Terex Corp Q3 FY2025 Earnings Call

Greetings, and welcome to the Terex and REV Group merger call. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Derek Everitt, Vice President of Investor Relations. Please go ahead.

Good morning, and thank you for joining us to discuss the planned merger of Terex Corporation and REV Group and Terex's intention to exit its Aerial segment. A copy of the related press release and presentation slides are posted at investors.terex.com and investors.revgroup.com. The replay and slide presentation will also be available on those websites. This morning, Terex also announced its third-quarter 2025 earnings. The corresponding presentation and press release are posted at investors.terex.com. Please turn to Slide 2 of the merger presentation, which reflects our safe harbor statement. Today's conference call contains forward-looking statements, which are subject to risks that could cause actual results to be materially different from those expressed or implied. These risks are described in greater detail in the presentation and in our reports filed with the SEC. In addition, we will be discussing non-GAAP financial information we believe is useful in evaluating operating performance. Reconciliations for these non-GAAP measures can be found in the conference call materials. References to year are financial year unless otherwise stated. Terex's fiscal year-end is December 31 and REV's fiscal year-end is October 31. References to the merged company's financial year on a pro forma basis reflect these different fiscal years. On Slide 3, we provide additional information and links to related documentation. Continuing to Slide 4. Today's presenters will be Terex's President and Chief Executive Officer, Simon Meester; and REV Group President and Chief Executive Officer, Mark Skonieczny; Jennifer Kong-Picarello, Terex Senior Vice President and Chief Financial Officer; and Amy Campbell, Chief Financial Officer of REV Group, will also be participating in the Q&A session that will follow the prepared remarks. Please turn to Slide 5, and I'll turn it over to Simon.

Thanks, Derek. Good morning, everyone, and thank you for joining us today as we launch a transformative new chapter for Terex and REV Group. Before we discuss this exciting new step, I want to take a brief moment to thank the Terex team for another solid quarter. We delivered $1.50 of EPS on sales of $1.4 billion with a cash conversion of 200% and are maintaining our full-year outlook. The team continues to execute really well. We successfully completed the ESG integration, and we're very excited about what's next. Today, we are announcing the merger of two great companies to create a U.S.-centric large-scale specialty equipment manufacturer with iconic leading brands serving highly resilient and growing end markets. The new combined company will be truly transformational in makeup and markets served. With complementary operations, management systems and channels, we have created the opportunity to unlock significant readily achievable synergies, making the combined company stronger and more competitive, a win-win for our customers, our team members, and our shareholders. We believe the financial profile, growth potential, and leverage is highly attractive and will deliver significant value to Terex and REV Group shareholders. In addition to stronger, more predictable earnings and associated free cash flow, the combined company will have a low capital intensity profile, providing a solid foundation for future profit-enhancing and growth investments. Let's move to Slide 6 to review the transaction in more detail. Terex and REV have entered into a definitive agreement to merge in a stock and cash transaction that will result in Terex shareholders owning 58% and REV shareholders 42% of the combined company. This allows both Terex and REV shareholders to participate in the potential upside of the combined company. REV shareholders will also receive $425 million in cash consideration. The combined company will trade on the New York Stock Exchange under the current Terex stock ticker, TEX, and I will serve as CEO of the combined company, supported by a proven management team that reflects the strengths and capabilities of both organizations. At closing, the Board will be comprised of seven directors from Terex and five from REV. We expect to complete the merger in the first half of 2026, subject to customary closing conditions. Our teams have developed a detailed plan to deliver at least $75 million in annual synergies, contributing to the highly attractive financial profile of the new company. We're also announcing that we plan to exit our Aerial segment and are evaluating a potential sale or spin-off. This exit will significantly reduce our exposure to cyclical end markets. Considering the achievement of synergies and the exit of the Aerial segment, the merged company is expected to provide a mid-teens adjusted EBITDA earnings profile in fiscal 2025 on a pro forma basis, near the top end of the specialty equipment peer group. At closing, the combined company is expected to have a strong balance sheet and liquidity position with approximately 2.5x leverage on a pro forma basis with the opportunity to delever further upon the exit of the Aerial business. Turn to Slide 7, and I'll hand it over to Mark.

Thanks, Simon, and good morning, everyone. Speaking on behalf of the REV team, I’m excited about joining forces with Terex and embarking on the next chapter of our transformation, becoming an even stronger company with new opportunities to leverage our combined scale and operating systems to drive product innovation and even greater efficiency. Both our teams have done a lot to transform our businesses over the past several years. We have taken steps to strengthen our respective portfolios by acquiring highly regarded businesses and making them even better while driving greater focus by divesting businesses that don’t align with our strategic direction or financial thresholds. Over the past few years, the REV team has deployed its operating system to drive broad-based improvements within the business. We executed simplification and process flow improvements across our manufacturing footprint, worked diligently to improve safety, and invested in onboarding and training for our employees. Our sourcing team fortified the supply chain through multi-sourcing initiatives that lowered costs and made material flow more dependable and less exposed to market disruptions. And we are now in the early stages of product simplification and commonization that we believe are the next steps in maximizing our operational potential. I am proud of the hard work and improvements delivered by our team over the past three years and believe the company has reached a level of performance that provides a foundation for even greater momentum. Combining with Terex is a unique opportunity that we believe will create meaningful value for our shareholders.

I agree, Mark. Terex went through a similar rationalization exercise in recent years. And when Terex acquired ESG last year, we took a significant step to strengthen our portfolio, improve our margin profile with higher and more predictable earnings and associated cash flow. The recently announced divestiture of our Italian crane business that we expect to close very soon was another step in that direction. And clearly, merging with REV and exiting the Aerial segment will take our performance to another level. All that said, we are still in the early innings of our strategic transformation with significant synergies to deliver and growth opportunities across each of our end market verticals to continue to create shareholder value beyond this merger. Let's turn to Slide 8. We are merging two strong companies to produce a combination that will clearly be greater than the sum of the parts. After completing the Aerials exit and adding $75 million in synergy value, the pro forma company is expected to deliver EBITDA margins of about 14% with a cash conversion of approximately 85%. At $5.8 billion in revenue, we will have meaningful scale with a strong balance sheet, well positioned to continue to invest and create additional value for our shareholders. Moving to Page 9. The combined company will be U.S.-centric, competing in a diverse and balanced set of attractive end markets. Approximately 85% of the combined revenue will be generated in North America with the vast majority from products that are made in our combined U.S. manufacturing network. The portfolio will be well balanced with about 40% of sales related to Specialty Vehicles with the remainder split between Environmental Solutions and Materials Processing. Each business has a demonstrated track record of delivering resilient and predictable operating results to a large degree because of the resilient end markets they serve. From a Terex perspective, the pro forma end market profile will be less cyclical than ever before in our history. And by design, with nearly 60% of revenue associated with emergency vehicles and waste collection, a significant share of our volume is tied to essential services that are not subject to economic ebbs and flows like other markets. On the utility side, we expect accelerated growth for years ahead stemming from AI, data centers, and the need to significantly upgrade the U.S. power grid. We also continue to see growth for infrastructure spending in the United States, Europe, and around the world, which will benefit our Materials Processing business. Turn to Slide 10, and you will see a snapshot of some of our great products and brands. We are a leading player in each of these markets. As I mentioned earlier, with combined pro forma sales of $5.8 billion, the total addressable end market for our products provides significant opportunity for additional penetration and growth. Terex Utilities manufactures bucket trucks, digger derricks, and related products that enable linemen to work safely on light electrical transmission and distribution lines across North America, a key advantage to maximize grid uptime with emerging opportunities overseas. As a leading player in this space, we are increasing capacity and throughput within our current manufacturing footprint as we see share gain opportunities in this expanding market. Our ESG business is a leader in refuse collection vehicles, compactors, and related digital products. The HAL brand is regarded as a technology leader with a full range of automated side loaders, front loaders, and multiple digital products. Our 3rd Eye digital platform is a meaningful and growing revenue stream on the refuse side of environmental solutions with extension opportunities across every vertical. In the center, you will see examples of our extensive materials processing product range. Our Powerscreen and Finlay brands are global leaders in mobile crushing and screening within the broad aggregates industry and relatively new brands such as Ecotec are leveraging core MP technology to expand into environmental and other adjacent markets. Examples of our industrial vehicles range include Advance, a market leader in front discharge cement mixers and Fuchs material handlers sold to scrap, recycling, and port customers around the world. Turning to Specialty Vehicles, REV has developed an extensive line of fire trucks and ambulances all under brands such as E-ONE, Spartan, AEV, and Wheeled Coach that are recognized as market leaders in quality and reliability by the first responder community. REV's nationwide customer base is supported by an expansive dealer network to ensure their vehicles are available to execute their life-saving duties. In addition, REV's niche portfolio of motorized recreational vehicles includes such leading brands as Fleetwood and Renegade. Turning to Slide 11. Common characteristics across many of our end markets include economic cycle resiliency through reliable replacement demand and aftermarket service, market growth supported by secular tailwinds and the ability to differentiate through quality technology and life cycle support. The emergency response fleet with the support of its dealer network serves the nation's first responders from volunteers in small towns to the largest cities that own fleets of hundreds of fire trucks and ambulances and everything in between. We continue to see demographic trends, including outward suburban expansion that leads to municipalities growing their fleets. REV has done an excellent job customizing its product offerings to align with the needs of its diverse customer base and vastly different infrastructure requirements. Its end customers have stable budgets supported by municipal tax receipts and departments that prioritize emergency vehicle replacement and fleet growth to maintain coverage requirements. There are similar dynamics in waste and recycling, where growth is fueled by four main drivers, starting with population and economic growth, more consumption generating more trash; and second, disciplined vehicle replacement, particularly with the national fleets and large municipalities. Third, accelerated replacement demand driven by innovation leading to lower total cost of collections from products such as automated side loaders that replace manual rear loaders and reduced emissions delivered by our CNG offerings. And finally, growth in digital solutions where we are the clear leader in this space. Within infrastructure, there is plenty of runway ahead with the allocated government spending with a clear need for more investments ahead. In the U.S. alone, the backlog of mega projects continues to grow, providing a tailwind through 2030 at least. Looking abroad, we are seeing infrastructure spending momentum across Europe, while the Middle East and India, where MP already has a strong presence also continue to grow. And finally, the utilities market is also poised for significant market growth. Demand on the U.S. electrical grid is increasing with the majority of data center-related growth still yet to come. Industry forecasts anticipate public power and independently owned utilities CapEx to grow between 8% and 15% per year through 2030. So with this portfolio of leading businesses, we think we're very well positioned for growth for years to come.

Thanks, Simon. I agree the combined company is well positioned for sustained growth. The investments we have made in our respective operating systems will help ensure we capitalize on those growth opportunities and deliver the synergy value that we have defined here today. Through our operating systems, our companies have provided a framework designed to drive excellence across all aspects of our organization from operational efficiency and innovation to customer satisfaction and employee development. By leveraging a structured set of tools, processes and performance metrics, these programs ensure consistent execution of our strategic priorities, fostering sustainable growth and profitability. They empower teams at all levels to focus on continuous improvement, problem-solving, and value delivery, creating measurable benefits for customers, employees, shareholders, and communities alike. This disciplined approach will align the combined company towards achieving world-class results while reinforcing our commitment to being trusted leaders in the industries we serve while delivering value to our shareholders.

And at Terex, we launched the Terex operating system, which is very well aligned in its design and purpose with the REV system to accelerate continuous improvement and leverage our growing scale. We also refined the integration excellence playbook component of our operating system as we integrated ESG. Terex has muscle memory from its past and got it back in shape recently, setting us up well to execute this integration. Our organizations also share a performance-based culture. The combined team will be energized and fully capable of capitalizing on the many opportunities that lie ahead. Let's move to Slide 13 to talk more about the $75 million in synergies. Our teams have already started to lay the groundwork for synergy realization. We have a detailed project plan and will hit the ground running the day we close. We expect to achieve about half the $75 million run rate within the first 12 months as we consolidate corporate activities and eliminate duplication. Sourcing savings will ramp up starting with simpler categories like MRO, hardware, steel, and more standard material before moving into more customized engineered components. Ultimately, every category will be addressed by the team, resulting in a more resilient and cost-efficient supply base. On the operational side, we will build on the best practice sharing that has been done within both organizations and extend them across the company. The extensive U.S. footprint will provide greater optionality to increase domestic capacity, leveraging our combined capabilities. We expect go-to-market synergies over time as we optimize distribution channels and customer relationships, and we see meaningful opportunities to extend our 3rd Eye digital platform in the fire and ambulance verticals in the future, building on the technology developed in refuse, which we have started to extend into our utilities and concrete businesses. The mission-critical status and intense conditions faced by first responders creates a natural use case for enhanced situational awareness for better maneuverability and safety provided by the 3rd Eye digital platform. We have a lot of exciting value creation opportunities and a track record of delivering. Turning to Slide 14. With this transaction, we are essentially rebaselining the new company with much more resiliency and predictability in both top and bottom line performance in different end market mix and an overall enhanced margin profile. As an example, we are significantly reducing our exposure to the cyclical construction markets. We believe that equity markets value resilient, predictable earnings and reward growth. The transformational actions we announced today hit both notes. The exit of the Aerial segment further enhances that profile by removing cyclicality in the combined business. With pro forma 2025 estimated EBITDA margin of 14%, we are creating a company with greater revenue growth potential and reduced earnings cyclicality that we believe is highly sought after by market participants. Moreover, our combined balance sheet provides optionality to take additional strategic steps over time to grow and further improve this attractive financial profile. Let's wrap up our prepared remarks on Slide 15. Merging Terex and REV creates a large-scale specialty equipment manufacturer with a highly synergistic portfolio of leading businesses across a diverse set of attractive, growing, resilient markets. We see a strong fit between our cultures and our management systems. We have the playbook, the muscle memory, and the team in place to execute our integration plan and unlock at least $75 million in annual synergy value. We will leverage our shared capabilities to outperform in our end markets and generate strong earnings and free cash flow. We purposely structured the transaction to result in a strong balance sheet and flexible capital structure to enable future organic and inorganic investments. I want to close by thanking the REV and Terex team members for their tireless efforts getting us to this point. I look forward to the exciting future ahead for our combined company. And with that, I would like to open it up for questions.

Our first question comes from Stephen Volkmann from Jefferies.

Congratulations. I don't usually say that, but this seems like a lot of work in a big transaction. So best of luck on all that. I guess I'm curious maybe as a starting point, Simon, you talked about the sort of more stable profile and the cost synergies, which all kind of makes sense. But what are you thinking strategically relative to growth going forward? I know you listed some specific growth things, but they were mostly kind of stuff that I think we already thought Terex had. So how does this kind of jump-start growth for you over the next sort of five years or so?

Yes, Steve, thanks for the question. And yes, thank you. We are obviously very excited announcing the merger this morning. We think it checks all the right boxes. And to your point, it creates a new significantly less cyclical combined portfolio with attractive and growing addressable markets. And yes, besides the synergies that this brings and the more predictable profile, we do see a lot of growth potential, as I mentioned in our prepared remarks, across all of our verticals. And a lot of that is tied to just urban expansion, population growth, electrical grid upgrades, infrastructure investments, but also more waste and recycling. And that's just the addressable markets as they grow. But then as this group comes together, we also see a lot of opportunities in customers that we both cover in products that we can develop together. I'm thinking about the digital use cases that we referenced in our prepared remarks that we see use cases, for example, in some of the REV applications with our 3rd Eye products. So we see a lot of growth upside in both purely addressable market and in terms of revenue synergies.

Okay. Great. And then maybe just a follow-up relative to the AWP sale or spin. That's interesting from a timing perspective because I guess one might argue that things are sort of bumping along a bottom there. Why not sort of hold on to that until it's a better business and sell it at some other point?

Yes. Great question. We think that the Aerials journey is very well documented on how it performs through the cycle. Our Aerials business has a strong brand, strong team, strong footprint, strong legacy. We are excited about the product portfolio and its pipeline. And obviously, the level playing field now that we have these two favorable antidumping rulings in both North America and in Europe. And we are convinced that there will be plenty of suitors out there who will recognize the through-cycle value that we believe the Aerials business will bring to their portfolio. So we think that, that is transparent enough.

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

I guess I would have a question for Mark, and this is a REV Group perspective here. I'm just sort of curious, Mark, to get your thoughts in terms of how this transaction came to be and how you evaluated value creation from the standpoint of the REV Group shareholders. Your Specialty Vehicles business has done well, and you're clearly on a path to expand margins with a lot more to come as we look at the next couple of years, right? So as you think about this business now being part of Terex, why does it make sense to enact this merger at this point? And from a valuation standpoint, I don't know if I'm doing the math correctly, but it looks to me like the transaction implies about 11x EBITDA on 2026. If that's correct, how did you think about the right valuation framework to apply in this transaction?

Yes, certainly. The opportunity emerged naturally through regular discussions with bankers, and it was very compelling, as we've mentioned in our prepared remarks. This merger is a logical step in our transformation journey. In previous conversations, we have talked about the types of products and companies we are interested in, and we have always considered something in the refu or utility sector. The leading brands in this portfolio align perfectly with our strategy, especially following the exit of the Aerials business. Combining these two firms makes a lot of sense. From a valuation standpoint, the structure of this deal is favorable for both sets of shareholders, allowing them to benefit from the future growth of the combined company. The $425 million in cash leaves the new entity with a robust balance sheet. Our shareholders can take advantage of both the potential upside you mentioned and the synergies we expect to realize, totaling $75 million, along with the value unlock from the Aerial exit. This framework underlines how we approached this merger, considering both operational benefits and the value creation for our shareholders.

Okay. And then my follow-up, $75 million of synergies, certainly not a bad number, but as a percentage of sales for the combined entity, it doesn't seem like a big hurdle. So I'm kind of curious to what degree this number might prove conservative over time. And we haven't really talked about RV. I know this has been part of the REV portfolio a smaller business, but perhaps less of a focus? Is RV considered for potential sales divestiture in the near term as well?

Yes, the $75 million run rate projected for 2028 is something we anticipate achieving 50% of within 12 months after closing. We have very similar operating systems and culture, which gives us confidence that we will start strong, backed by a solid pipeline. We want to take a cautious approach initially, similar to how we approached the ESG synergies; managing the pipeline properly is essential. While we aim to exceed this target, this is the figure we are currently communicating. For the RV business, our primary focus will be on today's announcements regarding the integration of the two companies and executing synergies, along with the Aerials exit. Moving forward, we will evaluate the effectiveness of our portfolio, as both companies have been doing, to ensure we make the best decisions for our shareholders.

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

Congratulations on the transaction. I guess my first question, Simon, back to the unlocking of shareholder value. Key to that, obviously, is you guys either selling or spinning the Access business. So I'm just wondering your confidence level in sale versus spin and potential timing because if it's a spin, I guess I'd be probably more concerned with the market would value the Access business. So first that. And then I guess my second question, wondering if you could talk a little more about the opportunity with 3rd Eye. You mentioned it a little in your prepared remarks and whether with the two combined companies, what the aftermarket is as a percent of sales? And is there a bigger aftermarket story here, the ability to grow aftermarket and increase it as a percent of the total to again reduce cyclicality and potentially improve margins further?

Yes. Maybe I'll talk about Aerials, and then maybe, Mark, you can share a little bit your thoughts on digital in the applications that your business addresses. So on Aerials, yes, as I mentioned earlier, the Aerials business is a great business. There's a lot of equity in the brands. There's obviously 60 years of history, part of the founders of that industry. And it's been a public reporting segment for almost 20-some years or so. So we think it is very well known what the Aerial business does and can do through the cycle. It is a cyclical business, but there are suitors out there that like that kind of profile. So we are not concerned that there won't be any suitors. Quite the opposite, we think there will be quite a few. So for the simple matter is that it's a very recognized business on how it performs through the cycle. Mark, do you want to take the digital question?

Yes, Jamie, I won't comment on the aftermarket aspect. However, during my visit to the facilities and while examining the products, I noticed that there is a straightforward replacement for some cameras we use, along with enhanced back-end software capabilities. We are just starting to explore telematics and other features that this product provides. This represents a significant advancement in our innovation efforts and gives us a competitive edge. The aftermarket aspect will follow, but the initial installation will greatly benefit the combined company, which we mentioned. We are enthusiastic about this opportunity and the progress it brings, particularly for municipal-based businesses as we've previously discussed.

Next question comes from the line of David Raso from Evercore.

I was curious, Simon, the decision to exit Aerials, when was that strategic decision made? Was that something you thought about when you became CEO about two years ago? Was that already on the agenda? Or would you say it was more related to the potential swap here in businesses?

We have always aimed to make our portfolio less cyclical. The first step in this direction was to reduce the cyclical components through ESG integration, which has proven successful and resulted in our stock showing more resilience over the past year. When the opportunity we analyzed came up, we recognized the clear benefits it could bring to our shareholders and saw it as a significant step toward reducing the portfolio's cyclicality. This process has evolved naturally over recent months, and we found a compelling case to move forward with the decision.

Yes. I'm just trying to get a sense of how far along are we already in you understanding who the potential buyers are? Are books out already? Just trying to get a sense of the timing, if it's something you've thought of for a while. And as you discussed, you feel like the earnings over the cycle are well understood enough. The timing of the sale, maybe you're a little less sensitive to than others could believe. But just curious, how far along are you in this process knowing who the potential buyers are? And are the books already out?

Yes, they are not out yet. However, we have discussions with many people. The business is well understood, and it is documented on how it performs throughout the cycle. I won’t go into specifics about our conversations, but we are formally starting the process today. We are confident that there will be many interested parties reaching out to us in the coming days and weeks.

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

The question I had was about distribution, particularly regarding Terex's ES segment and the Specialty Vehicles group of REV Group. I'm curious if there is any overlap there. I understand there is a mix of direct sales and dealer sales. I'm wondering if there could be overlap or potential channel conflicts, considering many specialty dealers carry multiple lines and brands. This raises the question of whether this is something that needs to be addressed.

Tim, this is Mark. And from our perspective, and we've looked at that, there is no overlap across these channels, which sort of is again, the beauty of this transaction, bringing these complementary products together. So there is no overlap that we're aware of that will cause an issue.

Got it. Okay. I apologize if I missed it, but was there a timeline for the AWP sale or spin? Also, can you provide any information regarding the tax basis of that business as we consider these two potential options?

Yes, we have not communicated an explicit time line. And yes, we will keep you updated as material developments occur, but nothing else to share on that at this point.

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

Congratulations. I wanted to revisit Mig's question and follow up. For the 2026 EBITDA of REV Group, it appears to be around 11 times, but your outlook for 2027 and 2028 shows significant increases of 25% to 35%, translating to roughly $75 million. I want to ensure that you're not double counting and that you're still on track to meet the EBITDA goals for 2027 and 2028 that you've mentioned. Additionally, I believe the multiple is slightly lower when considering that a large portion of the 2027 and 2028 figures is largely secured, particularly due to a significant number of fire trucks. I'm interested in how you approach discussions, given your insights into the expected direction compared to historical performance and trailing EBITDA.

Yes. Again, I think this transaction allows our shareholders to continue to participate in that as you've seen in our quarterly results and the fact that we've been ahead of the targets for 2027. So from the progression to those targets. So we feel very good about the accomplishments that we've had so far to date with the throughput increases and the margin realization that you're pointing out. So this is not a reflection at all of our ability to hit those. We are very confident in those numbers that those, and they were obviously supported the deal when we looked at valuations for both sides of the shareholder base. So I would say that. And then obviously, the synergies on top, as you pointed out, gives us value creation as well as the ability to participate in the unlock, like I said, to Mig on the Aerial exit on the side of the Terex house. So ultimately, I think all that was taken into consideration when we did the deal.

Okay. And then secondly, I wanted to ask the synergy outlook for the combined company. is that combined with Aerials or without? I guess I'm kind of curious, you'll get some synergies on purchasing steel and so forth post the merger, but are there dissynergies if and when you spin off the Aerials and you'll have the opposite. We'll have a little bit less scale on buying steel and other components. I guess I just want to know, is it net or is it gross, the current synergy expectation?

This is Jen. That's a net amount. So we have taken into account the dissynergies.

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

Congratulations on the deal. I am curious how you're thinking about integration of these two entities over time. It looks like there's some operational cost revenue synergies, especially between the ES segment and REV Group's businesses, but also looks like these two will kind of run as individual segments. So any thoughts there would be helpful.

Yes. Thanks for the question. Yes, first of all, in terms of integration, the plumbing, so to speak, will follow the same playbook that we used for the ESG integration. And we think we have a strong process there and a strong track record on doing these kinds of integrations. And then the way we will complete the segments makeup, so to speak, is that the REV segment will become a dedicated third segment to the Terex portfolio.

Got it. And then on synergies, it feels like the bulk of cost and revenue synergy would be between the ES segment and REV Group. So curious what the synergy is between REV Group and Materials Processing and just now how you think Materials Processing, how that segment fits in the portfolio?

The significant changes are primarily due to the corporate cost synergies from merging two public companies. There are various efficiencies in SG&A, supply chain, and logistics. Additionally, there are synergies in our shared services footprint and substantial improvements in manufacturing best practices. For instance, if we examine how our utilities margins have increased over the past year due to our reporting into the ES segment, we can see how these manufacturing best practices contribute to higher margins. These represent the major synergies expected between the two companies.

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

Congratulations on the deal announcement. Simon, I wanted to revisit the topic of cyclicality related to Aerial's. I understand this has been asked in various ways, but I wanted to explore it a bit more. Since you don't need the proceeds to reduce debt to a reasonable level, why not retain Aerial's to maintain some diversification in terms of end market exposure in the near term? Essentially, I’d like you to elaborate on the implications of the intention to sell Aerial's concerning your views on the near-term upside opportunities linked to the U.S. rate cycle or any improvements, as well as your long-term perspective on Aerial's ability to achieve mid-teens margins throughout the cycle, which I believe is the longer-term target. Could you discuss whether these positives are being delayed and if there are any structural changes in how you view that business?

Thank you for the question. With this merger, we aim to reset the company. By integrating the REV Group with our Materials Processing and Environmental Solutions segments, we are essentially evolving into a new entity. Our goal is to create a more stable, less cyclical earnings profile moving forward. We believe Aerial's is a strong and established business with significant growth potential, particularly from major projects in the United States. Furthermore, we are seeing Europe beginning to invest in infrastructure and public construction, which will drive additional demand. While we won't provide guidance for 2026 during this call, we are confident that Aerial's has substantial growth opportunities for many years ahead. Coupled with its well-established performance history through economic cycles, we believe it's an excellent business for investors.

That's very helpful. Could you comment on what you believe the fair value of this business is given the current demand landscape? Additionally, how do you see the geopolitical environment impacting potential avenues for divestiture and whether it limits the range of interested buyers for these assets? I'm asking this because we have seen other construction OEMs pause their plans to sell assets due to geopolitical challenges, which may restrict international parties from moving forward. I would appreciate your thoughts on this.

I’m not going to comment on any kind of valuation as it would be too early for this call. In terms of its appeal, it is a leading brand in its space and a very strong business. We have a level playing field in its addressable market, which indicates no immediate risk of dumping activities in North America and Europe. Therefore, it presents an attractive end market and has a solid U.S. base. Honestly, I view it as quite the opposite. It is a very interesting asset that could provide any owner with a significant presence in an appealing end market, particularly in the United States and Europe, which comprise about 90% or more of it. I see it as a highly attractive asset.

We have a question from Steve Barger from KeyBanc.

And sorry, I didn't have time to look this up, but can you tell me the dollar amount and duration in years of REV Group's backlog and maybe the concentration of it by product category, if you report that?

We don't report it by product category, but maybe, Amy, you want to take that. But it's about $4.5 billion all in and 2- to 2.5-year backlog. I don't know if you want to comment on.

You answered the question pretty well there, Mark. No, that's correct. We have a $4.5 billion backlog. We do break that out, $4.2 billion of that is in what we consider our Specialty Vehicle segment and about $300 million is in our Recreational Vehicle segment. And that 2- to 2.5-year backlog is strictly for those fire trucks and ambulances.

That concludes our question-and-answer session. I'd now like to turn the call over back to Mr. Simon Meester for closing remarks.

All right. Thank you. So thank you for your questions today. I want to just reemphasize how excited we are by today's announcement. We are merging two great companies, creating a low cyclical portfolio with strong synergies, a better margin profile, a U.S.-centric footprint, leading brands and last but not least, a low capital intense kind of structure. So we're very excited on how this sets up and the value that it brings to our shareholders. So with that, I want to thank you. If you have any additional questions, please follow up with the respective Investor Relations leads. Operator, please disconnect the call.

This concludes today's session. You may now disconnect.