Oshkosh Q2 2025 Earnings Call Transcript

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Provided by Quartr
August 1, 2025

Key Takeaways

  • Positive Sentiment: Delivered Q2 adjusted operating margin of 11.5% on $2.7 billion revenue with earnings per share of $3.41, up 2.1% year-over-year.
  • Positive Sentiment: Reaffirmed full-year guidance—fully offsetting tariff headwinds—to $11 EPS on about $10.6 billion revenue and raised free cash flow outlook to $400–500 million.
  • Positive Sentiment: Vocational segment sales rose 15%, driven by a 20% jump in fire apparatus deliveries, achieving a robust 16.3% operating margin backed by strong backlog and capacity expansion.
  • Neutral Sentiment: Access segment revenue declined 11% with higher 2–3% discounts, yet maintained a resilient 14.8% operating margin and expects a return to normal seasonality in H2 order intake.
  • Positive Sentiment: Transport segment margin improved to 3.7% from 2.1%, driven by new FHTV/FMTV defense contracts and continued ramp of NGDV production for the U.S. Postal Service.
AI Generated. May Contain Errors.
Earnings Conference Call
Oshkosh Q2 2025
00:00 / 00:00

Transcript Sections

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Operator

Greetings, and welcome to the Oshkosh Corporation Second Quarter twenty twenty five 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, Pat Davidson, Senior Vice President of Investor Relations for Oshkosh Corporation. Thank you, sir. You may begin.

Patrick Davidson
Patrick Davidson
SVP, IR at Oshkosh

Good morning, and thanks for joining us. Earlier today, we published our second quarter twenty twenty five results. A copy of that release is available on our website at oshkoshcorp.com. Today's call is being webcast and is accompanied by a slide presentation, which includes a reconciliation of GAAP to non GAAP financial measures that we will use during this call and is also available on our website. The audio replay and slide presentation will be available on our website for approximately twelve months.

Patrick Davidson
Patrick Davidson
SVP, IR at Oshkosh

Please refer now to Slide two of that presentation. Our remarks that follow, including answers to your questions, contain statements that we believe to be forward looking statements within the meaning of the Private Securities Litigation Reform Act. These forward looking statements are subject to risks that could cause actual results to be materially different from those expressed or implied by such forward looking statements. These risks include, among others, matters that we have described in our Form eight ks filed with the SEC this morning and other filings we make with the SEC as well as matters noted at our Investor Day in June 2025. We disclaim any obligation to update these forward looking statements, which may not be updated until our next quarterly earnings conference call, if at all.

Patrick Davidson
Patrick Davidson
SVP, IR at Oshkosh

Our presenters today include John Pfeifer, President and Chief Executive Officer and Matt Field, Executive Vice President and Chief Financial Officer. Please turn to Slide three, and I'll turn it over to you, John.

John Pfeifer
John Pfeifer
President & Chief Executive Officer at Oshkosh

Thank you, Pat, and good morning, everyone. Before we get into the quarter, I want to highlight the positive response we've received to our June 5 Investor Day. This slide from the event highlights the key elements that we believe make Oshkosh an attractive investment, bringing the full strength of our portfolio united by our shared strategy, accelerated innovation in autonomy, electrification and intelligent connected products, all supported by favorable long term trends. I wanna reiterate two key messages from the event about our 2028 targets. First, we expect to deliver sizable revenue growth.

John Pfeifer
John Pfeifer
President & Chief Executive Officer at Oshkosh

And second, we expect to transform margins. We believe many of the key drivers that support these returns are largely under our control at Oshkosh. Turning to Slide four, we delivered an adjusted operating margin of 11.5% on revenue of $2,700,000,000 in our second quarter. This led to adjusted earnings per share of $3.41 an increase of 2.1% over the prior year. These results reflect strong performance across each of our segments, which Matt will dig into later in the call.

John Pfeifer
John Pfeifer
President & Chief Executive Officer at Oshkosh

We grew adjusted EPS and maintained adjusted operating income margin year over year despite lower revenue, reflecting continued strong performance in our Vocational segment, improved returns in our Transport segment and a resilient mid teens margin in our Access segment. Maintaining adjusted operating income margins on lower revenue highlights our commitment to transform margins as we move forward. Our results reflect the disciplined execution of our innovate, serve, advance strategy, which we show on Slide five. Through this strategy, we have expanded our portfolio to include strong operations like AeroTech and Ausa that expand our business into attractive adjacent markets while improving our earnings profile. Turning to Slide six for Q2 highlights.

John Pfeifer
John Pfeifer
President & Chief Executive Officer at Oshkosh

As I mentioned earlier, we discussed our plans to grow the company at our Investor Day. We were excited to share our 2028 targets with you all, including a compound annual revenue growth rate of 7% to 10% and transformative margin expansion of 200 to 400 basis points. While these are targets for 2028, we believe the building blocks that support our plan are in place today. As we expected and highlighted at our Investor Day, we signed the three year sole source contract for FMTV, the family of medium tactical vehicles program, with the Department of Defense just a week later. This contract includes updated pricing and an economic price adjustment mechanism, which we believe will yield favorable returns as we build units under the contract.

John Pfeifer
John Pfeifer
President & Chief Executive Officer at Oshkosh

A significant part of the FMTV program is the launch of our LVAD or low velocity airdrop variants, which have been favorably received by the DOD. This new FMTV contract follows our five year FHTV, a family of heavy tactical vehicles contract with the DoD that we signed last year and has similar terms. Our performance this quarter in the transport segment in part reflects production of FHTV units under these new contract terms. For the delivery side of the transport segment, we're making steady progress with the production ramp up of the next generation delivery vehicle for the United States Postal Service at our Spartanburg, South Carolina facility. In June, we surpassed 1,000,000 cumulative miles driven by postal workers across the fielded NGDV fleet, an ex an exciting milestone that reflects the momentum of this program.

John Pfeifer
John Pfeifer
President & Chief Executive Officer at Oshkosh

And in July, the USPS topped 1,500,000 cumulative miles. We're also pleased to welcome Steve Nordland, who joined in mid July to lead the transport segment. Steve brings a proven track record of innovation, leadership, and success in securing major defense contracts. Most recently, he led Boeing's Air Dominance division, which includes the recent award of the sixth generation f 47 fighter aircraft. He's a valuable addition to our team and is well positioned to help drive continued growth and performance in this segment.

John Pfeifer
John Pfeifer
President & Chief Executive Officer at Oshkosh

Turning to slide seven. Another highlight of the quarter was the launch of our microsized scissor lift, which we announced in May and we began delivering in June. This product, designed for data center customers, has been so well received that we are already evaluating options to expand capacity for this model and broaden the product line. Sales in the Access segment were in line with expectations. The segment delivered nearly 15% adjusted operating income for the quarter despite 11% lower revenue.

John Pfeifer
John Pfeifer
President & Chief Executive Officer at Oshkosh

Last but certainly not least, I wanna highlight the strong performance in our vocational segment. At Investor Day, we discussed the opportunity to expand capacity progressively in this segment to meet growing demand and fulfill backlog orders. Deliveries of our fire apparatus increased 7% in the quarter compared to last year, which included 15 trucks for Kansas City, Missouri, a great example of the many deliveries we're making to fire departments across North America. These efforts contributed to a 15% revenue increase for the segment and 20% growth for fire apparatus. We are proud to serve firefighters throughout the country and are honored to once again cosponsor the nine eleven Memorial Stair Climb on September 20 at Lambeau Field in Green Bay.

John Pfeifer
John Pfeifer
President & Chief Executive Officer at Oshkosh

This is the thirteenth year of our support for this outstanding event benefiting the National Fallen Firefighters Foundation. We are committed to our to partnerships like these and building our business to be sustainable for the long term. Many of our initiatives are highlighted in our twelfth annual sustainability report, which we published in June. In summary, this was another strong quarter for Oshkosh with contributions from all our segments. As we shared at our Investor Day, we believe we are well positioned to grow revenue and transform our margins between now and 2028, and the building blocks to deliver on this growth are evident in this quarter's results.

John Pfeifer
John Pfeifer
President & Chief Executive Officer at Oshkosh

With that, I'll hand it over to Matt to walk through our detailed financial results.

Matthew Field
Matthew Field
EVP & CFO at Oshkosh

Thanks, John. Please turn to Slide eight. Consolidated sales for the second quarter were $2,700,000,000 a decrease of 115,000,000 or 4% from the same quarter last year, primarily due to lower sales volume in the Access and Transport segments, which was partially offset by higher vocational sales volume and improved pricing. Adjusted operating income was $313,000,000 down slightly from the prior year as a result of lower sales volume. Adjusted operating income margin of 11.5% was consistent with the prior year despite lower sales.

Matthew Field
Matthew Field
EVP & CFO at Oshkosh

Adjusted earnings per share was $3.41 in the second quarter, dollars $0.07 higher than last year. During the quarter, we stepped up our share repurchases, repurchasing nearly 415,000 shares of our stock for about $40,000,000 bringing our year to date share repurchases to nearly $70,000,000 Share repurchases during the previous twelve months benefited adjusted EPS by $06 compared to the second quarter of twenty twenty four. Positive free cash flow for the quarter of $49,000,000 was significantly higher than the 2024, which had a net use of cash of $251,000,000 Improved free cash flow primarily reflected the timing of tax payments and better management of receivables. Turning to our segment highlights on slide nine. The Access segment delivered resilient adjusted operating income margins of 14.8% on sales of 1,260,000,000.00 Market conditions for access equipment in North America were in line with our expectations.

Matthew Field
Matthew Field
EVP & CFO at Oshkosh

Sales were $151,000,000 lower than last year, reflecting the expiration of our agreement to produce Cat branded telehandlers, which ended last year, and higher discounts. We also experienced lower sales volume in Europe, which was partially offset by sales at IUSA. Our vocational segment continued to deliver higher sales volume and improved pricing as we worked down our backlog, achieving an adjusted operating income margin of 16.3% on $970,000,000 of sales. Vocational 16.3% adjusted operating income margin was a two twenty basis point increase from last year, reflecting improved price cost dynamics. The Transport segment delivered an improved operating income margin of 3.7% compared to 2.1% last year despite lower Transport sales decreased $93,000,000 to $479,000,000 Revenue from delivery vehicles represented an increasing share of transport sales, growing from 6% a year ago when we began shipping NGDVs to 11% during the 2025 and twenty two percent during the second quarter.

Matthew Field
Matthew Field
EVP & CFO at Oshkosh

As expected, defense vehicle volume was lower due to the wind down of the domestic JLTV program, partially offset by higher international sales of tactical wheeled vehicles. Improved FHTV pricing, as highlighted by John, was the largest contributor of the higher operating income margin. Please turn to slide 10. Turning to our outlook for the balance of this year, the tariff environment continues to remain dynamic. As we incorporate the impact of pauses and revisions to tariff rates as well as our strong performance this quarter, we expect a more limited impact from tariffs on our business compared with the last quarter after incorporating the cost actions we have enacted.

Matthew Field
Matthew Field
EVP & CFO at Oshkosh

For the year, we project the impact of tariffs to be fully offset and expect our adjusted EPS for the year to be in the range of $11 per share on revenues of approximately $10,600,000,000 equal to our pre tariff guidance. We anticipate tariffs and market dynamics will impact each segment differently, leading to a slightly weaker access adjusted operating income margin with stronger vocational and transport results, as shown on the slide. This remains a fluid environment, and I'm confident we have the levers across the organization to deliver these results, assuming the external macro environment remains resilient as we've seen to date. We are also increasing our outlook for free cash flow from a range of 300,000,000 to $400,000,000 to a range of 400,000,000 to $500,000,000 reflecting primarily the recently enacted tax bill and operating performance. In the second quarter, we stepped up share repurchases, and we fully expect to continue to materially increase the pace of our share buybacks across the year.

Matthew Field
Matthew Field
EVP & CFO at Oshkosh

I want to reiterate what we said last quarter, and you saw at our Investor Day and in our 2028 targets, that we remain committed to execute on our strategies despite uncertainty introduced by tariffs. We believe the trends that support our industry leading businesses will provide long term growth opportunities, and we are well positioned to capitalize on these opportunities. With that, I'll turn it back over to John for some closing comments.

John Pfeifer
John Pfeifer
President & Chief Executive Officer at Oshkosh

Thanks, Matt. Despite the dynamic tariff environment, we're well positioned to take the necessary actions to deliver strong performance. We shared our vision for the company, our balanced and resilient business and our path to roughly double adjusted EPS to a targeted range of 18 to $22 per share in 2028. Our performance in the second quarter is just the first step on this journey, and we are excited to share our progress with you along the way. I'll turn it back to you, Pat, for the Q and A.

Patrick Davidson
Patrick Davidson
SVP, IR at Oshkosh

Thanks, John. I'd like to remind everybody, please limit your questions to one plus a follow-up. Please stay disciplined on your follow-up question. And after the follow-up, we ask that you rejoin the queue if you have additional questions. Operator, please begin the Q and A session.

Operator

Thank you. We will now be conducting a question and answer session. Again, we ask that all callers limit themselves to one question and one follow-up. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue.

Operator

Our first question comes from the line of David Raso with Evercore. Quick

David Raso
Senior Managing Director - Equities at Evercore

question. On the Access segment, right, first half margins, 13.3%, implied second half, 10.7%. And the decrementals year over year are similar to the first half, 38%, 39%, 40%. The confidence in that pricing that you mentioned, can you give us a little more detail with the incremental tariff, I would assume cost pressure, when were those costs are those prices instituted? How much is that already in the backlog?

David Raso
Senior Managing Director - Equities at Evercore

Or is it related to expected orders the rest of the year? Like your backlog coverage is 54% of the implied second half guide. So I'm just trying to make sure, is it pricing that's already in the backlog so you feel confident you'll get it? Or is it orders to come that you're hoping to get the price?

Matthew Field
Matthew Field
EVP & CFO at Oshkosh

Good morning, David. Thanks for the question. So the second half results really is two things. One, obviously, there's some seasonality in there. But fundamentally, what we expect to see is in really, it's more of the fourth quarter, some of the impact on tariffs on the cost side.

Matthew Field
Matthew Field
EVP & CFO at Oshkosh

There's a number of mitigation actions we've taken against tariffs that we talked about on prior calls. And our overall top line, we expect continued discounts relative to last year and a weaker external environment, kinda similar to what we saw in the first half roughly.

David Raso
Senior Managing Director - Equities at Evercore

Okay. So 3Q is a little bit old pricing, but still more of the older costs. Fourth quarter is really the where the price has to show up. Then lastly, on Vocational sorry?

Matthew Field
Matthew Field
EVP & CFO at Oshkosh

Yes. That's where we'd see more of the cost elements kick in is the fourth quarter plus some of the resourcing actions and other actions we would have from our tariff mitigations.

David Raso
Senior Managing Director - Equities at Evercore

And then lastly on vocational, the margins in the second half at 16.4% implied after 15.6% in the first half. Is that some of the pricing we've heard for a while about we have better pricing in the backlog? And even with, you know, assuming some tariff input cost, is the backlog already priced where you feel very confident you have better margins in the second half than first half? And I know the backlog coverage is large, so I'm just really trying to figure out do we already have it sort of baked in.

Matthew Field
Matthew Field
EVP & CFO at Oshkosh

Yeah. So so on vocational, as we've talked about before and we talked about at Investor Day, we're progressively working through ramping up our capacity, and that's a big driver of the second half relative to the first half as we ramp up capacity. Obviously, there is pricing in the backlog that would come to the fore. We would see that continue. But really, you're talking about volume growth over the second half driving improvements.

David Raso
Senior Managing Director - Equities at Evercore

All right. Thank you so much.

John Pfeifer
John Pfeifer
President & Chief Executive Officer at Oshkosh

Yes. David, with those backlogs in Vocational, we'll continue to get some modest benefits from pricing for the next two, three years.

Operator

Our next question comes from the line of Mig Dobre with Baird. Just

Mircea Dobre
Associate Director - Research & Senior Research Analyst at Robert W. Baird & Co

a quick clarification on your tariff commentary. Mean, what I heard is that you said that you expect to fully offset the headwind. So I'm kind of curious to hear as to exactly how you're going to do that. And then for the prior question, it seems that the fourth quarter is where you're starting to experience maybe some higher tariff related headwinds. Does that is that getting fully offset?

Mircea Dobre
Associate Director - Research & Senior Research Analyst at Robert W. Baird & Co

Or is that becoming more of an issue into 2026 as we're thinking about asset equipment maybe specifically?

John Pfeifer
John Pfeifer
President & Chief Executive Officer at Oshkosh

Hey, Meg. It's John. Thanks for the question. So let me let me be clear. We we we, just like any manufacturer in America, still have tariff headwinds coming at us.

John Pfeifer
John Pfeifer
President & Chief Executive Officer at Oshkosh

Right? And and there's a few things going on. Number one, the tariffs that we're experiencing now, you know, it's a very dynamic situation, changes regularly. So what we're seeing right now is a little bit better tariff environment than we saw one quarter ago. So that's part of it.

John Pfeifer
John Pfeifer
President & Chief Executive Officer at Oshkosh

The other part of it is we're continuing to execute our mitigation strategy. I've always said most of what we sell in America is made in America. That gives us an advantage to start. We have a local for local strategy. We're really trying to drive local production for for local regions.

John Pfeifer
John Pfeifer
President & Chief Executive Officer at Oshkosh

Europe for Europe example, US for US. We do a lot of work negotiating with our suppliers. We do we're we're engaged in resourcing work where we need to or onshoring work where we need to, but we still do have a tariff headwind. We just believe that that, we've got the right strategies in place to be able to to deal with tariffs and and offset what we need to offset. There's also business outperformance that that's helping us get over tariffs as well, and that that's why we're back to an $11 guide.

Mircea Dobre
Associate Director - Research & Senior Research Analyst at Robert W. Baird & Co

Okay. I see. Then my follow-up, maybe in the transportation segment, pricing out q three versus q four margin that's embedded into your guide. And then should we sort of think about that exit run rate as something that's sustainable into 2026 that maybe hopefully you can build upon? Sure.

Matthew Field
Matthew Field
EVP & CFO at Oshkosh

So as you saw, Transport improved in the second quarter. We would expect steady improvement as we roll on to new contracts. We as we mentioned on the call, we started building under the new FHTV contract, and we announced the new FMTV contract. We'll start building on that in 2026, kinda midyear or so. So I would expect to see, you know, second half performance as it implied in our guide will improve, and then we have additional building blocks into 2026.

Patrick Davidson
Patrick Davidson
SVP, IR at Oshkosh

Next question comes

Operator

from the line of Angel Castillo with Morgan Stanley.

Angel Castillo
Angel Castillo
Executive Director - Head of US Machinery & Construction Equity Research at Morgan Stanley

Hi, good morning, and thanks for taking my question. I just wanted to go back to the Access Equipment. A couple of things. I guess you noted a little bit of kind of sales discounts or higher sales discounts in the quarter. Just hoping you could comment a little bit more on that and just the general kind of competitive environment and what how as you combine that with what you're hearing or seeing from customers in terms of demand and order backlog for the second half, like what gives you confidence that we won't see potential push outs or further pressure from kind of that discounting activity?

Matthew Field
Matthew Field
EVP & CFO at Oshkosh

Yes. So as I mentioned, Angel, that we're seeing an external environment that's about what we expected at the beginning of the year. Discounts in the range of two to 3% is consistent with our expectation for the year as well. Book to bill has kinda returned to normative levels, so we're seeing a return to normal seasonality. You know, I'll let John comment on customers and some some of the conversations we're having there.

Matthew Field
Matthew Field
EVP & CFO at Oshkosh

But overall, you know, the market's been, you know, fairly resilient and really, you know, overall as we expected.

John Pfeifer
John Pfeifer
President & Chief Executive Officer at Oshkosh

Yeah. And, you know, Angel, going on with with regard to our customers. First thing that I'll highlight is that utilization rates of equipment in the access industry are are fine. They're they're actually pretty good. And so what what our customers are really seeing is there's a really nice pocket of demand, which is meaningful coming from big projects.

John Pfeifer
John Pfeifer
President & Chief Executive Officer at Oshkosh

That's infrastructure spending, which is gonna go on for years. It's data centers that that will go on for years. And these data centers are gigantic, and they draw a lot of equipment, power generation. On the other side of it, you've got private, nonresidential. Think about, building construction where there you know, we're we're seeing a lot of kinda holding and pausing.

John Pfeifer
John Pfeifer
President & Chief Executive Officer at Oshkosh

We're not seeing any project cancellations in the market to to speak of anyways, but there's a lot of pausing and kinda waiting for conditions to stabilize. That might mean interest rates, what's the Fed gonna do. It might mean what's how's tariffs gonna impact end markets before we proceed with this project. So that's on the other side of it. And and I I think that but but overall, customers are are comfortable with where utilization rates are.

Angel Castillo
Angel Castillo
Executive Director - Head of US Machinery & Construction Equity Research at Morgan Stanley

That's very helpful. Thank you. And then maybe just as it relates to those customer conversations, I guess, one, have you seen any step change in their desire to buy equipment, I guess, given the tax bill? And then could you quantify a little bit more specifically what's kind of embedded in your guidance for free cash flow in terms of those tax benefits?

John Pfeifer
John Pfeifer
President & Chief Executive Officer at Oshkosh

Well, we think that the the tax benefits in the in the OBBB are certainly supportive of our of our long term outlook and long term trends. It's an ongoing change to the tax law, so so I don't know that we're gonna see a specific spike in the near term. There is not an expiration date to the to what they did with regard to taxes. But we think, overall, it supports the long term health of of the industry when our customers buy capital equipment.

Matthew Field
Matthew Field
EVP & CFO at Oshkosh

Just building on that in terms of the free cash flow specifically, we did increase our guide from 300 to 400 to $405,100. That largely reflects, some of the tax bill changes on R and D credits and how those get handled.

Angel Castillo
Angel Castillo
Executive Director - Head of US Machinery & Construction Equity Research at Morgan Stanley

Understood. Thank you.

Matthew Field
Matthew Field
EVP & CFO at Oshkosh

Thanks, Angel.

Operator

Our next question comes from the line of Steven Fisher with UBS. Please proceed with your question.

Steven Fisher
Steven Fisher
MD & Equity Research Analyst at UBS Group

Congratulations on the quarter. Just to follow-up again on sort of the second half on the access side of things and that last question. I guess, as was pointed out before, only about half of the second half revenue implied is in backlog. So are you anticipating that sort of activity will actually increase in the second half of the year and there'll be a lot of sort of book and burn. Is that sort of what you're expecting and your confidence there?

John Pfeifer
John Pfeifer
President & Chief Executive Officer at Oshkosh

Yes. Thanks for the question, Steve. The backlog that we have right now are about $1,200,000,000 in backlog. It's a totally normal backlog, especially as we're here in kind of the early first third of the of the third quarter. Mhmm.

John Pfeifer
John Pfeifer
President & Chief Executive Officer at Oshkosh

And it you know, this is it's normal for us to come in with orders already booked, but also needing to continue to take orders. That's a totally normal environment for us. Nothing is abnormal about that. So, yes, we do need to book some orders, in the third and the fourth quarter, and that's almost always the case. So it's not abnormal at all.

John Pfeifer
John Pfeifer
President & Chief Executive Officer at Oshkosh

$1,200,000,000 backlog sitting right now is is, in the line of of historical norms.

Steven Fisher
Steven Fisher
MD & Equity Research Analyst at UBS Group

Okay. Fair enough. And then, I know, as you said in in the release and on the call, it is a dynamic tariff environment. I think the release said you're reflecting tariffs as of July 30. I'm curious, just I don't know if you even had any time to think about it, the August 1 updates, what that might mean relative to kind of what you've already assumed based on July 30.

John Pfeifer
John Pfeifer
President & Chief Executive Officer at Oshkosh

Well, it's a surely, Steve, it's a dynamic environment, and we we are always updating our outlooks and what we need to do based upon, the changing environment. It you know, the good news is some of our biggest trading partners seem to have come to some, resolution with the administration of what the tariff rate will be. Think about Europe for one as one example. So so that gives us some comfort. But, sure, there could be some disturbances today on on August 1 or over the next, you know, quarter, and we'll adjust to it as as necessary.

John Pfeifer
John Pfeifer
President & Chief Executive Officer at Oshkosh

But, we do feel okay because some of our big trading partners have have seemed to come to a a framework for resolution.

Steven Fisher
Steven Fisher
MD & Equity Research Analyst at UBS Group

Okay. Thank you.

Matthew Field
Matthew Field
EVP & CFO at Oshkosh

Thanks, Steve.

Operator

Our next question comes from the line of Tim Thein with Raymond James. Please proceed with your question.

Tim Thein
Tim Thein
Managing Director & Research Analyst at Raymond James Financial

Thank you. Good morning. The first question is just on the vocational business, the strength in the fire segment of 20%. Just curious how as you think about delivering on that backlog in the back half of the year, should we expect kind of a similar construct in terms of the from a product mix standpoint? Or any changes that you'd call out in terms of going back to that earlier question, I would assume that had some positive impact from a margin standpoint in the quarter.

Tim Thein
Tim Thein
Managing Director & Research Analyst at Raymond James Financial

So I'm just curious if if that's expected to continue, in the second half.

John Pfeifer
John Pfeifer
President & Chief Executive Officer at Oshkosh

Yes. It is expected to continue. Pierce, our fire brand, is a very strong business for us. We are continuing to invest in Pierce. It's our it's the market leading brand.

John Pfeifer
John Pfeifer
President & Chief Executive Officer at Oshkosh

We're really focused on continuing to increase capacity. We've got great people and a great team that is executing this, And, we're confident that every quarter that goes by, we'll continue to be able to increase supply to our customers and the velocity with which we can supply. But this is a great business, and we think it's going to be for a long time stable market, not a cyclical market. So so yes is the answer to your question.

Tim Thein
Tim Thein
Managing Director & Research Analyst at Raymond James Financial

Okay. And just a a quick follow-up on the access business yet again. On the sales mix, it was noted as a as a positive. Was that a more of a product mix, I. E, you know, telehandlers being being down more than than access or geography with with Europe being down or both?

Tim Thein
Tim Thein
Managing Director & Research Analyst at Raymond James Financial

And then just, you know, what what's how you're thinking about that dynamic in the back half? Thank you.

Matthew Field
Matthew Field
EVP & CFO at Oshkosh

Sure. Hi, Tim. Good morning. So it's a it's a number of factors in there. Partly, it it would be geography mix.

Matthew Field
Matthew Field
EVP & CFO at Oshkosh

We saw, you know, stronger mix in North America, which helps. We also actually had a a stronger mix of independents than than this time last year even though, clearly, we swing into nationals for this quarter relative to last quarter. But on a year over year basis, we did see a stronger mix of independents holding up as they support some of the larger projects. And then within that, there was obviously some some mix among units.

Tim Thein
Tim Thein
Managing Director & Research Analyst at Raymond James Financial

Got it. Thank you for the time.

Matthew Field
Matthew Field
EVP & CFO at Oshkosh

Yep. Thanks, Tim.

Operator

Our next question comes from the line of Tammy Zakaria with JPMorgan. Please proceed with your question.

Tami Zakaria
Tami Zakaria
Executive Director at JP Morgan

Hey. Good morning. Thank you so much. Very nice quarter. I have just one question.

Tami Zakaria
Tami Zakaria
Executive Director at JP Morgan

I I think I heard you say you want to steadily increase the buyback through the course of the year. So just wanted to frame what the opportunity could be. Is there a way to think about the repo as a percentage of the free cash flow you guided, 400,000,000 to $500,000,000 Is there a target that XYZ amount of that could be deployed for repo this year?

Matthew Field
Matthew Field
EVP & CFO at Oshkosh

Thanks, Tammy. Thanks for the question. So year to date, we've seen about $70,000,000 share repurchase. We've got 40,000,000 of that in the second quarter. As you correctly noted, we did mention that we would step that up. Last year, we brought about a 120.

Matthew Field
Matthew Field
EVP & CFO at Oshkosh

I would expect that to, you know, roughly double, maybe maybe a little bit more than that. So I don't look at it necessarily as a percentage of free cash flow, more as just how we're executing this year and our comfort level with our execution level.

Tami Zakaria
Tami Zakaria
Executive Director at JP Morgan

Understood. Thank you.

Angel Castillo
Angel Castillo
Executive Director - Head of US Machinery & Construction Equity Research at Morgan Stanley

Thank you.

Matthew Field
Matthew Field
EVP & CFO at Oshkosh

Thanks, Tammy.

Operator

Our next question comes from the line of Chad Dillard with Bernstein. Please proceed with your question.

Chad Dillard
Senior Analyst - US Machinery at Bernstein

Hey, good morning, guys. Can we talk a little bit more about your expectations for orders in the second half? More specifically, how are you thinking about the contribution from national accounts versus independent? And then maybe you can talk about just what is in the backlog mix on those terms.

John Pfeifer
John Pfeifer
President & Chief Executive Officer at Oshkosh

Yes. Thanks, Chad. You know, I'm not gonna get in into what's in the backlog right now. Our backlog is healthy. It's normal.

John Pfeifer
John Pfeifer
President & Chief Executive Officer at Oshkosh

As I talked about a little bit earlier, know, when you look at the marketplace, you see really strong, healthy demand in big, big projects, big infrastructure, data centers, that kind of thing. And the nationals tend to get a lot of that business because they've got the huge fleets that can support it, and it takes a huge fleet of equipment to support that kind of that kind of activity. So I think you can assume it's a little bit heavier weighted towards nationals, for the short term, and, we'll we'll see how how, some of the private nonresidential construction shapes up. Again, there's nothing being canceled. It's just kind of a lot of stuff on hold.

John Pfeifer
John Pfeifer
President & Chief Executive Officer at Oshkosh

So that's a little bit of clarification for you on that.

Chad Dillard
Senior Analyst - US Machinery at Bernstein

That's helpful. And can you also talk through your 3Q and 4Q expectations for Access revenues and margins? So just based on what's in backlog, is typical seasonality the right way to think about it? Or, you know, should we be thinking about something else?

Matthew Field
Matthew Field
EVP & CFO at Oshkosh

Hi, Chad. So, yeah, you should really think about access as returning to normal seasonality. We saw that in the first quarter. We're certainly seeing that in the second. I would expect third quarter to be a good strong quarter on a relative basis and then fourth quarter to dip down again.

Matthew Field
Matthew Field
EVP & CFO at Oshkosh

So that's really what we've seen historically, you know, kind of pre COVID, and that's certainly our outlook for the year as well.

Chad Dillard
Senior Analyst - US Machinery at Bernstein

Great. Thank you.

Matthew Field
Matthew Field
EVP & CFO at Oshkosh

Thanks, Chad.

John Pfeifer
John Pfeifer
President & Chief Executive Officer at Oshkosh

Thanks, Chad.

Operator

Our next question comes from the line of Kyle Menges with Citi. I

Kyle Menges
Kyle Menges
VP - Equity Research Analyst at Citi

think the vocational margin guide for this year now, it already gets you to the low end of your 2028 target already. So would would seem already coming in a bit ahead of the expectation laid out at the Investor Day a couple months ago. So maybe if we could just take a step back and and if you could talk a little bit about, you know, what what you've seen in vocational, what's come through the backlog, and and execution that has got you to this point to margins now guided to 16% for the year. And and just based on what you see in the backlog and and in the plan from an execution standpoint, what could incremental margins look like over the next, you know, one one to three years for vocational?

John Pfeifer
John Pfeifer
President & Chief Executive Officer at Oshkosh

Well, we were I mean, we we really love our we love all of our businesses, but vocational is a business that that really is shaping us to continue to be healthy for a long time. These are not cyclical markets. They're real fairly stable markets. And the the other thing that's great about them is that there's their their technology is is in demand in these markets, whether it's a fire truck or an environmental vehicle and refuse and recycling or an airport ground service equipment. Our our customers want advanced technology in the form of autonomous functionality, sometimes full auto autonomous.

John Pfeifer
John Pfeifer
President & Chief Executive Officer at Oshkosh

You saw it at at the Consumer Electronics Show. We showcase a lot of this autonomous capability. Mhmm. And our and and using AI to deliver insights and features on products that nobody ever dreamed possible before. These are the types of things that our customers want us to do, and we are able to do it.

John Pfeifer
John Pfeifer
President & Chief Executive Officer at Oshkosh

And we believe that this is helping drive demand for vehicles like our new fully integrated refuse and recycling vehicle. It's just got all sorts of productivity benefits all over it. That helps our customers be better, and that's that's why we think these are good markets where we're continuing to execute and grow. And, we think that that, the health is gonna continue for a long time.

Kyle Menges
Kyle Menges
VP - Equity Research Analyst at Citi

Helpful color. Thanks. And then, a question for Matt. Just, I guess, how he's about capital allocation. I thought it was noteworthy increasing the expectation for share buybacks. I guess that's driven by increase in the free cash flow expectation. But I mean, the stock is also trading at fifty two week highs, so I would love to hear just how, Matt, you're thinking about capital allocation and share buybacks going forward.

Matthew Field
Matthew Field
EVP & CFO at Oshkosh

Sure, Kyle. So I really I think we outlined a good framework at our Investor Day. And so our priorities are unchanged from that, which is really, first and foremost, you know, maintaining a strong investment grade balance sheet. We're in great shape there. Two, it's, some of the activities we talked about, which is organic growth.

Matthew Field
Matthew Field
EVP & CFO at Oshkosh

So all the capacity additions we're talking about vocational, the opportunities there, that's our second priority. After that would come, even though we're at a fifty two week high, we're still, we believe, a discounted multiple. So share repurchases would would be a priority following that. And then lastly would be m and a opportunities as they arise, and we had a good discussion in our investor day deck about how we think about m and a. But so those priorities really don't change even if we're at a fifty two week high.

Matthew Field
Matthew Field
EVP & CFO at Oshkosh

We we still do believe our multiples would would would be higher if we were rated as we would expect.

Kyle Menges
Kyle Menges
VP - Equity Research Analyst at Citi

Makes sense. Thanks for the time, guys.

Patrick Davidson
Patrick Davidson
SVP, IR at Oshkosh

Thanks, Kyle.

Operator

Our next question comes from the line of Steve Barger with KeyBanc. Please proceed with your question.

Matthew Field
Matthew Field
EVP & CFO at Oshkosh

Steve, are you there?

Steve Barger
Steve Barger
MD - Equity Research at KeyBanc Capital Markets

Sorry. I was muted.

Matthew Field
Matthew Field
EVP & CFO at Oshkosh

No worries.

Steve Barger
Steve Barger
MD - Equity Research at KeyBanc Capital Markets

Morning. Yeah. John, with all the focus on near term access trends, I'm just gonna ask one about the longer term targets. To get to the 2028 midpoint requires about an 8% CAGR. And sitting here today, does that feel like a heavy lift?

Steve Barger
Steve Barger
MD - Equity Research at KeyBanc Capital Markets

And you can you break out how much you think comes from overall market growth? How much from share gains or new product introduction? Do you expect m and a to be part of that growth? Just holistically, how are you thinking about getting from here to there?

John Pfeifer
John Pfeifer
President & Chief Executive Officer at Oshkosh

Yeah. Well, when we do those, the, you know, the 8% CAGR you're talking about, you're exactly right. We never include any m and a that might be on the horizon. That's all organically driven. And we think it's a a reasonable, achievable growth rate based upon what's going on in our business, in our markets, and how we're investing, only in new products in the core of our market, where you'll see us continue to come out with innovations in kind of that core AWP market, but also in some of the places that we've invested, with some of the acquisitions we've already made.

John Pfeifer
John Pfeifer
President & Chief Executive Officer at Oshkosh

And then you look at some of the more futuristic investment that we're making in, our ability to create the job site of the future, which we showcased at CES. And our ability to drive connectivity, drive insights through through that connectivity and and and analytics and even getting into some machine learning and AI for our customers, you know, that that really drives a healthy kind of life cycle business for us that that we think is gonna continue to be the future of where our end markets want us to support them. And when you combine all that together, you know, we think that an 8% growth rate is very, very reasonable and very achievable. So so some of the tailwinds in the market too, Steve. You see, you know, the of which I've already talked about on this call, you see all these big trends around data centers and infrastructure that's gonna go on for a long time. Those are those are also strong long term underpinnings to to to help demand move along over time.

Steve Barger
Steve Barger
MD - Equity Research at KeyBanc Capital Markets

So is this really more about the the pie growing and you maintaining or growing share, or do you expect a lot of proliferation of applications to go along with that?

John Pfeifer
John Pfeifer
President & Chief Executive Officer at Oshkosh

We we expect both to happen.

Steve Barger
Steve Barger
MD - Equity Research at KeyBanc Capital Markets

Got it. And and if I can just squeeze one more in. Sorry if I missed this, but for the transport revenue cadence in the back half, is 3Q more like the front half in terms of revenue? Or with a really sizable step up in 4Q? Or will the quarters be more level loaded in terms of both revenue and margin?

Matthew Field
Matthew Field
EVP & CFO at Oshkosh

So again, we would expect it to be progressively growing over the quarters. Again, as a reminder, think about us building up our production of NGDBs, and so we're steadily ramping throughout the year. So so that should give increase sequentially by quarter in terms of revenues in the transport segment. And then as we shift on to new contracts, so think of it as FHTV production this year under the new contract. That would also be driver for higher revenue sequentially.

Steve Barger
Steve Barger
MD - Equity Research at KeyBanc Capital Markets

Got it. Thanks.

Matthew Field
Matthew Field
EVP & CFO at Oshkosh

Sure. Have a great day.

Operator

Mr. Davidson, we have no further questions at this time. I'd like to turn the floor back over to you for closing comments.

Patrick Davidson
Patrick Davidson
SVP, IR at Oshkosh

All right, Christine. Thank you. Thanks, everybody, for joining us today. We report a very strong beat and raise. Please consider that when you're looking at Oshkosh.

Patrick Davidson
Patrick Davidson
SVP, IR at Oshkosh

If you have any follow-up questions, please reach out to me or get back with us. We look forward to seeing you in the next quarter at conferences, and have a great rest of the day and a great weekend.

Operator

Ladies and gentlemen, this does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation and have a wonderful day.

Executives
    • Patrick Davidson
      Patrick Davidson
      SVP, IR
    • John Pfeifer
      John Pfeifer
      President & Chief Executive Officer
    • Matthew Field
      Matthew Field
      EVP & CFO
Analysts
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