Greetings, and welcome to the Terex First Quarter 2023 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, Paretosh Misra, Head of Investor Relations. Please go ahead.

Good morning, and welcome to the Terex first quarter 2023 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 John Garrison, Chairman 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 two 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. In addition, we will be discussing non-GAAP information we believe is 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 three. And I'll turn it over to John Garrison.

Thank you, Paretosh, and good morning. I would like to welcome everyone to our earnings call and appreciate your interest in Terex. I would like to begin by thanking all Terex's team members for their exceptional efforts in this challenging global macroeconomic environment, and for their continued commitment to our Zero Harm Safety culture and Terex Way Values. Safety remains a top priority of the company, driven by think safe, work safe, home safe. Terex team members continue to work tirelessly to improve our performance for our customers, dealers, and shareholders, while maintaining a safe working environment. Please turn to slide four to review our strong financial results. The team delivered excellent financial performance for the quarter. Sales of $1.2 billion were up 23% from last year and up 27% on an FX neutral basis. Operating margins at 12% expanded 450 basis points from the prior year, and earnings per share of $1.60 more than doubled year-over-year. As a result of our team members' continued strong execution in the first quarter and our strong backlog, we are raising the full-year earnings per share outlook to a range of $5.60 to $6. Please turn to slide five. I'm excited about the future of Terex and the opportunities in front of us. Our MP and AWP segments participate in diverse global end markets and are well-positioned for profitable growth. Infrastructure investments are increasing throughout the world, but in particular, in the United States. In fact, the Infrastructure Investment and Jobs Act alone is expected to drive $1.2 trillion of spending over 10 years. In addition, the CHIPS Act and Inflation Reduction Act will be supportive of additional spending in construction and infrastructure that should drive growth for our businesses. Our Powerscreen assembly brands have leading positions in global mobile crushing and screening markets that will benefit from growth in aggregate. Our Genie products are needed for general maintenance, infrastructure, and construction projects, and will benefit from increased government-sponsored spending throughout the globe. Another important growth driver is initiatives that support Circular Economy goals. The global demand for waste recycling solutions is increasing, driven by regulatory and societal changes. Our MP brands, including Ecotec, CBI, Terex Washing Systems, and our recycling systems are at the forefront of meeting demand for sustainability initiatives. The increasing reliance on electrification to reduce greenhouse gas emissions requires grid capacity expansion. Terex utilities have a wide portfolio of products well-positioned to capitalize on the investments needed to enhance the electrical grid. And our Genie business, in particular, will benefit from increasing digitization, including data warehouses and chip manufacturing onshoring projects in the United States. Despite the near-term macroeconomic issues, we continue to be optimistic and excited about the opportunities for Terex growth. Please turn to slide six to review our backlog. Our Q1 backlog remains strong at $4.1 billion, up 2% from year-end. In fact, our backlog has remained relatively consistent for the last five quarters, and we've had minimal customer and dealer push-outs and cancellations. Our current level of backlog is consistent with Q1 of 2022, the highest backlog for Q1 in our recent history. Our backlog demonstrates the strength of our end markets and supports our outlook for the remainder of the year, giving us visibility into early 2024. Elevated customer fleet ages and historic low dealer inventory levels continue to support robust demand. Consolidated Q1 bookings remain healthy at $1.3 billion, resulting in a book-to-bill ratio of 105%. Turning to slide seven for an update on our strategic operational priorities; we continue to make progress on our Execute, Innovate, and Grow strategic initiatives that strengthen our company. Our operations team had excellent execution in the first quarter, demonstrating adaptability and flexibility to overcome the dynamic supply chain environment. Our permanent Mexico facility is on time and on budget. The new facility is an important element of our strategy to improve Genie's through-cycle performance. Starting in March, Genie began to transfer product lines from our temporary facility in Monterrey to our new permanent facility. Moving some other factories in our network will take place over the next 12 to 18 months. While these moves will have significant long-term benefits, this process will result in short-term manufacturing inefficiencies, which the Genie team is working hard to overcome. The company continues to make capital investments in our facilities around the world. These investments are paying off, and we are proud of a return on invested capital of 24%, which remains significantly above our cost of capital. We showcased 20 new innovative products at CONEXPO, ARA, World of Concrete, and Bauma India. Our investments in the development of environmentally-friendly new products with superior performance will help to deliver growth. Our parts and service teams are investing in digital offerings for dealers and customers, including My.Terex and Liveconnect. We now have more than 70,000 machines fitted with our telematics technology. Execution of our EIG strategy enabled our strong organic sales growth for the quarter. In addition, we continue to supplement organic growth with inorganic investments. We recently acquired MARCO, a manufacturer of bulk material handling conveyors for the growing MP segment offerings with products that complement the existing portfolio. In February, we completed an equity investment in Apptronik, a robotics company, reaffirming our commitment to invest in technologies that enhance our product and solution offerings. Turning to slide eight, during the quarter, our team members were active in tradeshows. We saw high attendance and interest in our products. In fact, attendance set a new record at two of the biggest tradeshows, CONEXPO and Bauma India. Our customers' attitude was upbeat. The MP team displayed the Powerscreen Gladiator product at CONEXPO, a fully-electric, wheeled crushing and screening machine. After significant success with this product in North America, we recently launched the Gladiator World Series this year for sales around the world. The Genie team introduced our highest capacity Telehandler at the Show; the 12,000-pound Telehandler is engineered to offer superior productivity and low total cost of ownership. We also introduced our first all-electric Mini Mixer at CONEXPO, expanding MP's concrete offering. Similar to our all-electric utility truck, the Mini Mixer leverages our investment in biotechnology to develop zero-emission products. If you had the opportunity to visit our booths at these tradeshows, I hope you took away from your visit that Terex team members are engaged with our customers. Our products and services offer the features and benefits that provide value. Turning to slide nine, at Terex, we are intensely focused on developing and delivering sustainable solutions for our customers. In this example, Terex recycling systems saw the first all-electric powered waste separation solution delivered to a customer site in the U.K. The installation combines our waste heater conveyors, screened sorters, and separators. The system efficiently recovers products of higher value, including metals, aggregates, plastics, and cardboard from waste, thus diverting more material from the landfill. This is another example of Terex products making the circular economy a reality. Please turn to slide 10. Our environmental, social and governance programs deliver stakeholder value. We continue to progress on our ESG journey, and recently completed our materiality assessment. We heard from our stakeholders that product development, stewardship, and innovation are core business differentiators. Stakeholders regarded product quality and safety as critical for meeting regulatory requirements and customer expectations. Team member health, safety, and well-being are important. We know that Zero Harm is possible—it's not just an aspiration. We designated April as safety month for teams across the globe and scheduled a variety of events to reinforce and rededicate ourselves to Zero Harm. I want to thank our stakeholders who participated in our materiality assessment, which provided us valuable insights. Please turn to slide 11. We continue to operate in a challenging macroeconomic environment with inflationary pressures and supply chain constraints. We did see slight supply chain improvements. However, our hospital inventories increased in the first quarter after declining in the fourth quarter of last year, which is a clear indication of the level of disruption our teams continue to face and overcome. Overall, our market demand remains strong, and I am confident in the team's ability to continue to adapt and overcome the macroeconomic challenges that we have been facing. And with that, let me turn it over to Julie.

Thanks, John, and good morning, everyone. Let's take a look at our first quarter financial performance found on slide 12. Terex is in a strong financial position. We demonstrated excellent execution in a dynamic environment. Sales of $1.2 billion were up 23% year-over-year on higher volume and improved price realization necessary to mitigate rising costs. Sales in constant currency were up 27% as foreign currency translation negatively impacted sales by $42 million, or approximately 4% in the quarter as the Euro and British Pound weakened against the dollar. Gross margins increased by 410 basis points in the quarter as volume, pricing, a favorable product mix, improved manufacturing efficiencies, and strict expense discipline helped to offset costs increases and the negative impact of foreign exchange rates. Both segments recorded a year-over-year increase in gross margin. SG&A was 10.6% of sales and decreased by 50 basis points from the prior year as business investment and marketing costs were coupled with continued expense management. SG&A increased over the prior-year due to inflation, unfavorable foreign exchange, incremental spend on new acquisitions, and increased marketing expenses and tradeshows. Income from operations of $148 million was up 98% year-over-year. Operating margin of 12% was up 460 basis points compared to the prior year. Our incremental margin was 31% compared to the last year. Interest and other expense of $15 million increased $4 million from the prior year due to increased interest rates. The first quarter global effective tax rate was 17.5%. First quarter earnings per share of $1.60 more than doubled, representing a $0.86 improvement over last year. This strong performance was driven by increased volume, disciplined pricing, and continued cost management. This quarter includes an unfavorable earnings per share impact of $0.10 from foreign exchange translation. Free cash flow for the quarter was negative $11 million, representing a significant improvement over the prior year. I will discuss free cash flow later in more detail. Let's look at our segment results, starting with our Materials Processing segment found on slide 13. MP had yet another excellent quarter with consistently strong operational execution. Sales of $554 million increased 22% compared to the first quarter of 2022 with healthy demand for our product across multiple businesses. On a foreign exchange neutral basis, sales were up 28%. Bookings were up 6% sequentially. MP ended the quarter with backlog of $1.2 billion. The backlog remains robust and is approximately three times historical norms. MP delivered operating profit of 15.4%, up 120 basis points over the prior year driven by higher sales volume, favorable product mix, and disciplined cost management, resulting in an incremental margin of 21%. On slide 14, see our aerial work platform segment financial results. AWP had an excellent quarter with sales of $686 million, up 24% compared to the prior year on higher demand. On a foreign exchange neutral basis, sales increased 27%. Backlog at quarter end was $2 billion, up 4% from the prior year. Bookings remained strong with a book-to-bill ratio of 112%. AWP more than doubled their operating profit and delivered operating margins of 12.1% in the quarter, up 620 basis points from last year with an incremental margin of 38%. The improvement was a result of higher sales volume, favorable mix, cost reduction initiatives, manufacturing efficiencies, and disciplined pricing actions to offset martial supplier costs. Please see slide 15 for an overview of our disciplined capital allocation strategy. The company's strong balance sheet provides us the financial flexibility for the future. As a reminder, although Terex does provide customer financing solutions through our banking partners, in February of 2021, we sold our TFS asset. We no longer carry this exposure on our balance sheet. We remain diligent in managing counterparty exposure and risk as well as regional customer and supplier risk. Today, we have not seen a negative impact due to current market conditions. Free cash flow for the quarter was negative $11 million compared to negative $72 million a year ago. This $61 million year-over-year improvement in free cash flow was due to increased operating profit. Hospital inventory at the end of the first quarter was $48 million. An increase of $12 million from the fourth quarter of last year and down slightly from a year ago reflecting continued supply chain disruption. We continue to invest in our business with capital expenditures and investments of $30 million. We increased our quarterly dividend per share to $0.15, a 15% increase over the prior year. We repurchased $3 million of shares in the first quarter. In April, we continued our share repurchase program and purchased $14 million of shares partially offsetting the dilution from our compensation programs in March. Through April, we have returned $28 million to shareholders and have $175 million remaining on our share repurchase program. We will offset dilution and take advantage of market dislocation in these volatile times. We have no debt maturities until 2026, and 77% of our debt is at a fixed rate of 5% until the end of the decade. Our net leverage remains low at one-time, which is well below our 2.5 times target through the cycle. We had ample liquidity of $677 million. The company is in an excellent position to run and grow the business. Now, turning to slide 16, and our updated full-year outlook, it is important to realize we are operating in a challenging macro environment with many variables and geopolitical uncertainties. So, these all could change negatively or positively. With that said, this updated outlook represents our best estimate as of today. Thanks to the strong execution of our team members and our robust backlog, we are pleased to raise our 2023 outlook. We now expect earnings per share of $5.60 to $6. Our increased sales outlook of $4.8 billion to $5 billion incorporates the latest dialog with our customers and our suppliers. We anticipate higher volume as customer demand remains strong. Our sales are expected to be relatively consistent in Q2 and Q3, and down slightly in Q4, due to lower production days. Our operating margin outlook has increased to a range of 11.4% to 11.8%. This reflects our excellent performance in the first quarter, continued strong customer demand, the latest information from our supply chain, cost benefits, and continued strict expense management. We expect to improve free cash flow in the next three quarters, and we are raising our outlook to $300 million to $350 million, primarily due to higher earnings. Let's take a look at our updated segment outlook. Based upon MP's continued strong execution, which includes continued mitigation of cost pressures and supply chain challenges, we are increasing our sales outlook to range of $2.1 billion to $2.2 billion, with an increased operating margin of approximately 15.8%. We expect MP sales and margins to be relatively consistent for the remainder of the year. The AWP team has increased their factory output. And as a result, we are increasing our sales outlook to a range of $2.7 billion to $2.8 billion. Incorporating the increased volumes, the team's cost reduction activities, pricing actions, and improved manufacturing efficiencies, we are raising our full-year operating margin outlook to approximately 11.5%. We anticipate AWP sales to be relatively consistent in Q2 and Q3, and down slightly in Q4 due to normal seasonality and lower production days. AWP margins are expected to be negatively impacted by manufacturing inefficiencies due to scheduled production moves to our Monterrey facility, which will have a greater impact in the second half of the year. And with that, I will turn it back to you, John.

Thanks, Julie. Turning to slide 17 to conclude my prepared remarks, Terex is well-positioned for growth to deliver value for our stakeholders in 2023 and beyond. Because we participate in strong end markets, including infrastructure, electrification, and environmental, we will continue to execute our disciplined capital allocation while investing in new products and manufacturing capability along with strategic inorganic growth. We have demonstrated resiliency and adaptability in a challenging environment. Most importantly, we have great team members, strong businesses, strong brands, and strong market positions. And with that, let me turn it back to Paretosh.

Thanks, John. As a reminder, during the question-and-answer session, we ask you to limit your questions to one and a follow-up to ensure we answer as many questions as possible this morning. With that, I would like to open it up for questions. Operator?

Thank you. We will take our first question from Stanley Elliott at Stifel.

Good morning, everyone. Thank you for the question, and congratulations.

Good morning, Stanley.

Can you talk about the increase for the AWP? How much of that is price? How much of that is throughput? And to what extent is the Mexico shift going to be a negative detractor there?

Thanks so much for the question, Stan, and good morning. The AWP team just did a great job in executing this quarter. They were able to get higher sales volumes, coupled with disciplined pricing actions. They had favorable regional product mix. They really worked hard on cost reduction initiatives between the supply chain and engineering team and evaluated engineering efforts, getting dual supply, and those types of things. With the increased volume, they also had favorable manufacturing efficiencies. So, they had strong execution and successful cost-out actions. This led to an incremental margin of 38%. The Genie team had very strong volume in the quarter, as we mentioned. In terms of the Genie impact on the Monterrey move, we started that move from the permanent to the new facility in March. More moves are going to happen over the coming quarters, and we expect the second half of the year to be impacted by manufacturing inefficiencies due to all of those product moves. So, just a really great job of execution by the AWP team this quarter.

And switching gears, on the MP business, you are talking about inventories at your channel partners being exceptionally low. Looking at your backlog, it's three times what normal would end up being. When do we think that will it get right-sized within that channel? I'm assuming that most of those orders still are for retail use, as opposed to just stocking, but it just sounds like there is a lot of visibility for that part of the business going forward.

Stan, you are right. There is significant visibility with MP's backlog being at about $1.2 billion, which is similar to the prior year. It is important to note that we have about three times the normal backlog that is changing our world policies within the business. For example, in our aggregates business in the quarter, our order book wasn't open for the whole quarter to fill Q3 and Q4 because we are still in the position of slotting orders we have received. The reality is that we are really in an allocation mode. As the orders come in, we have to allocate to ensure that all dealers have the opportunity to take product, and we don't cut off a dealer in a certain part of the world without product. Demand remains strong. Dealer inventories are low. Remember that about 75% of the MP business goes to the dealer channel. Their inventories are not stocking dealers in the sense that they are not putting equipment on the line. Most of the equipment here goes into their specialized rental fleets and turns into rather purchase-type contracts or the O-type contracts. Again, the challenge for them is that those contracts then convert to sales, and we haven't been able to get the product back to them that they need. They are seeing that depletion in their network in their rental fleets, and that is helping to sustain demand. Again, we are witnessing strength in the MP segment, with strength observed globally. If we continue to see improvement in the supply chain, supply output continues to improve, we'll see that return to more normal, but right now, we have a strong backlog, extended visibility, and historic levels of visibility going forward. It's also important to understand the dynamics within the backlog regarding order push-outs and order cancellations, and we are just not seeing that at this time. So, we have a good robust backlog, and while the book-to-bill overall company with a 105% was down a little in MP, that is coming off an exceptionally high Q1 of last year in both businesses.

Perfect. Thanks so much for the time, and best of luck.

We will move next to Steve Volkmann at Jefferies.

Great. Good morning, everybody. Thanks for taking the question. John, I just want to pull on that throw a little bit because I feel like if we are going to see any signs of weakness or push-outs, as you just noted, it would be in the AWP, and probably specifically with the smaller customers. So, I guess I just wanted to hear your comments around what you are seeing from sort of the small independents on AWP orders?

Thanks, Steve. Similar market dynamics exist for both national and independent customers, who continue strong market fundamentals and growth across both segments. We continue to see strong utilization, and again, industry constraints have led to the increase in fleet ages. We have talked about the replacement cycle on numerous occasions, and the fact that the replacement cycle has been delayed. This shows up in relatively strong used equipment values right now. Customers are still requesting more than we can deliver due to the supply constraints. We will talk with our customers, and if supply constraints alleviate, there may be an opportunity to get more supply, and that's true for both nationals and independents. In the AWP segment, our book-to-bill ratio was 112% in this segment. So, good backlog and good coverage. The reality is that we are still in an allocation mode, and we are trying to keep customers equally dissatisfied with the distributions we are receiving. We are trying to keep things relatively consistent against historical patterns for both nationals and independents. This speaks of the relative tightness we had in the market. So, still constrained, and the team is working to reduce that constraint, but again, the backlog and market environment continues to appear robust across the customer base, not just in the large national accounts.

Understood, thank you so much. And then, just a follow-up there on AWP. I was a little surprised to see hospital inventory actually up, but also, of course the margin much stronger than what we are looking for. I usually sort of assume hospital inventory means headwinds to margin. So maybe you can square that with us, and specifically I am trying to think about as those hospital inventories normalize their margin upside that might be sort in our back pocket here?

As Julie started with her comments, the team executed well. You are right, Steve, we saw a modest increase in our hospital inventory to about $48 million, up from $36 million at the end of Q4. This speaks to the level of disruption the team is seeing, but they are continuing to work to improve the continuity of supply. We are seeing modest improvements in the supply base in terms of on-time delivery. We are also seeing modest improvements in the quantity or the level of supply. Our teams are driving that. There was a tremendous amount of work going on in our supply chain teams around the world to really increase the number of suppliers that we are working with, dual sourcing, modifying design, and so all of that work is occurring. Despite that, we still saw a slight increase in the hospital inventory in the quarter. That creates disruption. But as Julie said in her comments, they had good efficiency on the higher output that we were able to deliver. The team managed to take that efficiency and apply it to the bottom line.

Got it. Thank you.

We will move to our next question from Steve Barger at KeyBanc.

Hi, good morning. Sorry, I missed your prepared comments. But with you already guiding this year above FY'24 consensus, people are going to be wondering long-term thoughts on your ability to drive growth. So, to the extent that you can, what are your general thoughts on cycle longevity, and just how you are positioning Terex for the next few years?

Yes, thanks for the good question. It's early to talk about 2024, but if you look at our strong backlog coverage that we are seeing, it is pretty much consistent in the last five quarters. Governments around the world are pointing to infrastructure as stimulation, and we are seeing this as a robust major around the world. When you put that on top of what is transpiring in the U.S., and I mentioned this, Steve, in my opening comments about the Infrastructure Act, the Inflation Reduction Act, and the CHIPS Act, those are massive sums of money that provide us tailwinds against the current headwinds of the macroeconomic environment and the rising interest rate environment. If you look at the mega trends we are dealing with in that area, and the consistent performance of our MP business, as well as our sustainability initiatives, those trends provide some degree of tailwinds to potentially offset the headwinds we are experiencing in a normal rising interest rate environment. So, if I look at MP, we are seeing consistent performance around the globe across multiple verticals, and we believe that environment will allow us to drive growth. For AWP, that has been constrained. The replacement cycle has been delayed in both North America and Europe due to overall market supply. The backdrop of those major infrastructure bills provides tailwinds against the headwinds of the rising interest rate environment. As we see rental companies continuing to win, we do believe that we can be a growth company over the coming period. Of course, it is not always linear, but as we set the company up, we believe we are positioned to take advantage of those mega trends ahead of us.

Yes, that's really great context. And to your point about the interest rate environment, I know this will be hard to answer, but there are a lot of concerns around commercial real estate, specifically office. Have you ever tried to quantify your end market exposure by project type, or do you have a guess how much of your fleet has been allocated in the past to office construction? I am just wondering if new challenges in that specific area create a fleet overhang for your customers, or is that relatively small?

First of all, we don't have precise information, so I can't give you a percentage. I do know there are, especially on the AWP side, our larger customers report where they believe their products are going. If you look at that macro environment in non-residential construction, office and retail are going to experience headwinds in a rising interest rate environment. That part of the business will be impacted. However, if you look at non-residential in totality, 40% plus of that is public. That won't be adversely impacted in a rising interest rate environment. The CHIPS Act and the onshoring of chip manufacturing are driven by geopolitical reasons to improve shares of supply. A rising interest rate environment will not hinder those projects; they will proceed. So, there are clearly cross currents, the headwind of a rising interest rate environment, particularly impacting commercial real estate and office. However, other parts of business are substantial, and that's the macro tailwind. This reflects the headwind and tailwinds we have, and we will continue to position the business to take advantage of those opportunities. Right now, we're dealing with $1.1 billion of backlog going into 2024, which is highly unusual for us.

That's great. Appreciate the time.

We'll go next to Timothy Thein at Citigroup.

Great, thank you. Good morning. So, John, the first one is on AWP, and I know it’s very early to talk about anything for '24. But I’m just curious how the team at Genie is planning with respect to that fourth quarter production levels. If you look into '24, there's a lot of moving pieces with what's going on in Mexico, but just curious your initial thoughts, you have to be informed to some degree by what you've seen in terms of order intake and backlog. So, I'm just curious how the plan is currently laid out in terms of expectations as to how you're exiting the year and inventory position going into '24.

Thanks, Tim. As Julie said in her opening comments, we are anticipating lower volume in the fourth quarter due to production days in the AWP segments, specifically the Genie business. As the supply chain begins to improve, and we are able to enhance our lead times—because that's another issue going on—excessive lead times are present right now across the industry. As those improve, we expect more normalcy in customer order patterns, as larger customers were taking gear ahead of the normal due to the fact we could deliver that equipment to them. So, they took things in Q4 that they otherwise wouldn't have, and the same went for early Q1. We plan on lower production volumes in Q4; if for no other reason than there are fewer production days due to the holidays. However, we expect to ramp up production in Q1 to meet our customers' needs.

Got it. And then just on MP, there are a lot of product segments there, none of which have the same margin profile. I'm just curious how you've reconfigured that, or changed the order policy. Is that resulting in any significant differences in mix as we move to the balance of the year in terms of what you expect to deliver out of that backlog?

No, not anything fundamentally different. As Julie said, we did have some favorable mix in the quarter in the Aggregate segment. We are anticipating that to continue through the year, but nothing substantive will change, I would say, in the makeup. We did see some favorability in aggregates.

All right, thank you. Thanks, John.

We'll go next to Steven Fisher at UBS.

Thanks. Good morning. I'm wondering if you can comment on the price versus cost gap for the rest of the year. Are you expecting that to be wider, narrower, or steady? And to maybe make it meaningful, how would that look excluding any of the Monterrey costs that you're going to be incurring?

Thanks for the question, Steve. When you think about us for 2022, as a total company, we were priced cost negative in the first six months and then we became price cost neutral for the year of 2022. Our objective is to continue to be priced cost neutral for the year. We talked about offsetting material and freight and logistics costs. So, we continue to see a dynamic inflationary environment, with container freight decline observed while we've seen row increasing. We’ve taken multiple pricing actions throughout 2022, and further pricing actions in 2023 across the company. We're being transparent with our customers and distribution partners regarding the level of inflation we're seeing and why we need to take these actions. If I look at it by business, the MP group does dynamic pricing and it continues to be price cost neutral for 2023. For AWP, they were price cost negative in the first six months of last year but managed to turn neutral for the year. There is higher pricing in the first six months of this year, but our objective remains to be price cost neutral for the entire year.

Okay, and then, John, you mentioned the study backlog added when you look at the picture on slide 20. It really shows a general leveling off, what's your expectation for how this is going to trend from here? I know you said there are some more normalization of ordering. So, does that mean just generally, kind of a continued steady backlog or if it were to break out from here, what would be the most likely driver of that?

Great question, and let me answer it this way: right now we are not the reliable supplier we would like to be for our customers, because a lot of what we are delivering continues to be in line with our original customer promise. As the supply chain improves, we will get back to our historical ability to deliver on time. I would not be surprised if, over time, as we become a more reliable supplier, backlog would come down to more historical levels. That does not imply anything about the market; it implies we're getting our lead times back to more normal levels. Right now, our lead times are extended, and it will take time to return to our normal ability to deliver on commitments. I think improving supply chain is going to help us do that.

Terrific, thank you.

We'll go to our next question from David Raso at Evercore ISI.

Yes, hi. Thank you. Picking up on the order thoughts, just curious, are you starting to see enough normalization of what you can promise on lead times or for whatever reason customers are a little skittish about '24 that, are they having conversations now that says, 'Hey, look, if that's now the situation on lead time or whatever may be, let's push that conversation to September?' I am just trying to get a read here and level expectations about the book-to-bill particularly in AWP. Of course, the backlog is abnormally high and people liked the visibility on '23 even starting '24. But just so we understand that, are we starting to get what you're hearing around the sector broadly with supply chains normalizing? You're going to see orders come down as customers rethink how early they need to order for '24 or have you not seen any change in behavior from your customers because, punchline, I think people are trying to figure out how much book-to-bill drops below one. Are you seeing that already for Q2? Just trying to level-set those expectations.

Thanks, David, and you are right; in the AWP segment in the quarter, our book-to-bill was 112%. So, we saw strong book-to-bill in the quarter. I think it likely does come down as the supply chain improves. Right now, customers are taking orders because there's still a percentage of what we are delivering that aligns with our original delivery commitments. It is improving but nowhere near the levels of our historical performance. As supply chain improves, lead times remain extended for now, but we will be transparent regarding those lead times. As they improve, we anticipate that translating into customer buying behavior and returning to more seasonal patterns historically.

Yes, that's all logical. These backlogs are so big, the order comps are hard; it makes sense they're down. But how much has it really reflected in-demand for '24, or is it just normalizing behavior because supply chains are normalizing a bit? So, theoretically...

It's a normalizing behavior. We are not seeing a significant reduction in customer demand; it is just that we are aligning deliveries and commitments and ensuring that our forecasting meets our production capabilities. In the AWP segment, we are booked out for 2023 with potential discussions for larger customers, but not signing contracts extending beyond one year.

All right, thank you. I appreciate it.

We will go next to Michael Feniger of Bank of America.

Hey, guys. Thanks for taking my questions. And apologies if you already hit on this, but with your address revenue now approaching $2.8 billion for the year, it's kind of almost back in that '18-'19 period. Obviously, it’s been a lot more price-filled like this year in that revenue number. I’m just curious if production units are still below those '18-'19 levels? And going forward with Monterrey, your strategy there, does that give you any ability to add incremental capacity above those '18-'19 levels?

Thank you, Michael. We are currently producing below the '18-'19 levels within the Genie business, and with the investments we've made in our Watertown facility, and improved supply chain, we should be able to achieve increased production out of the Watertown facility. The Monterrey facility, this is very important: the Monterrey facility for Terex and Genie specifically was to improve our global competitiveness and diversify our global footprint. Yes, it will provide some incremental capacity, but that's not why we made the investment. We invested to improve our global cost competitiveness and utilize our Mexico supply chain. This places us in a robust position, not just for supplying the Monterrey facility, but also for our U.S.-based manufacturing. So, Monterrey was intended for improved global cost competitiveness in a challenging economic environment.

Very helpful. And just on material processing, you highlighted how inventories you are dealing with are still low. Just curious how that should finish the year for 2023, is '24 about replenishing those inventories? Any metrics that help us understand how low these inventories are for MP dealers compared to where they normally should be?

They're lower than normal. I think we will progress as we move through 2023. We are not assuming we get all the way back to historical levels right now, but we will improve the situation. The order book for the MP business in our aggregates business was not open for the quarter since we were still slotting orders ensuring equitable distribution across our production capabilities. As production improves, we expect that inventory situation to also improve moving forward, leading to allocation. We are currently in allocation mode today.

Very helpful, thank you.

We will go next to Tami Zakaria at JPMorgan.

Hi, good morning. Thank you so much for taking my questions. So, just to clarify, and I'm sorry if you have already mentioned this, but price cost in the first quarter was positive. My understanding was that the first half would see price cost somewhat positive, but then it tapers in the back half to get you to a neutral level for the year. Is that the right way to think about it?

I think if you think about the—as we go through the year, you see the pricing actions come through into 2023. So, there is a greater impact in the first half than in the second half, particularly for the AWP segment. For MP, they’ve been dynamically pricing all along and have thus maintained price cost neutrality throughout.

So, price costs will be neutral for the rest of the year for AWP?

Yes. So, remember, this is definitely offset material for logistics costs.

Got it. And so, you raised the full-year guidance by about $200 million. How much of that is a better volume outlook versus incremental pricing?

From our original outlook, almost all of the increase is attributed to volume rather than price.

Got it. Okay, thank you so much.

We will move next to Seth Weber at Wells Fargo.

Hi, good morning, guys. This is Larry Stavitski on for Seth this morning. Just wanted to ask about the utility business, what are some of the dynamics there in terms of what you are seeing with demand and supply chain, and order trends?

The utilities business remains quite strong, and in terms of backlog, we are pretty much covered for 2023 and booking well into 2024, especially in our highly-customized units. We are witnessing strength across the segments that we serve. The transmission network continues to be robust, and the independent utilities and public power utilities maintain significant demand. The utility contractor segment remains strong, although it’s trickier due to ongoing circumstances in California. We are seeing strong growth across all four segments, and supply chain has started to improve there. We were significantly impacted in that business, especially around chassis and bodies, and the sequencing of receiving chassis, bodies, and then the booms we put on there. We are beginning to see improvement in chassis availability, body availability has improved as well, and we are seeing progress with hydraulic supply. We are gradually experiencing increased output as supply chains enhance and the market demand across segments remains strong.

Okay, great. That’s great color. Appreciate it. And just switching gears a little bit, just in terms of your expectations for price cost neutrality for the year, what are your expectations for steel prices that are embedded in your guide? And if you could remind us how you manage the movement in steel prices?

Thanks for the question. We have a hedging program; we hedge 50% of our North American HRC steel requirement for our Genie business. It's a rolling program, so we are hedging out and averaging the cost. For the remainder of the year, we are anticipating about a $950 per ton assumption.

Okay, great. Thanks so much. I appreciate the color.

We will go next to Jamie Cook at Credit Suisse.

Hi, good morning. Congrats on a nice quarter. I mean most of the questions have been answered. I guess one—Julie, just on the guidance, if you look at your guidance, it implies the first quarter was probably the high EPS quarter, while generally it's the lowest in earnings generally improves sort of sequentially. So outside of Monterrey, I am just trying to understand why the first quarter would be one of the highest quarters versus normal seasonality for your business?

Thanks for your question, Jamie. We increased our sales outlook to $4.8 million to $5 million, which includes all of these dialogs with our customers and suppliers. We anticipate high volume because customer demand remains strong, and we saw some slight improvement in supply chain. So, our sales are expected to be relatively consistent in Q2 and Q3, and down slightly in Q4 due to lower production days. We expect our MP sales and margins to remain relatively consistent for the remainder of the year, while we anticipate AWP sales to be relatively consistent in Q2 and Q3, and down slightly in Q4 due to normal seasonality and lower production days. The AWP margins are expected to be negatively impacted primarily due to manufacturing inefficiencies resulting from those scheduled production moves to our Monterrey facility. That latter factor will have a greater impact in the second half of the year than it does in the second quarter.

Okay, great. Thank you.

And that does conclude our question-and-answer session. At this time, I would like to turn the conference back over to John Garrison for closing remarks.

Thank you, Operator. Please let us know if there are any additional questions; we know you have to get on a couple of more calls this morning. If you have further inquiries, please reach out to Julie, John, or Paretosh. Stay safe and healthy, and thank you for your interest in Terex. Operator, please disconnect the call.

Thank you, and that does conclude today's conference. Again, thank you for your participation. You may now disconnect.