here in the fourth quarter and specifically maybe the composition, I would imagine more of your NRCs are the ones that take up the order slots in the fourth quarter that are booking orders rather. But maybe just any kind of guardrails as to how you're thinking and maybe how the initial discussions have shaped up just with respect to how we should be thinking about order activity. Obviously, that will be important as to how we think about '26. So maybe I'll start with that one.

And then part B of the question is just on the vocational segment. And just on fire & emergency, obviously, that's a big part of the nice margin improvement that you have lined up into that 2028 target as you talked earlier about more stock units in the Build My Pierce. Does that have any implications that we should think about from a product mix standpoint? So that's two long questions.

Yes. So one on access, one on the fire industry and our fire truck business, Pierce. To start on access. I mean you kind of hit the nail on the head, Tim. The reason that we went from an $11 guide to a -- $10.50 to $11 guide is primarily orders in the fourth quarter for Access. And when I say orders in the fourth quarter for Access, I'm talking about orders in the fourth quarter for delivery in the fourth quarter. And right now, it's in terms of how much equipment our customers, I'm talking from the thousands of independents to the big guys are going to take in the fourth quarter, but that's why there's a bit of a range there from $10.50 to $11. If it's as we expect, we'll be around $11. If it's -- they're not going to take quite as much equipment in the fourth quarter, then it could come down a little bit. With regard -- hey, I want to continue to emphasize how well our people at Access Equipment and JLG are performing in this very dynamic market. We're performing extremely well. We'll continue to do that in this environment. But again, we see nice growth on the horizon ahead of us as we've talked about through the year.

On our Pierce business, the fire truck business, we're continuing to get improved output. We'll continue to get improved output as we go forward the next few years. That will continue to draw the backlog down. The Build my Pierce and more of the off-the-shelf fire trucks are great products. We don't see a specific margin differential between whether or not we're shipping Build My Pierce units or we're building our fully customized units.

The next question comes from Steve Barger with KeyBanc.

This is actually Christian Zyla on for Steve Barger. Just as a follow-up, maybe to Tim's first question on Access. I heard your comments about the near-term uncertainty your customers are facing. Just historically, 4Q was a big sequential order quarter for Access as your customers plan for next year. So do you still see a normal step-up in 4Q? Or is that more of a 1Q event now? And then is your access backlog split evenly? Or does this skew one way between bigger nationals or the smaller independents?

Christian, it's Matt. So the way to think about Q4 is you're right. Traditionally, the book-to-bill will be higher. Honestly, I think it would be presumptive of me to assume that, that's the same as you end up with price negotiations. Some of that might set to January versus December. But honestly, it's too early to make a call like that. So traditionally, I would say it's higher, how it's going to shape up this year is unclear.

Got it. Okay. And then just switching gears to your defense related business. It seems like the industry is wanting more transport type vehicles. Is that what you're seeing as well? It may be a pitch for the CTT program. What differentiates your portfolio capabilities versus the other bidders in that program?

Yes. Thanks for the question. Sure. I mean what's really differentiating us in this market today is our technological capability as well as our quality. We've got a really strong quality and service reputation, so they know what they get when we supply them with tactical-wheeled vehicles. But going forward, as I talked in my prepared remarks, it's a lot about things like autonomous functionality or full autonomy and that's why you see a lot of our products moving that way with the technology that we have. And that's kind of what we see as the future of this. And it's why we stand out in that industry is that reliability and the technological performance and capabilities of our vehicles that get better and better as we go forward.

Our next question comes from David Raso with Evercore.

Of the defense revenue cut by $200 million, how much of that was the postal truck?

It was all on the delivery side, David.

All of it, yes.

And when it comes to that, is that the ramp-up of the BEV truck that's giving you a little bit of struggle to ramp up? Or is it the ICE truck as well?

It's unrelated to ICE and BEV, David. The vehicles are produced on the same line. It's just continuing to dial in all of the autonomous functionality of this manufacturing plant and its normal ramp-up challenges that we're addressing and we will get to full rate production. But it's not related to ICE and BEV.

I mean just so I know how much of this you feel is under your control because 35% to 40% of the EBIT cut actually came from defense. And that program is hugely significant next year for driving defense profits to say, take a little pressure off of Access, so it's not immaterial. I think most people feel Vocational, that backlog should carry you, but that interplay between transport, defense and Access is not immaterial. So can you be a little clearer on when do you feel you'll have the ability to ramp that -- I was looking for revenues getting close to $300 million a quarter at some point not too far in the future. So I apologize to push a little bit, but just a little more clarity. It's very important for '26.

That's fine, David. So just on the OI, remember the warranty charge we took in the third quarter, which is about $13 million, that's flowing into OI for the full year. We did fully expect the licensing, which was in our guidance, the warranty however, it would flow through to OI. So you shouldn't look at the top line change in revenue as the full impact on to OI.

Okay. The licensing was in the guide.

Yes. We were expecting that, that was under negotiation when we set up our guidance for the year previously.

And David, I will just say your expectation for quarterly revenue on the delivery side is in line with ours.

Thank you. At this time, I would like to turn the call back over to Mr. Pat Davidson for closing comments.

Thank you, and thanks for joining us today. We will be meeting with investors at several conferences during the fourth quarter in Chicago, Florida and New York. We'd be happy to connect in an early January, we'll be showcasing our technology at the annual CES show in Las Vegas. We encourage you to stop by our booth and learn about technology that supports airports, job sites and neighborhoods of the future. Take care, everyone, and have a great rest of the day.

Thank you. This does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation, and have a great day.