Greetings, and welcome to the Terex Third Quarter 2024 Results Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Derek Everitt, Vice President, Investor Relations.

Good morning, and welcome to the Terex third quarter 2024 earnings conference call. A copy of the press release and presentation slides are posted on our Investor Relations website at investors.terex.com. In addition, the replay and slide presentation will be available on our website. We are joined by Simon Meester, President and Chief Executive Officer; and Julie Beck, Senior Vice President and Chief Financial Officer. Their prepared remarks will be followed by Q&A. Please turn to Slide 2 of the presentation, which reflects our Safe Harbor statement. Today's conference call contains forward-looking statements, which are subject to risks that could cause actual results to be materially different from those expressed or implied. These risks are described in greater detail in the earnings materials and in our reports filed with the SEC. On this call, we will be discussing non-GAAP financial information, including adjusted figures that we believe are useful in evaluating the company's operating performance. Reconciliations for these non-GAAP measures can be found in the conference call materials. Please turn to Slide 3, and I'll turn it over to Simon Meester.

Thanks, Derek, and good morning. I would like to welcome everyone to our earnings call and appreciate your interest in Terex. Emphasizing our commitment to our zero harm culture and the Terex revalues at the start of this call reflects what we do across the organization every day as part of our Terex Operating System. As we continue to grow, our core values will continue to include keeping each other safe, treating each other with respect and dignity, and being responsible stewards of our environment. Let's turn to Slide 4. Before diving into our Q3 results, I'm very pleased to welcome the ESG team to the Terex family. ESG is a great strategic and cultural fit, reduces our cyclicality and makes Terex a stronger company with a bright future. ESG is a leader in the growing waste and recycling industry where waste management and recycling solutions are critical for every jurisdiction, not only in America but around the world. I want to thank the many team members, both on the Terex side and the Dover side that worked tirelessly over the past couple months to complete the acquisition. In addition, our treasury team did an outstanding job raising funds at attractive rates and terms, allowing us to complete the deal and maintain a strong and agile balance sheet. ESG is financially accretive from day one. It is expected to add approximately $40 million in EBITDA in the fourth quarter for the period following the October 8 close. With the close behind us, our focus turns to integration. Thanks to detailed advanced planning, our cross-functional integration team hit the ground running. We fully expect to deliver at least $25 million in operational run rate synergies by the end of 2026 and realize additional commercial opportunities as we integrate ESG into Terex.…

Thank you, Simon, and good morning, everyone. Let's look at our third quarter financial results on Slide 10. Net sales of $1.2 billion were down 6% compared to the third quarter of last year, resulting from lower volume at MP, which was partially offset by modestly higher year-over-year sales at AWP. The growth at AWP was lower than we initially anticipated, as rental customers adjusted delivery schedules during the third quarter to better align with their fleet requirements and shorter equipment lead times. Our MP segment continued to be impacted by softness in the European market and lower retail sales in the United States, impacting dealer restocking. Gross profit of 20.5% reflects lower than expected volume and unfavorable mix, partially offset by cost reduction actions. SG&A expenses declined by $7 million compared to last year as we executed cost reduction actions, which continued throughout the quarter and lowered incentive compensation. Income from operations was $127 million with an operating margin of 10.5%. Interest and other expense was consistent with the previous year. The third quarter global effective tax rate was 12.5%, compared to 20.4% in the third quarter of 2023. The lower rate was primarily due to a one-time increase in favorable discrete items, partially offset by higher tax related to geographic distribution of income. Our EPS for the quarter was $1.46 and our EBITDA was $141 million. Free cash flow for the third quarter was $88 million, compared to $106 million in Q3 of 2023 due to lower operating income in the quarter. Turning to bookings and backlog on Slide 11. Our current backlog of $1.6 billion remains elevated compared to historical norms. We saw bookings continue to trend back towards historical ordering patterns with Q3 being a seasonally lower bookings period. We expect our bookings and backlog to…

Thanks, Julie. I will now turn to Slide 16. Terex is very well-positioned to deliver long-term value to our shareholders. We have a strong portfolio of industry-leading businesses across a diverse landscape of industrial segments. The ESG acquisition increases our presence in the growing waste and recycling industry and reduces our overall cyclicality. Our AWP and MP businesses continue to drive operational improvements and deliver innovative new products that create value for our customers. We will manage through near-term market adjustments but then return to growth with the benefit of the replacement cycle and megatrends as tailwinds. Finally, I want to thank our team members from around the world. We have made great strides together and we will continue to grow our company together. I'm very excited about the road ahead for Terex. And with that, I'd like to open it up for questions. Operator?

Thank you. We'll now begin the question-and-answer session. [Operator Instructions]. And your first question comes from the line of Jerry Revich from Goldman Sachs.

Hi, this is Clay on Jerry. First off, congrats on the completing the ESG acquisition.

Thank you. Good morning.

Yes. So, first question, typically, the first production cut of a downturn is the hardest, and once production normalizes, we see decremental margins normalizing in around the low-20s range. Should we be at that level of decremental margins as we move into next year? Thanks.

Yes. Thank you for your question. Yes. We will see the AWP margins in particular impacted in the fourth quarter due to lower production rates. And as we enter into 2025, we will take in this adjustment in production and we'll be trending back to our normal decremental targets.

Yes. Good morning. I'll just add that we've taken channel adjustments in both businesses in MP and AWP. MP probably more impacted in Q3, AWP more impacted in Q4 from an absorption standpoint. But then on top of that, we've taken the opportunity to take additional management actions as well. And then, if you lump in what ESG brings to the portfolio, we're very, very comfortable with our typical 25% decremental incremental target for 2025, no matter what volumes will do for us next year.

Thanks. And as a quick follow-up, can you update us on the Monterrey transition, given the demand declines, just how that changes, if that eases the transition or -- and how that impacts the magnitude of cost savings on the lower volumes. Thanks.

So thanks for the question. Monterrey is performing really well. Monterrey performed great in the third quarter and we're pleased with the supply chain that we set up. We're pleased with our team members and what we've been able to accomplish in Monterrey. And so we are -- we'll be transitioning more products and taking advantage of the low cost structure that that we have in the cost competitive operation we have in Monterrey. Unfortunately for the next this course Q3 and Q4, some of the favorableness in Monterrey is being offset by some unfavorableness in the other locations. But overall, we're very pleased with this facility and believe it will be a competitive advantage for us going forward and provides us with a low cost manufacturing.

Thanks. I appreciate it.

Yes. Thanks for the question.

Your next question comes from the line of Kyle Menges from Citigroup.

Hi, good morning. This is Randy on for Kyle. I was just hoping you guys could provide some any color you have on the ESG backlog and how that's trending and how we should be thinking about backlog coverage for ESG exiting this year.

Yes. ESG backlog is very healthy, very strong. They typically run in six-month cycles, so they take their bookings two quarters before the desired delivery. And actually their backlog has continued to be very strong. Their book-to-bill has been over 100% for the last four or five quarters. And so we expect that to continue in the fourth quarter setting us up for a really nice year again in 2025, so looking really good, strong backlog. But on top of that the business has really shown to be a competitive differentiator on how quickly they turn that backlog for their customers. So their throughput is really strong and their lead times are really strong. So very pleased how that business is performing, only 21 days since we officially closed, so.

Great. Great, thank you. Just a quick follow-up on I just wondering any visibility on the timing of the ESG synergies going into the next year?

Yes. So we're pleased that we've kicked off a lot of planning and a lot of good work is being done by the integration teams and we're very excited about the start here and we've said that we will expect $25 million in run rate synergies by the end of 2026 and we expect to see some starting in 2025 and we'll talk about that later in our Q4 year-end call.

Got it. That's helpful. Thank you, guys.

Thank you.

Your next question comes from the line of Angel Castillo from Morgan Stanley. Please go ahead.

Hi, thanks. This is Brendan on for Angel. I want to touch on the revenue guidance quickly. So understand the comments that things were perhaps softer than you had expected. I just want to clarify if that specifically softer from the September pre-announcement the overall is $150 million given though. However, ESG was $200 million implies sort of the total MP, AWP guidance for revenue was lowered by $50 million. So if you can just talk to what you're seeing by segment there relative to expectations back in September. Thank you.

Yes. So we're within the margin of what we came out with in our outlook for our updated outlook in September. We're right in there. Rate as we expected and as we communicated in September.

Yes, just trying to be prudent, no major deviations, just within -- still within the margin of the outlook.

Okay. Thank you. And then you noted local projects being deferred largely due to interest rate uncertainty. I'm just curious if customers have given you any indication of maybe how much lower rates would have to go before, they gain sort of the needed optimism to move forward with the projects or just any other color you can provide from conversations with those local customers?

Yes. It's more timing than what the rates would need to be. Generally, the consensus that we get is that it will probably continue to be soft going into the first half of 2025, and that will start to pick up in the second half of 2025. But that's really for the local projects. The mega projects are expected to continue to be a tailwind going into 2025 and 2026, but that we mostly pick up that six months timing issue.

Great. Thank you.

Yes. Thank you.

Your next question comes from the line of Steve Barger from KeyBanc Capital Markets. Please go ahead.

If I go back to the original ESG deck, you showed a 7% organic CAGR and you just said the backlog visibility is strong. I'm not looking for specific guidance for next year, but what do you expect the organic growth rate in ESG will be for the next few years?

Yes, obviously a little too early for us to guide for Terex overall. But generally speaking, it's safe to assume that we think that Terex will be up next year just by the nature of the ESG integration. But ESG as a business will be up, utilities will be up, and then aerials and MP are expected to be down. And I would just -- in all those cases, we're hovering around the high-single-digits, either down or up for all of those four businesses.

That's good help. Thank you. And just going back to the more legacy product lines, what's going on with customer positioning for orders on the books relative to conditions on the ground? Is anyone trying to delay deliveries or even take things sooner?

So different -- different answer for different businesses. In MP, it's mostly rate anxiety and customer, the utilization of the equipment is still high, just rental conversions that are being delayed by end users. And then typically, our dealers only place a new order on the factory if a rented unit is converted into a purchased unit. So we expect that rate anxiety to eventually disappear and then normal activity to -- booking activity to pick up. On the AWP side, it's really an adjustment that we've seen. All of our customers, especially our larger customers are reporting strong tailwinds from the mega projects, and then the smaller customers are perhaps more dependent on the local projects. So not really anyone asking to pull anything in or mostly just rephasing towards what their fleets need. It's mostly about turning over the fleet.

Yes. Understood. All right. Thank you.

Yes. Thank you.

There are no more questions. I will now turn the conference back over to Simon Meester for closing remarks.

All right. Thank you, Operator. If you have any additional questions, please follow-up with Julie or Derek. And thank you for your interest in Terex. And with that operator, please disconnect the call.

Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect.