Terex (TEX) Q2 2026 earnings call transcript

It is now my pleasure to introduce your host, Drew Konop, Vice President of Investor Relations. Good morning, and welcome to the Terrex 2nd Quarter 2026 Hearnings Conference Call. A copy of the press release and presentation slides are posted on our Investor Relations website at investors. terrex. com. In addition, the replay and slide presentation will be available on our website.

We are joined today by Simon Meester, President and Chief Executive Officer, and Jennifer Kon, Senior Vice President and Chief Financial Officer. Their prepared remarks will be followed by Q&A. Please turn to slide 2 of the presentation, which reflects our Safe Harbor Statement. Today's conference call contains forward-looking statements, which are subject to risks that could cause actual results to be materially different from those expressed or implied.

These risks are described in greater detail in our Hearnings materials and in reports filed with the FCC. On this call, we will be discussing non-GAP financial information, including adjusted figures that we believe are useful in evaluating the company's operating performance.

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

Thanks, Drew. Good morning, and thank you for joining us today. Eight and a half percent compared to last year on a proforma basis. The quarter's performance reflects revenue growth in all segments, improved earnings conversion, and progress against the strategic priorities we've laid out in the past two years.

Today I'll begin with our consolidated performance and the demand backdrop we are seeing across the portfolio. I'll then discuss how each segment is executing against those market conditions before providing an update to our full-year guidance, and Jen will then take you through the detailed financials.

At the consolidated level, second quarter performance was supported by revenue growth and improved earnings conversion both sequentially and year over year. Adjusted EBITDA of $269 million increase, $26 million or 10.7% versus last year on a proforma basis driven by meaningful improvements, especially in the materials processing and specialty vehicle segments.

Bookings increase 25% year over year on a proforma basis. Our backlog of $6.9 billion provides solid coverage and supports our confidence in the second half and today's updated full-year outlook. From a macro perspective, the demand environment for our business is positive and improving in many of our verticals. US non-residential construction is benefiting from the ongoing transition of planned projects to new starts, supporting demand across multiple segments.

Year to date, US non-residential construction starts rose 18% to $368 billion, driven by momentum in data centers, energy investments, and civil projects such as bridge, water, and sewage infrastructure.

Mega project starts total approximately $80 billion a year today through May, creating increased opportunities for many of our businesses.

Across our end markets, we're seeing higher utilization rates for our products, increasing capital expenditures by our customers, and positive sentiment from channel partners. These indicators in our Bookings trends support our view that demand is growing in many of our verticals.

Looking ahead, policy and infrastructure activity in Washington also provides a promising backdrop, including enactment of the 21st Century Roads to Housing Act, an introduction of the Build America 250 Act. The timing and implementation of these programs may vary, but the direction of public and private investment is supportive.

LP municipal budgets and replacement needs support demand for fire apparatus, ambulances, refuse collection vehicles, and related equipment. Within specialty vehicles, during the quarter, the City of Chicago approved the purchase of 80 fire trucks and 40 ambulances as part of its fleet replacement plan. The breadth of our specialty vehicle portfolio allows us to serve communities of all sizes, and because these are essential assets that municipalities replace on a regular cycle, they provide a recurring source of replacement demand.

In environmental solutions, long-term demand is supported by a large installed base of refuse collection vehicles, digital, and aftermarket activity, and robust transmission demand in utilities. While the segment is navigating a temporary softness in refuse collection vehicles, ESG's second quarter bookings increased first to the prior year, the first year of the year increased since the first quarter of 2025, indicating that a momentum could be built into 2027.

Long-term demand for refuse collection vehicles is intact, including a regular replacement cycle, and customer interest in technologies such as automated sight loaders, third-eye camera systems, and back-office software that can improve productivity and safety for our customers and their operators.

Teructabilities is benefiting from demand tied to grid modernization, renewable energy investments, data center-related power needs, and storm-hardening activities which we expect to support the business over the next several years. In materials processing, the U. S. mobile crushing and screening market is showing growth in fleet utilization and rent to purchase conversions. We also saw increased bookings for material handling and concrete mixers, which supports our view that the segment's overall demand is broadening.

In aerials, customer demand is supported by non-residential construction activity, with customer mix in the quarters queued toward national accounts that have greater exposure to mega-projects.

Turning to execution, I believe it is important to point out that after we completed the two largest transactions in our history in just the last two years, both the ESG acquisition and the merger with REV are trending above their respective business cases to date. Across our new and bigger portfolio, our focus is to convert backlog more profitably improved through put, realize synergies, and continue to bring exciting new products to market for our customers.

The second quarter demonstrated our progress in all those areas. Starting with specialty vehicles, the REV group integration is proceeding well and the segment delivered record earnings performance. The teams are executing against the integration plan and synergy realization is progressing as expected. Our near-term priorities for the segment are to improve throughput, reduce lead times, and expand capacity in targeted product categories.

During the quarter, we made significant progress with the expansion of our ladder truck planned in Ocala, Florida, and were nearing completion of the expansion in Brandon, South Dakota. The brand and investment is intended to increase capacity of the S-180 semi-custom pump and further reduce lead times directly supporting our longer-term growth objectives. We expect the first deliveries from our brand and expansion within the fourth quarter.

In environmental solutions, ESG is making progress with its ongoing manufacturing efficiency improvements in an already world-class facility. In utilities, we are aggressively ramping up shipments to keep up with the accelerating demand and are executing our plans capacity expansion.

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

In aerials, the team continued to navigate tariff headwinds and execute mitigation efforts in their supply chain and improve operational efficiency.

As expected, our price cost position improved in the second quarter, and we believe the full year will be price cost neutral based on the visibility we have within our backlog and our ongoing cost-out actions.

Before turning to our 2026 guidance, let me provide an update on our SUGITIC review of the aerial segment. We are pleased with the progress we are making. We have interest from multiple parties and are working towards an outcome that maximizes value for our shareholders. We do not have any specific details to share at this time, but we will update you as the process unfolds.

Based on our second quarter performance, our backlog coverage and synergy pipeline, we are raising our full year guidance. The increased reflects strong first half execution overall, increased volume in aerials, and improved performance in materials processing.

We now expect sales of $7.9 to $8.2 billion, adjusted EVA of $960 to $1 billion, adjusted EPS of $4.70 to $5.10. And with that, I will turn it over to Jen to walk through the financials in more detail.

Thank you, Simon, and good morning, everyone. Let's review our second quarter results, starting with the consolidated performance on slide 4.

Consolidated sales, including the results of specialty vehicles, were $2.24 billion, up $751 million, or 51% as reported. On a pro-forma basis, excluding the sale of the queens and the meat west businesses, sales increased $175 million, or 8.5% with growth across each of our segments.

Adjusted EVA, margin with 12% compared to 11.8% on a pro-forma basis in a prior year. Adjusted EVA to increase by $26 million, driven by healthy demand for our products, operational execution, and real-life synergies, and spike-ups significantly higher tariffs compared to this time last year.

Adjusted earnings per share was $1.37, including a net benefit of $8 million from our EVA tariff refunds, plus a one-time unfavorable customs-related rule. Working capital continues to improve, net-working capital declined to 15.2% of sales compared to 16.7% in the first quarter, and 22.8% a year ago, primarily driven by the merger with refuse.

We generated 128 million of operating cash flow, and 101 million of free cash flow within the quarter. Net debt ended the quarter was $2.28 billion, including $407 million of cash on hand, and that leveraged improved to $2.3x net debt of 12-month adjusted EVA. We also returned $20 million to shareholders through dividends in the quarter, turning to segment performance, starting with environmental solutions on slide 5.

Environmental solutions sales increased by $26 million of 5.9% versus the prior to $4.56 million. Growth was driven by strong demand and increased shipments and tax utilities, which more than offset temporary stockness and demand for ESG. Despite the temporary unfavorable mix, the segment reported an adjusted EVA margin of 17.5% down to 150 basis point year-over-year due to the fourth-mentioned unfavourable mix coupled with production wrap-up inefficiencies and low-works options in ESG, moving to material processing on slide 6.

Materials processing sales increased 11.1% of 47 million to 464 million, driven by healthy for mobile crashes in the US, supported by infrastructure, data centers, and other industrial projects.

Adjusted EVA margin expanded 440 basis point to 18.8%, reflecting a favorable product mix and price-cost discipline. One-time benefits contributed approximately 180 basis point to the margin performance within the quarter.

Turning to specialty vehicles on slide 7, specialty vehicles sales increased 38.6.2% to 650 million driven by improved throughput and fire.

As the adjusted EVA margin improved 210 basis point to 14.5% compared to last year, reflecting favorable mix, operational efficiencies, and price realizations, partially offset by cos inflation.

Turning to Eris in slide 8, Eris sales increased 10.9% year-over-year to 673 million, driven by demand from national accounts that supported by mega projects.

Adjusted EVA margin was 5.7% in the quarter, down 340 basis point from last year, which had significantly last tariff impact.

As expected, Eris improved margin sequentially in the second quarter by 560 basis point, reflecting improving price-cost dynamics and a higher production volume.

We are on track to be price-cost neutral for the year. The IDPA refunds we received in the quarter were offset by a one-time unfavourable customs accrual. Please note, Tarrx is not accruing for future refunds, not yet received.

Turning to bookings on slide 9, as Simon mentioned, consolidated second quarter bookings were 2 billion, up 400 million, or 25% year-over-year on a pro-forma basis.

In environmental solutions, bookings were 417 million, an increase of 18% versus last year's quarter, mostly driven by utilities. We expect bookings and utilities to be solid for years to come, and our focus is to ramp throughput to meet the accelerating demand.

In ESG, bookings were up year-over-year, which could indicate momentum is building going into 2027. Having said that, given the conversations with our customers and suppliers, we no longer expect a material second-half pre-buy of RCVs ahead of 2027 EPA regulations.

As a result, we are updating our second-half ES segment revenue outlook to low single-digit growth. Materials processing second-quarter bookings of 469 million increased 18% on a pro-forma basis.

While aggregates demand was the main driver, bookings also increased meaningfully in material handling. The MPN of the quarter with 599 million, up 232 million, or 63% year-over-year supporting an updated four-year outlook of low double-digit sales growth.

This implies high single-digit year-over-year growth in the second half. Speciality vehicles' bookings were 588 million in a quarter, up 9% versus the prior, led by the previously announced City of Chicago ordered. Increased throughput drove higher sales and lowered the segment's backlog as intended. We expect the segment will execute against its backlog, and our outlook remains high single-digit revenue growth for the year.

Finally, our second-quarter bookings of 530 million reflect 71% growth versus last year, particularly from national customers tied to large, funded projects and infrastructure and non-residential construction.

Arrows ended quarter with 914 million in backlog, an increase of 200 million, or 28% versus the prior year. Given Ariel's first half-performance, healthy bookings and backlog visibility, we're updating the full-year outlook to low double-digit sales growth.

Now, turn to slide 10 for our update to the consolidated 2026 outlook. We're operating in a complex environment with many macroeconomic variables and geopolitical uncertainties, and results could change negatively or positively.

The outlook we're providing today reflects our current portfolio and does not account for any cost to achieve the synergies, purchase accounting adjustments or other non-recurring items. Today, we are increasing our outlook for the year with 2026 sales expected to grow approximately 7.4% at a midpoint on a pro-forma basis to a range of 7.9 to 8.2 billion. We now expect pro-forma EVTA to grow by approximately 124 million, or 14.5% year-of-year to between 960 million and 1 billion, or 12.2% EVTA margin at the midpoint.

Included in our EVTA outlook is approximately 28 million of synergies that we're well on our way to realizing. Updated guidance reflects 22% incremental adjusted EVTA margin conversion at the midpoint, pro-forma despite a dynamic tariff environment.

We anticipate interest and other expenses to approximately 185 million, based on average debt outstanding of $2.7. The effective tax rate for the full year is still expected to be 21% despite favorability in the first half of the year.

We now expect 2026 EPS between $4.70 and $5.10, with slightly more earnings per share in the third quarter and a typical seasonal step-down expected in the fourth quarter.

Please note, the share count for the second half will be approximately 114 million. Finally, we expect to deliver 300 to 350 million of free cash flow in 2026. With that, I'll turn it back to Simon for his closing remarks.

Thanks, Jen. I would like to thank everyone again for joining today's call, just to quickly summarize what we share today.

We see strong demand from most of the markets we compete in, and we see clear momentum from the execution of our strategy. The red integration is progressing as planned, our synergy pipeline is building, and the new specialty vehicle segment is improving through food quarter after quarter. Environmental solutions is well positioned with its manufacturing, know-how, digital offering, and multi-year demand and utilities.

Materials processing is executing effectively, and together with aerials benefiting from investments in infrastructure, data centers, manufacturing, and overall power generation.

We are raising our full-year guidance because of the performance we delivered in the first half and the visibility we have at the backlog and the momentum we're building.

Taken together, these results demonstrate the strength of the new Terricks, the more diversified, more resilient, and higher-performing company with clear opportunities to grow, improve margins, generate cash, and create value. I want to thank our global team members for their dedication, our customers and dealers for their partnership, and our shareholders for their confidence in Terricks. And with that, we'll turn the call over to the operator for questions.

Good morning, Miig. I'll take the first one and I'll let Jen Wei in on your second question. So yeah, from a top-line perspective, for the segment overall, obviously strong bookings, 18% year over year, sequential also growth in bookings, 20% versus prior quarter. I know you asked about refuse, but part of environmental solutions is obviously also utilities. We see a lot of accelerating demand in utilities and we're expanding capacity to keep up.

In ESG, which is the refuse collection vehicle business within environmental solutions, we actually saw bookings were up as well year over year and sequentially and we do see momentum building for 2027. When we look at that business, we look at booking streams, we look at fleet utilization, we look at telematics, we look at what customers are telling us and we clearly see that in the first half, maybe even starting late last year, there was probably a little bit too much fleet in the system. It's not that America is producing less waste or that there are less garbage trucks on the road, but clearly there was a little bit of rethinking that needed to happen between supply and demand and we think that that happened in the first half and is now mostly behind us as we see bookings coming back up.

That's the first piece. The second piece in our initial guide, we assumed there was going to be some pre-buy activity in the second half of 2026 going into 2027 when the new engine emission regulations come out. We now think that that will actually spill over in 2027 as some of those changes are grandfathered and delayed by a couple of months, so we don't see as much of an uptick in pre-bives in the second half as originally assumed. We still think that bookings will sequentially recover. We still think that 2027 is most likely a growth year for refuse. We just see it being delayed by a couple of months because of the delayed in pre-bives. Jenn, you want to weigh in on the margin?

Okay, good morning, Meg. So from a margin perspective, we expect, I would say for Q3 to be very similar based on Q2, given that it's going to be driven, the top line growth is going to be continued to be driven by the utilities and they have a very different margin profile. But we do expect that for Q3 to Q4 to be a step up in the margin at the site level driven by favorable product mates, favorable customer mates, and then the inefficiencies that I mentioned and my prepared remarks, especially in utilities, to be behind us. So those are the big three drivers and trips to step up in the margin.

Yeah, I'll let Jen talk about the synergies. But yeah, very pleased with how the integration is going. It's been five months now. We're very pleased that they booked a record quarter in terms of EVTA performance and make you know this business. You know the momentum that that team was building and has been building over the last two to three years before we merged with REV.

So we were obviously very keen and very focused on making sure we would maintain that momentum, that continues improvement momentum, if you will. And that's exactly what has been happening so far in the first five months. We, you know, it's the exact same leadership team operationally that runs SV today that was running REV before the merger. And we continue to improve. We continue to improve throughput. We were up again in units produced in the second quarter. But then to your point, you know, with the acquisition of ESG, we think we acquired one of the best specialty vehicle manufacturers in the industry. And so what we see, what our game plan is and has been and will be is we see that manufacturing excellence in high mix low volume of ESG, now helping Terracutility.

So you see Terracutilities margins coming up. And we expect that same manufacturing know how to help SV going forward. You know, at the end of the day, it's all about continuous improvement and and continue to try to reduce the number of hours per truck. But the most immediate focus is on just making sure we keep that momentum that we have in SV. And we're very pleased with how the integration is going and how to soon G pipeline is building, generally context.

Yeah. So make from a financial standpoint, we committed that 28 million of synergies for the 11 months post merger. We have and they are largely corporate. And that's what I said in my previous call, we have realized about 20% of that in Q two with a very good visibility of converting the remaining 80% in the second half of the year with a sequential step up quarter over quarter. So like what Simon said, we're very confident of the integration that now translates to synergies that drops to me by my next question, please.

All right, I'll talk about the yes, the fire truck backlock and then Jen can talk about aerials margins. Yeah, so quite honestly, Jamie, we want that backlog to come down because obviously our customers are waiting for a very long time for their truck. And we are focusing on ramping up, continue to ramp up our throughput, which is what we're doing. And we're making another step in Q4 when our capacity in Ocala comes online for ladder trucks and our capacity for S 180 pumpers, which is a low lead time product, if you will, a semi-custom product when that capacity comes online in Brendan South Dakota.

We're pleased with our bookings. As I mentioned, we secured a large order from City of Chicago. Our bookings continue to continue to grow, but quite frankly, what's more important for us and what you should be expecting. If the backlog is to come down, is it actually our book to build, shoot stay below 100% in SV, just by the virtue of lead times improving. And that's the that's the mission is to get our lead times down. And we think a more sustainable number for us and for the industry is to get lead times back to about a year or so. And that's that's the mission. And we think that that's what the trends will be over the next 24 months or so where you will see the consistent below 100% booked bill just because lead times are improving.

Hey Jamie, good morning on errors questioned from a margin perspective of youth to they came in better than expected. As I mentioned, my prepared remarks, the NQ2 we had, we took it on favorable customer tools in Ariel's. Without that accrual, we would have achieved 8.3% of adjusted beta. Overall, it's going to be from a year over year perspective, still a relatively top calm because, you know, last year, the Liberty Liberation Day was actually April, but we didn't really see the P&L impact heading us until June last year. So it was one month of tariff impact last year versus three months of tariff impact this quarter. What we believe that, you know, it's important that we show from a like for like basis with the same kind of tariff impact as a sequential improvement that I mentioned in my prepared remarks of 560 basis point, quarter of a quarter of sequential improvement, and that is despite an unfavorable mix.

Like what Simon mentioned, we saw more nationals coming in in terms of our shipments as well for Q2. For the second half the year, we do expect that we continue to see a quarter of a quarter improvement in our margin expansion from Q2 to Q3, and a seasonal step down from Q3 to Q4 driven by less scheduled deliveries.

We expect that we will be able to continue to drive the improved price cost dynamics, such that we are full year price cost neutral for the ARRI's basis. And year over year, that seven months plus the one time customer pool, that's actually a 17 million at hate winds. There were actually absorbing and driving the cost actions and also price cost neutrality throughout the rest of the year.

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

You're welcome.

Yeah, so on the independence, and we said we saw the first signs in the first quarter, and we continued to see those in the second quarter, where independence bookings sequentially continue to improve. And as you know, Angel, they're a little bit more tied to private construction and commercial jobs, which tend to be more interest rate and input cost sensitive.

And so we'll have to see kind of what the long-term impact is going to be on inflation and so on. And we quite frankly think that Europe is probably in a little bit more of a vulnerable spot, where we see some markets kind of hinting with stagflation. We think the we see the US market as being a lot more resilient. And as such, you know, we think that that independent bookings pattern will continue to improve. So that's encouraging. But as Jen said, the Nationals just grew faster. You know, then we had originally assumed in the first half, and that's where the revised top-line guide is coming from. And with that obviously comes a little bit of unfavorable mix.

Yeah, in terms of market share, we typically don't talk about market share on, you know, on public calls. I do believe in the genie value prop, and I know I sound biased, but I do believe the team has made tremendous progress with their value proposition, the customer's, you know, centric approach. And I do believe they are on a great run, you know, commercially. So I'll just leave it there for now.

So you cut out at the beginning of your question, I assume you're talking about SP? Yeah, I'm talking just generally about the EPA 27 and the engine implications there to particularly your SP standardization of equipment. Yeah, yeah. So yeah, so as I said, earlier is that we think that that's all kind of, you know, pushed out a little bit, it's not canceled. So we still very much think, and it's confirmed by multiple sources that the engines switch over will take place in 2027. It will be probably more of a phased approach.

Some engines to your point like the X10 or some of the other engines might go sooner or later. It really depends on what engine platform. Yeah, we knew that this was coming for quite some time, and I need to give the legacy rev team a lot of credit that they kind of started designing on where the puck was going. And so as those engines are being introduced, it will actually allow us to further optimize kind of our bill of material and our designs and our commonality. So that will be an efficiency gain for us. I think that was the first part of question.

And then Jen, you and Angel from a financial standpoint, there's no material impact to tags, as what Simon mentioned, and as the those benefits will be in 2027 when the EPA regulation gets affected, you're right that the causes pass through from OEM. So we don't bear them. In ES, you know, if even when that that EPA gets affected, there's some potential benefit again with regards to suppliers having additional flexibility. No impact from financial sampling for areas and MP on this EPA regulation, just because they're largely off the proposals on on them. So hopefully that helps.

Hey, good morning, Tim. Yes, we're very pleased with the MP. I would call it not just Q two, but first happy year performance. As you right police said, our Q two year over year margin expansion for MP was 450 basis point, excluding the one timer is still a very strong 270 basis point, year over year improvement better than Q one as well. And that's driven by two factors, mainly on the favorable mates and also a geography makes as well and price cost disciplined. As we look into the second half of the year, that would say a normalize a beta of like that 17%, excluding the Q two one timers, I would only see potentially a little bit of marginal is stepped down just because we have seen an uptake in the material handling orders, like what Simon mentioned, and that's from a margin perspective a little bit lower.

So but overall, still a very healthy margin expansion. We expect that the full year from an incremental perspective without the one time is for MP to be above our normalize incremental margin. It's mainly just been a very strong year for MP in terms of execution. They're really executing in a very disciplined manner on price costs. And that's really helping the segment benefiting from the uptake that they're seeing in bookings.

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

Hey, David. Good morning. Yes, based on our revised guidance and outlook, we have really achieved 48% of our EPS in first half the year from a quarterly phasing perspective. If you back out the one-time Dutch customer pool that we have, it's 12.8% of adjusted beta at the Tarex level. So it's fair to say that maybe Q3, very similar, kind of profile, and then with the seasonal step down in Q4.

Yes, and David, you're exactly right. The change, the top line growth that you see there is primarily driven by our areas coming up from flat to low double digit, and our highest most profitable segment coming down from net single digit to low single digit. That mixed change is entirely explaining for that drop through in the margin profile, but I would say that, you know, even with the revised guide on a year-over year perspective at a Tarex level, we are seeing 22% of incremental margin year-over-year on a profile, my basis, went and all our three of our four segments are operating at meet to high double digit of EBITDA, one on a year-over-year, absorbing close to about significantly higher tariff, and also the customs accrual in total, that number is about 19 million.

So I would say that that's a very strong performance, 22% incremental full year, despite the higher tariffs.

Exactly. You're right.

Hey, Kyle, thanks for the question. Quite a bit. So 80 plus percent of our revenues now is in North America, but to your point, two businesses that have European or overseas exposure is MP and aerials. But even within MP, North America is the largest market followed by Europe and then Asia. So the story in MP overseas is Europe started promising in Q1 and then started to cool off a little bit in Q2. It's a little bit of touch and go. Our take on it is that the European economies are just a little bit more sensitive to the current kind of dynamic environment that we're operating in. It's more of an export economy versus the US being more of a consumer economy.

And so an export economy, more sensitive to input costs and rising costs of fuel and inflation and so on. And so we see a little bit of softening still growth, a little bit of softening in Europe, but that's baked into the guide that we shared for MP stop line. India and Australia are the other two large markets. Both of those are actually strong. Australia driven by mining activity and India driven by infrastructure investments. And we have a big presence with MP in India, as you know, but we also have a reasonable presence in Australia. So Australia and India are creative.

Europe is a little soft. And then I would say in terms of margin impact, it's a little bit of a wash. I wouldn't give it a blanket summary that all overseas markets are dilutive. That's not necessarily the case.

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

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

Not in fire. No, we won't be there in just one year. But I think that will probably take two years for us to bring the backlog down by a full year. It will probably take us two years. But yeah, I think that's really only the, I think, a sustainable model is where we take lead times down to about a year in fire. And that's what we're aiming for.

Thanks, Steve.

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

Yes, yes, we do. We actually tracked it in all of our businesses, not just in fire trucks. Typically, it's a pretty fixed ratio. And we don't see that ratio going up or down. If anything, it might be a tad up, but I wouldn't call it material.

But the center of gravity on our focus in fire is really on throughput and making sure that we build the trucks that we have in our backlog. You know, that's really where the center of gravity is for this business. It's very much a supply business, if you will. And the center of gravity naturally moves more to kind of demand focus when you get your lead times back in check.

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

Thank you.

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

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

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

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