Oshkosh Corp (OSK) September 2026 Conference Transcript

Good morning. For those who weren't in the last session, I'm Steve Volkman, Jeffrey's Industrial Analyst. Very pleased to welcome Oshkosh to the dais. 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 is the 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.

Please. Thank you for coming. So let's talk about maybe just get this out of the way. We are in 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. Very good.

But thank you for asking. Yep, yep, 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.

Yeah, so as you know, we spoke early in the year, and some of the investors in the room I've spoken to 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 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've switched on to the 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 uh that's been a change in our outlook for for the access segment we think that's going to be more more positive than we were earlier in the year and we do see that growth continuing to 2027 despite the fact that we probably won't get an interest rate cut this year so originally our outlook was assuming we'd get an interest rate cut and that might broaden out a non-residential at this point we see non-residential quite strong based off mega projects driven through a lot of a lot of the nrcs and we think that outlook will continue into 2027 and what are you seeing from sort of large national accounts you know versus more regional or local type customers certainly we've seen a product 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 non-residential whether that's you know local shopping malls or multi-residential units or some of the other stuff that had had been stronger in past years then i think i think i'd be confident that it's even more sustaining broader boom boom's the wrong term but boom favorable outlook right right well i thought that was a pun the boom pun i'm not that i'm not that good so uh the uh one question i get from uh investors around this is uh 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 for 2027 does that ring true at all with you uh it's not something 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.

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 conversations 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 float through to price potentially for what we can't mitigate Okay.

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

Yeah, 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 site 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 clear sky connectivity which which all our products have which allow our equipment to talk to each other and 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 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 micro sized scissors so smaller narrower scissors that operate inside the maintenance of data centers that's been a real growth growth area for the overall industry and then lastly I would say there's product innovations like we had at the construct con expo with a two-piece boom which allows us to build 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. Is there anything that you're seeing with respect to that in the market?

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

Okay, great. Let's move to defense. I bet you didn't see that coming.

Transport division with defense, yeah.

Transport division with defense. 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?

Yeah, 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 is officially called the LLV, long-lived vehicle. It has 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 a 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 I'm 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, quote, it's as if we gave them talking points, which we don't, just for the record, nor do we have them painted or stenciled on the side of the truck, but they are a spectacular vehicle. So we are a rampant production. We've had, I think, we did our 5,000th early 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's going well, not without its challenges, I have to say. Any manufacturing ramp-up is a learning event. And so, you know, 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 as well. That's great. None in my neighborhood yet.

They are getting out there a little bit. um so you you mentioned the sort of a few challenges here and there as as that's pretty normal with these big ramps are where are we in the challenges are those behind us or we got through most of them yeah we're still working through whenever you have um this much automation in parts of the plants it's still tweaking robots to make sure they're they're doing the right thing at the right time um we've put in mitigation efforts to uh to support the ramp up in the production so i'm confident we'll get there and we're pleased with the quality off the line and how we're managing that so uh it's just now 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 yeah so so the way uh government contracting work so this 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 know you don't want your supplier to get a phone call from one of the big three or somebody else saying hey we want you to use your capacity for X Y and Z and you know 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 a cadence of orders with one expected this year and that probably be fourth quarter that's our estimation yeah 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 too far.

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 the need for vehicles is very clear. The existing vehicle, I kind of talked about it earlier, but the Postal Service right now is spending $5,000 to $10,000 per vehicle per year in maintenance costs. 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, you know, 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.

Yeah. So as you can see, I've 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. The medium is the lower left, as you see the slide there. 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 the 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 under new trucks so it's not binary like if you're building let's say automotive vehicles where you stop production and 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'll start 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 show this segment going to a 10 percent margin overall by 2028 whereas last year was about 3.7 i think was the number a little bit less than four 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 yeah okay yeah fair enough and before we leave i would be remiss because i just love the pictures uh to before without pointing out the rogue fires which sits in the middle there um so we talked about the technologies in access and the the job site of the future one of the exciting technologies uh that we have is autonomy and building autonomous capable products so actually the middle one there is road fires it's a marine contract we got another award for this year fully autonomous JLTV platform which can carry multiple payloads so it was 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 road fires or the vehicle above that which is the PLS Polytized Load System A2, which is autonomous ready. And so really being that platform of choice, whether that's a FAD 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 now?

Department of War Secretary.

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

Yeah, so really excited to welcome Secretary Hegseth to our assembly operations two weeks ago, I want to say. It was really great to have him on site and see our production capacity and capabilities. I know you 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 MATV, which is what he was in in Afghanistan, but also drive our JLTV, which you can see in the lower left, lower left, yes, sorry. I might have rights and left mess up here, but I'm not paid for right and left. I'm paid for the numbers. And so the JLTV, which we built for many, many years successfully, performed spectacularly if nobody's ever driven it or ridden in it. 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 a Marine Corps order in 10 months. So we were explaining that on the trip as well. But it was great to host him.

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

Go to Polymarket? No, I don't know. I joke. I joke. I don't support any of that. But I don't know, honestly. I would say, you know, follow the news. You know, 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, yeah, I don't even do fantasy football.

All right. 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.

So in the vocational segment, our largest operation is Pierce Fire Trucks. It's the number one fire truck brand in the U.S. It's over 100 years old. Firetrucks, for those who don't know the firetruck 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 loved firetrucks before I joined Oshkosh. I'm a runner, and so I was running through New York yesterday. And it's just shocking to me when firetrucks come out of a fire department here, people stop and take videos of FDNY driving through the streets just to show the power of the service that fire departments provide and the trucks they use are a visualization of that. The sales director of Pierce joked with me once, and I use 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, what 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 production throughput. And that was based off work we'd done at McNeilus, which is our refuse brand. You can see a picture there in the upper left. Yep, 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 talked about 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, their storage units, all those doors, those are all fabricated in-house, as is all the shiny metal. And so if you have a step that's, you know, 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 or broken bottlenecks, those are looking good. Now we're really focused on making sure the flow of parts can support the 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 process?

No, 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 tight turning radiuses, 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 I'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 three four years what happens when that normalizes what happens if the industry uh starts to 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 it super efficient and so it's not just throwing 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 you know if i was taking a custom fire truck order today it'd be probably 2029 or so um 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 uh with the quality and customization that our customers want okay and i think you're on track to to increase production sort of 10 percent this year is that still yeah that's our goal this year is by the end of the year we'd increase production 10 percent last year we got a 10 percent increase in the second half of last year relative to the prior year uh we're targeting 10 percent by the end of this year uh with the goal of getting 25 to 30 percent and and how do you expect the margins to step up then as you go through this process uh so they they have you saw that in the second quarter have taken a little bit of a dip as we've invested in the facilities as we've uh 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 percent margin range that we guided for for 2028 for the segment okay and then maybe lastly not leastly refuse maybe the one end 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 plays out yeah really excited with our mcneilus brand which is our go-to-market brand for refuse trucks you can see um our volterra there on the upper left left thank you this this this one actually faces me i should be able to do this without looking but anyway um uh so the volterra is a fully electric uh vehicle designed around the driver with as you can see in the picture optimized visibility but also ergonomics and and uh the ability to step into it. We're really excited about innovations we launched in that sector around refuse identification, 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 really is us who generate garbage, but the people who contract the services or 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 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 that flow and and uh industry needs to come back but it's it's down you know call it 20 20 to 30 percent this year relative to last year so so i think it'll 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 it either, 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 a tariff environment and some of the 27 model year engine upgrades some of the EPA certifications and so forth we're gonna get through those certainly the tariff environment appears to be stable-ish and so I think we should see a clearing of this call in 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 sure um 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 yeah um you know how do you share that amongst the businesses and um what are the sort of attach rates what what are the responses you're seeing from from customers yeah technology is one of my one of the most exciting parts about this business one of the things i love about commercial vehicles and and those end markets we serve is that you don't really need to guess what customers want i mean you you sit with them and they'll tell you what their pain points are they can tell you hey i want my side loader to be five seconds faster because then i can pick up x more you know cans per day they'll tell you their pain points about airport rescue firefighting you can see a little bubble there with our ARF truck that electrification solves because if you have an electric ARF it actually manages your 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 that is a combination electric diesel. We have the same on the ARF 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 Euro Satori, we had an electric JLTV, um which which we've uh which we had as a demonstrator and and took to europe um so that electrification is one of those channels autonomy and robotics is another one that i'm personally really excited about um we already have a jet dock so we build jet bridges here in the u.s primarily um and we have uh autonomous jet docking which is somebody standing much like you are at a podium who has to handle a couple switches to get the jet bridge to the plane but JetDoc 2.0 could allow that jet bridge to be monitored remotely and go straight to the plane and so the ability not to sit 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 so bringing technology onto the tarmac we think is a fantastic opportunity and that's either autonomous technologies with jet bridges but also as you see on this picture and and there's videos we've shown called with airport of the future but bringing robots under the tarmac because I didn'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't have robots and so what we've done is we've taken some of the defense technologies we have, and identified applications in, yeah, okay, good, airport of the future has that robot, in fact, there 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 a perimeter detection, because sometimes like deer cross a fence or other things cross fences that shouldn't, and the airport needs to know that but there's also things like there's a person who puts the they're called chocks those triangles that go in front of them behind the wheels they have to put those in place well you could have a robot do that and so really excited to see that a robotic technology go from in this case defense to airport but also we invested in a robotics company next era robotics for job sites and we acquired technologies called canvas which does a drywall sanding robot yeah it's a job that it's a tough job but it's great for robots and so

bringing robotics to the job site bring it to the airport neighborhood is one of the things that really excites me okay good one more chance from the field here up we do have one hold on one second for the mic thank you on price cost and access segment next year 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 have to price with the NRC's versus IRC's 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 NRC's and just kind of your degree of confidence going into next year thank you sure um 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 um 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 lifts into our henua facility which we had been importing from our chinese plant probably two years ago and so making sure first and foremost you're addressing cost and so tariff engineering tariff management is one 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. I would hypothesize that might not be true on everything. but certainly uh when you take home bulk cans of coffee um you tend to get a discount and so so that's true in our industry as well um and so we have those discussions ongoing uh they're regular discussions nothing to talk specifically about 2027 on that um but it is something we work through to get price cost neutral by year end this year and then you know 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 they'd have to sell it the outside they do sell cars though yeah yeah uh anyway let's not go down that rabbit hole

uh one minute and 30 seconds left shall we talk about capital allocation quickly yeah that's priorities, plans.

Yeah, so thanks for that side. So our capital allocation we shared at Invest Your Day in June of 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 an 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 firetruck 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 steady increases 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 and 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 who come to fruition like in 2023 when we acquired Aerotech or our acquisition of Hinoa which allowed us to localize boom lifts so that's kind of what we look at 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 our best use of capital super all right that's right on time Thank you guys so much appreciate the insights