Note: This is an earnings call transcript. Content may contain errors.

Image source: The Motley Fool.

Date

Wednesday, Oct. 29, 2025, at 9:30 a.m. ET

Call participants

  • President and Chief Executive Officer — John C. Pfeifer
  • Executive Vice President and Chief Financial Officer — Matthew Allen Field
  • Vice President, Investor Relations — Patrick N. Davidson

Need a quote from a Motley Fool analyst? Email [email protected]

Risks

  • Adjusted full-year EPS guidance was lowered to a range of $10.50 to $11 for fiscal 2025 (ending Dec. 31, 2025), reflecting reduced revenue expectations in the Access and Transport segments.
  • Matthew Allen Field reported a negative pricing environment in Access Equipment for fiscal 2025, stating, "given the weakness we see in external demand, we've seen a negative pricing environment in access."
  • Approximately $30 million to $40 million in tariff expenses are anticipated for the full year 2025, with $20 million to $30 million expected in the fourth quarter and pricing actions scheduled for 2026.
  • Warranty costs increased due to a one-time charge in the Defense segment, addressing quality issues from vehicles built during 2021-2022 supply chain shortages and recorded in the third quarter of fiscal 2025.

Takeaways

  • Consolidated revenue -- $2.7 billion in consolidated sales for the third quarter of fiscal 2025, down $53 million or 2% from the prior year, driven mainly by lower Access segment sales, partially offset by higher Vocational and Transport volumes and pricing.
  • Adjusted operating margin -- 10.2% adjusted operating margin for the third quarter of fiscal 2025, consistent with the prior year, achieved despite lower consolidated sales.
  • Adjusted EPS -- $3.20 adjusted earnings per share for the third quarter of fiscal 2025, up 9.2%, with $0.30 of the increase attributed to lower tax expense from the resolution of a U.S. federal income tax audit.
  • Free cash flow -- $464 million, up from $272 million in the prior year, primarily due to working capital improvements, including customer advances and inventory reduction.
  • Share repurchases -- 666,000 shares repurchased for $91 million in the third quarter of fiscal 2025, totaling $159 million year-to-date, resulting in a $0.05 EPS benefit compared to 2024.
  • Access segment sales -- $1.1 billion, down $254 million or nearly 19% in the third quarter of fiscal 2025, reflecting weaker North American market conditions and higher discounts.
  • Access segment operating margin -- 11% in the third quarter, demonstrating resilient margin performance amid sales declines.
  • Vocational segment sales -- $968 million, up $154 million or nearly 19% in the third quarter of fiscal 2025, led by improved throughput in municipal fire apparatus and growth in airport products.
  • Vocational segment operating margin -- 15.6% in the third quarter, benefiting from a nearly 200 basis point margin increase driven by improved price-cost dynamics.
  • Vocational orders -- $1.1 billion in the third quarter of fiscal 2025, driven by Pierce fire trucks and AeroTech products.
  • Transport segment sales -- $588 million, up $48 million in the third quarter of fiscal 2025; delivery vehicle revenue rose by $114 million to $146 million, now representing approximately 25% of the segment’s revenue.
  • Transport segment operating margin -- 6.2% in the third quarter, up from 2.1% last year, driven by a $25 million software IP license and higher pricing, partially offset by increased warranty costs; the IP license contributed roughly 400 basis points of the margin improvement.
  • Defense vehicle revenue -- Declined in the third quarter of fiscal 2025 due to the wind-down of the domestic JLTV program, partially offset by international sales and a one-time licensing agreement.
  • Adjusted full-year EPS outlook -- Adjusted EPS guidance updated to $10.50-$11 on expected revenues of $10.3 billion-$10.4 billion for fiscal 2025, reflecting lower Access and Transport segment revenue expectations.
  • Cash flow guidance -- Raised to $450 million-$550 million for fiscal 2025, up $50 million due to reduced capital expenditures and continued spending discipline.
  • Tariffs -- Anticipated cost of $30 million to $40 million for the year, with $20 million to $30 million incurred in the fourth quarter; pricing increases are planned for 2026 to offset continued tariff impacts.
  • Discounting in access -- Overall discount levels in the Access segment were around 3%-4% in the third quarter of fiscal 2025, with negative pricing pressure expected to persist through year-end.
  • NGDV (Next Generation Delivery Vehicle) revenue -- $146 million in the third quarter of fiscal 2025, with over four million operational miles and ongoing production ramp-up challenges at the new facility; full-rate production remains the end-of-year target.
  • One-time warranty charge -- The Defense segment faced a one-time warranty charge related to quality issues from vehicles built during supply chain disruptions in 2021-2022, recorded in the third quarter of fiscal 2025.
  • R&D and innovation -- Launched FMAV autonomous vehicle variants, the Tempus SI De-icer, and AG619 telehandler; international offerings expanded with the LiftPod for commercial low-level access.

Summary

Oshkosh (OSK 9.48%) revised its full-year fiscal 2025 outlook, updating guidance for adjusted EPS and segment revenues, as management cited weaker demand and negative pricing pressures in the Access segment, along with ongoing tariff headwinds. The quarter saw reduced consolidated revenue compared to the prior year, with adjusted earnings per share increasing due to tax benefits and continued share repurchase activity. Free cash flow rose substantially to $464 million in the third quarter of fiscal 2025, supported by improved working capital management. Double-digit margins were maintained across major operating segments, and the company continued to invest in new product innovation, including autonomous vehicle platforms and electric refuse vehicles. Management highlighted ongoing challenges and active mitigation strategies for tariffs, quality costs, and NGDV production ramp, while maintaining the long-term earnings growth target shared at Investor Day.

  • President and CEO John C. Pfeifer reaffirmed plans to implement price increases beginning in 2026 to offset tariffs, stating, “there'll be some price increase in 2026.”
  • Executive Vice President and CFO Matthew Allen Field quantified current-year tariff impacts for fiscal 2025, stating, “tariffs, for this year, it's kind of $30 million to $40 million is what we see for the full year, most of that being in the fourth quarter. So we would ask that to be about $20 to $30 million in the fourth quarter.”
  • John C. Pfeifer addressed Access Equipment segment margin resiliency, noting double-digit adjusted operating margins (non-GAAP) in the third quarter of fiscal 2025 despite a 19% sales decline, and emphasized operational execution during what he described as “a temporary phenomenon” in the market.
  • Adjusted EPS growth in the third quarter of fiscal 2025 was favorably impacted by lower tax expense related to “the resolution of a multiyear US federal income tax audit,” according to management.
  • Both executives described a one-time increase in warranty costs in Defense, clarified as a non-recurring “charge in the third quarter of fiscal 2025,” specifically due to issues from 2021-2022 supply chain constraints, according to Matthew Allen Field.

Industry glossary

  • FMAV (Family of Multi-Mission Autonomous Vehicles): Oshkosh's portfolio of autonomous, payload-agnostic vehicle platforms for diverse military and commercial applications.
  • NGDV (Next Generation Delivery Vehicle): The advanced electric and internal combustion postal delivery vehicle developed for the United States Postal Service.
  • JLTV (Joint Light Tactical Vehicle): A military program for advanced tactical wheeled vehicles; referenced here for its impact on Defense segment revenue and technology licensing.
  • Build My Pierce: Oshkosh’s streamlined stock fire pumper offering enabling faster lead times through simplified configuration.
  • JetBridge and ARP businesses: Oshkosh’s airport support product lines, cited as significant contributors to Vocational segment growth.

Full Conference Call Transcript

Patrick N. Davidson: Good morning, and thanks for joining us. Earlier today, we published our third quarter 2025 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 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. 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 8-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. Our presenters today include John C. Pfeifer, President and Chief Executive Officer, and Matthew Allen Field, Executive Vice President and Chief Financial Officer. Please turn to Slide three.

I'll turn it over to you, John.

John C. Pfeifer: Thanks, Pat, and good morning, everyone. We continue to successfully navigate a dynamic external environment with resilience and a strong sense of purpose to serve our everyday heroes with high-quality products that are safe, intuitive, and productive. We do this with a strong mission of service for our everyday heroes, like firefighters in our communities. We proudly sponsored the thirteenth annual 9/11 Memorial stair climb in Green Bay where more than 2,000 people raised over $120,000 for the National Fallen Firefighters Foundation and honored the brave firefighters that lost their lives on 9/11. We also demonstrated our commitment to our communities as over 1,200 volunteers came together for Oshkosh's eighth annual Feed the Body, Feed the Soul event.

These volunteers packed 224,000 pounds of rice in just twelve hours to support individuals and families facing food insecurity across Eastern Wisconsin. Turning to our financial results on Slide four. We delivered an adjusted operating margin of 10.2% on revenue of $2.7 billion in our third quarter. This led to adjusted earnings per share of $3.20, an increase of 9.2% over the prior year. These results reflect solid performance across each of our segments. Despite lower revenue, we maintained a double-digit adjusted operating income margin year over year, reflecting continued strong performance in our vocational segment, improved returns in our transport segment, and a resilient double-digit margin in our access segment.

Our adjusted EPS grew compared with last year, reflecting our operating performance and taxes. While I am pleased with the resilience demonstrated in our third quarter results, we are updating our outlook for the full year to reflect the demand environment we have been seeing starting mostly in the third quarter. We are revising our 2025 adjusted EPS guidance to a range of $10.50 to $11, which reflects slightly lower revenue expectations for both access and transport segments. I want to emphasize that end market activity in our access segment is healthy. But we are seeing customers be more cautious in the near term regarding new equipment purchases as a result of tariffs and the current economic environment.

Matt will provide additional details on segment performance and our outlook later in the call. Please turn to Slide six for Q3 highlights. In September, we continued to demonstrate how Oshkosh is shaping the future of airports by showcasing our advanced technologies at the International Airport Ground Service Equipment Expo. And in Washington DC at the AUSA Defense Conference just two weeks ago, we introduced our family of multi-mission autonomous vehicles.

Matthew Allen Field: FMAV,

John C. Pfeifer: Autonomy was a key focus at both events. At the GSE Expo, we displayed our full range of ground support equipment and showcased a flexible autonomous robot that can serve multiple roles on the tarmac. Also launched the new Tempus SI De-icer designed to easily navigate congested ramps while providing improved visibility and more intuitive controls for operators. At AUSA, Oshkosh featured three production-ready variants from the autonomous vehicle portfolio, that's FMAV, highlighting our ability to deliver autonomous, payload-agnostic platforms. Please turn to Slide seven. As I mentioned earlier, access equipment end market activity remains healthy as we see in equipment utilization percentages. That said, customers are being cautious with CapEx spending.

I'm proud of our team's execution, delivering double-digit adjusted operating margins despite this environment. While overall demand in the current environment is lower than in 2024, construction activity for data centers and infrastructure has continued to drive demand. We believe that additional long-term tailwinds related to lower interest rates, project deferrals, aged equipment, and manufacturing reshoring will support a broader pickup in construction activity. In the near term, the team remains resilient and is working to mitigate the impacts of tariffs across our business. As we have discussed previously, we are aggressively pursuing cost levers to offset the impact of tariffs.

We are also having initial discussions with customers regarding the impact of tariffs on pricing with the expectation that we will raise prices in 2026 to keep pace with input costs. Our success is driven by designing and building world-class products to meet the needs of our customers. This quarter, we introduced our new AG619 midsized AG telehandler aimed at the heart of the market which we revealed at the World Dairy Expo last month. And in Europe, we launched the innovative LiftPod, providing low-level access for commercial customers needing a safe, portable, and stowable solution to support a wide range of projects at height. Turning to Slide eight.

In the vocational segment, we continue to advance initiatives that increased production of fire trucks. This is a multiyear process as we seek to improve production efficiency by addressing bottlenecks associated with building highly customized complex trucks. At the same time, we continue to support firefighters with our stock pumpers and Build My Pierce product offerings, which improve lead times by simplifying configurations. In recent quarters, we've seen an increase in the mix of orders for Build My Pierce pumpers, which should further support our efforts to streamline production and reduce lead times.

We finished the quarter with strong orders for Vocational as the segment recorded $1.1 billion in the quarter led by orders for Pierce fire trucks, and our AeroTech products. Of course, we remain focused on increasing throughput and we expect to bring the backlog down over the next few years as we discussed at our Investor Day in June. Team that supports our McNeilus, Volterra, ZSL refuse collection vehicle, which won the coolest thing made in Tennessee 2025. This product is a game changer for the refuse collection industry as the first fully integrated electric vehicle designed with the operator in mind to deliver world-class ergonomics, purpose-built performance, and a zero-emission quiet driving experience in neighborhoods.

Please turn to slide nine. As I previously mentioned, we showcase autonomy at the AUSA defense conference. Earlier this month, we announced an order from the United States Army valued at $89 million for the modernized PLS A2 autonomy-ready heavy tactical truck designed for load handling, another example of innovation that is already available in our products today not years in the future. We continue to advance core programs to building. We have also monetized JLTV related technology through a one-time license of select operational software IP to the Department of Defense that occurred during the quarter. This further demonstrates our commitment to our government customers by providing cutting-edge technologies to support mission-critical requirements and fleet sustainment.

Lastly, we continued to ramp production of the NGDV this quarter and are targeting line rates that support our annual production goals. As with any new product launch in a new assembly plant, challenges are to be expected. And we've seen this across the vehicle industry worldwide. And the team continues to work with urgency to ramp production while maintaining quality. We now have over 4 million miles driven by postal workers, and we remain excited about the rollout of this much-needed productivity-enhancing vehicle. With that, I'll hand it over to Matt to walk through our detailed financial results.

Matthew Allen Field: Thanks, John. Please turn to Slide 10. Consolidated sales for the third quarter nearly $2.7 billion, a decrease of $53 million or 2% from the same quarter last year. Primarily due to lower sales volume in the Access segment partially offset by higher vocational and transport sales volume and improved pricing. Adjusted operating income was $274 million down slightly from the prior year primarily reflecting lower volume. Adjusted operating income margin of 10.2% was roughly in line with last year. On slightly lower sales. Adjusted earnings per share was $3.20 in the third quarter. Dollars $0.02 7 higher than last year.

Adjusted EPS was favorably impacted by about $0.30 due to lower tax expense resulting from the resolution of a multiyear US federal income tax audit. During the quarter, we again stepped up share repurchases, repurchasing 666,000 shares of our stock for $91 million bringing year-to-date share repurchases to $159 million. Share repurchases during the previous twelve months benefited EPS by 5¢ compared to the 2024. Free cash flow for the quarter was strong, at $464 million compared to $272 million in the 2024 primarily reflecting working capital changes, including customer advances, and inventory. Turning to our segment results on slide 11. The Access segment delivered resilient adjusted operating income margins of 11% on sales of $1.1 billion.

Sales were $254 million or nearly 19% lower than last year, which reflected weaker market conditions in North America and higher discounts. Our vocational segment continued to deliver strong sales growth through higher volumes and improved pricing as we deliver our backlog. Achieving an adjusted operating income margin of 15.6% on $968 million in sales. Sales grew $154 million or nearly 19% from last year. Led by improved throughput for municipal fire apparatus and robust growth in airport products. Revenue in airport products was up 17 compared with last year, demonstrating our strong JetBridge and ARP businesses. The nearly 200 basis point increase in adjusted operating income margin for this segment primarily reflected improved price-cost dynamics.

Transport segment sales increased $48 million to $588 million. Delivery vehicle revenue grew by $114 million to $146 million and now represents approximately one quarter of Transport segment revenue. Delivery revenue grew 37% sequentially compared to the 2025. As expected, defense vehicle revenue was lower compared with last year, due to the wind down of the domestic JLTV program. This was partially offset by higher international sales tactical wheeled vehicles and one-time revenue from the license of JLTV related intellectual property the US government for $25 million.

The Transport segment delivered an improved operating income margin of 6.2% compared to 2.1% last year reflecting the software IP license improved pricing on new contracts, and favorable mix, offset by higher warranty costs. The one-time licensing agreement which was contemplated in our guidance last quarter, represented a roughly 400 basis point improvement in operating income margin. Please turn to slide 12. Turning to our outlook for the remainder of 2025, The macro backdrop and end market activity have remained broadly resilient. Access customer orders, however, reflect a more judicious approach to spending as you heard from John. Our team continues to execute well amidst a dynamic government policy and international trade environment.

As John mentioned, we are updating our 2025 full year adjusted EPS guidance. Be in the range of $10.50 to 11 on revenues of approximately 10.3 to $10.4 billion. As you can see on the slide, we have further moderated our expected adjusted operating income margin in the Access segment to reflect our sales outlook and in the Transport segment for our present expectations for NGDV production. Our cash flow outlook of $450 million to $550 million up $50 million from our previous outlook reflects lower capital expenditures as we maintain rigorous spending controls. We also plan to continue with share repurchases through the balance of the year at a modestly higher pace we did in the third quarter.

With that, I'll turn it back to John for some closing comments.

John C. Pfeifer: Thanks, Matt. It's clear that 2025 has proven to be a dynamic year, including the tariff landscape and sustained higher interest rates. Our updated outlook reflects the impact of these conditions on our customers and, in turn, on the demand for our products, notably in the access segment. Even so, our team has shown strong focus and agility by managing through these conditions while delivering solid results. This performance reinforces our confidence in managing the near term while supporting our long-term growth objectives. Earlier this year at our Investor Day, we shared our vision to roughly double adjusted EPS to a range of 18 to $22 per share by 2028.

Each quarter represents a step toward that goal, and we're encouraged by the steps our teams are making today to lay the groundwork or nearly doubling EPS by then. We appreciate your continued confidence in Oshkosh and look forward to updating you as we advance our strategy and create long-term value for shareholders, customers, and team members. I'll turn it back to you now, Pat, for the Q and A.

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

Operator: Thank you. Our first question comes from Mircea Dobre with Baird. Please proceed.

Mircea Dobre: Hey, good morning, everyone. Thank you for taking the question. Maybe we can start with access a little bit. And, you know, I'm sort of curious your perspective here as you're talking to your customers. Obviously, only for business cover in Q4 but into 2026, you hinted at the fact that prices are going to go up. Which makes sense given tariffs and whatnot. What is your sense for where demand seems to be shaking out? Because we have seen some that are increasing CapEx, at least optically, it looks like there are some signs of stabilization in that industry. I'm curious if that sort of gels with what you're hearing or your salespeople are hearing as they're contemplating 2026.

And maybe more broadly, what should investors be thinking just as a general framework for this segment next year it would look to me like production is likely to be down in the '26, but perhaps you think about it differently.

John C. Pfeifer: Well, on the la I'll answer that, Mircea. It's John. So thanks for your question. You know, we're not guiding today, but I can give you some context on what we see ahead for sure. We'll guide. You know, we're in discussions with all of our customers about what 2026 looks like, so we'll have a lot better clarity for you when we get through the fourth quarter. But I'll give you context. First of all, we don't know if, at this point in time, if production is gonna be down in 2026. I honestly don't know that.

What I will tell you is that we feel, you know, we feel when we look at the market going forward, and all customers are not the same. This is a vast customer base. We've got thousands of independent rental customers, and we've got a group of big national rental customers. And you've heard some positive things from the big national rental customers of ours. There is still a bit of hesitancy in the very near term. When I talk about the very near term, I'm talking about Q3, Q4 in terms of with the current environment how much equipment do I wanna take in the here and now?

But when we look forward to '26 and we see what's going on in the market, we talk about long-term demand drivers a lot. You hear about mega projects. Constantly. Those are real, and they are ongoing. And they do drive a lot of equipment. But we're starting to also see some free up in terms of the commercial construction activity. So there's been a nonres has had a lot of commercial construction kind of on hold or pause some of the a lot of those projects are starting to get cleared through the into the planning phase. That's a very positive sign for the market going forward.

So we'll get through this year, which has been one of the most dynamic years that anybody in business has ever experienced. We'll manage it really well. We'll continue to deliver strong margins even through this dynamic period of 2025. And as we get into 2026, we'll give you some guidance in January, and we think that the market long-term looks very, very healthy. As we've been saying for a while.

Mircea Dobre: Understood. My follow-up maybe to put a finer point on the tariffs give us a sense here for how the tariff picture has changed you, maybe quantify the cost, And then, you know, as you think about next year and, again, I'm not asking for guidance. I'm just asking for your strategy. How do you think you'll be able to mitigate these tariffs if any at all? Thanks.

Matthew Allen Field: Morning, Mircea. So tariffs, for this year, it's kind of $30 million to $40 million is what we see for the full year, most of that being in the fourth quarter. So we would ask that to be about $20 to $30 million in the fourth quarter. Obviously, as you look into 2026, you'd project a full-year impact, as those are implemented and feathered in. What you don't see in the fourth quarter is the pricing John talked about, and you highlighted in your questions. So there'd be some pricing that would occur in 2026 against that. So that's how I think about tariffs for next year and how they kind of feathered in this year.

Patrick N. Davidson: Thanks, Mircea. The next question comes from Stephen Volkmann with Jefferies. Please proceed. Steven, your line is live.

Stephen Volkmann: Sorry about that. Yeah. Hey, Dave. It's Dave. I'm still kinda new at this, so I'm figuring it all out as I go. We all So the follow-on just to Mircea's question, actually. Is it reasonable to think that you can offset this tariff headwind during 2026? Is that sort of the plan, or will it take longer?

Matthew Allen Field: Hi, Steve. So as we've talked about on prior calls, you know, our approach to tariffs is really multifaceted. First, it's negotiating the supply chain. Second, it's what we call tariff engineering, and that can come in many forms. And that could be sourcing. It could be, you know, how we import. It could be the class as we run into two thirty-two and other classification ifications, we look strongly at each part we bring in and make sure it's classified in the right way so that we get the right tariff treatment. And then only then do we start talking about pricing. So it would be preliminary for me to speculate on how much would be offset next year.

But, certainly, the goal is we mitigate as much as we can on the cost side, and then we look at what pricing we need to discuss with our customers. John, is there anything you wanna add?

John C. Pfeifer: Well, I just wanna make a point to say that we do a lot. We've got a lot of really great work happening with our teams supply chain person foremost. There's engineering, manufacturing teams. We do a lot of work to offset the impact of tariffs, and we've had a lot of success doing that. Our MO when we look at tariffs is we wanna absolutely minimize the impact of tariffs on our customers. That's our first goal, minimize the impact to the customer. And we've been pretty good at doing that. Now you can't mitigate everything, so that's why I said in my prepared remarks that there'll be some price increase in 2026.

We believe that the landscape will be calmed down enough to be able to assess what any price increase needs to be. But our MO is to get through this without impacting customers very much.

Stephen Volkmann: Got it. Thank you. And then if my math is right, I think you're sort of implied incremental margins for vocational. And the fourth quarter like 40%, which is obviously impressive, especially with tariffs at How should we think about that going forward? Is that a reasonable assumption for a while, or is that something special?

Matthew Allen Field: So yeah. So for the fourth quarter, the math would imply exactly as you said, about a 40% incremental. For the year, our guidance is about 30-33%. Actually. So you know, it's really impacted this year as higher production throughput, higher volume, We've had a good mix with, with strong sales in airport products. Again, it'd be preliminary for me to speculate what the incrementals are. Our 2028 guidance, which we provided in June, would be a little lighter than that on an annualized basis, but certainly strong results out of vocational. Thanks for highlighting.

Operator: Alright. Thanks.

Patrick N. Davidson: The next question comes from Jamie Cook with Truist. Please proceed.

Jamie Cook: Hi. Good morning. I guess just two questions. One, John, as think about the competitive landscape within Access Equipment, and some of the market share movement you've seen between you and your peers. You feel like with section two thirty-two and tariffs, like, are you in a position to gain share just based on your manufacturing footprint relative to some of your peers? And then my second question, if you could just quantify or talk through more you know, some of the discounting that you noticed you know, in the access market. Quantify it, and to what degree, you know, given the tariffs, situation, you know, do, you know, does this ease, I guess? Thanks.

John C. Pfeifer: Yeah. Sure. So I'll thanks, Jamie, for the question. On the in the excess equipment world, you know, what we're doing is we're executing what we call a local for local strategy. Now we've all always been predominantly a of US manufacturing for US sales in The US in our access business. So that's good. We started with a strong position. We're continuing to execute that and do more and more of that, particularly in The US, but also in Europe. That kind of overarching strategy allows us to manage the tariff landscape as best we can and minimize the cost that it that we incur.

So, yes, that we think that helps us a lot versus the competitive environment, particularly against competitors that are outside The United States for sure. But JLG is the leading brand in the industry. We've got fantastic innovations that continue to come to market. You know, our intent is to continue to focus on our customers, how can we drive improvement for them, and that ultimately is what drives long-term share. And that's what we're intently focused on. So you know, that's what I can tell you about that.

Matthew Allen Field: So and, Jamie, just adding to your second question and a follow-on. So the team practices very disciplined pricing. You've seen that in prior cycles. You've seen it in prior quarters. That's also supported by, you know, a strong service network and that in the end, results in a very strong residual on our JLG equipment. And that's important for rental customers. And so what you saw in the third quarter is about a three, 4%, all in discount level. Which we think is very reasonable given the external environment we have. Obviously, we've not gotten into pricing for tariffs in the third quarter with the limited impact. And that'll really, be a factor in 2026 versus 2025.

Jamie Cook: Thank you. Thanks, Jamie.

Patrick N. Davidson: The next question comes from Tami Zakaria with JPMorgan. Please proceed.

Tami Zakaria: Hi. Good morning. Thank you so much. Question from me on the warranty cost. Which seemed to be an item headwind in the quarter. Are you able to elaborate on that, what's driving it and how to think about it for the rest of the year?

Matthew Allen Field: Hi, Tami. So that's really a one-time item we had in the third quarter. As we're working through the units that we've built as specifically in the defense sector. For vehicles in the kind of supply chain shortages 21-22, where we identified issues that we need to repair, as we built with kind of interim parts and so forth. So we took that charge in the third quarter. We think that's behind us.

John C. Pfeifer: Yeah. Tami, I want to just emphasize that's a core defense product. It's not the postal vehicle. It's core defense. We are a quality-focused company. We're known in the Department of Defense for quality. When we see that we have an issue, we wrap it up, and we address it as quickly as we can with the customer. Again, as Matt said, this is not an ongoing issue to expect going forward.

Tami Zakaria: Understood. That's very helpful. And one question on access. I remember, I think earlier in the year, you talked about taking some pricing doing some price investments. Did that is that still the case? Do you expect that to continue through the rest of the year, or anything changed there?

John C. Pfeifer: Can you clarify that, Tami? I'm not sure if I got exactly what you were referring to.

Tami Zakaria: So my question is on access pricing, Ariel's pricing for the year. The way it's playing out, do you expect positive pricing this year as some of these tariffs have come in or are you going back to your customers and giving some discount to any comments on pricing and how that's trending in the after setting up?

John C. Pfeifer: Go ahead, Matt.

Matthew Allen Field: Yeah. Thanks for the clarification. So as I just mentioned, this year, really, given the weakness we see in external demand, we've seen a negative pricing environment in access. Obviously, with tariffs hitting in the latter part of this year and mostly next year, we would talk about a different pricing environment into 2026.

Tami Zakaria: Understood. Thank you.

Operator: Thank you. The next question comes from Mike Shlisky with D. A. Davidson. Please proceed.

Mike Shlisky: Hey, guys. Good morning. In access, it seems like a lot of the client taking a little bit deeper into the numbers. A lot of the client have third quarter case in Telehandlers. It was down, like, I think a little over 40% and on the sales line. And you're actually expanding capacity there. Could you maybe just take just the access one step deeper and just tell us a little bit about how that's going, what's happening there, compared to the core aerials?

John C. Pfeifer: Yeah. The difference is CAT. Know, we've talked about it for a few quarters that we've had a long-term agreement with CAT. That agreement is no longer in place, and that's the primary reason you see the change in telehandlers. Our JLG telehandlers, including the Skytrak models, they're doing extreme they're doing great. They're not losing share there. And then you look at the aerials know, we're in a situation where hey, the market is down because of nonresidential private construction being down, but this is a you know, it's a temporary phenomenon.

And long-term, we see very strong health in the market, and we're really pleased with how we're able to perform with resilience during, you know, you see in Q3, for example, our revenue in access equipment is down nearly 19%, and we're at, you know, healthy double-digit margins. That's exactly the way we expect to operate, and that's what we're doing. And we'll continue through this, and the market will grow as we go forward.

Mike Shlisky: Great stuff. Thanks for that, John. And then just talking about Pierce real quick. Have you seen the impact over the last few weeks at Pierce from the federal government shutdown, especially any local effects on a wildfire assistance grants or other state loan government assistance that the federal government provides to fire department.

Matthew Allen Field: Hey, Mike. It's Matt. So in terms of federal government shutdown in the near term, not really seen a material impact. If it extends much longer, or significantly longer, I guess, you know, we may have some contracts affected as we do sell directly to the government in some cases. You know, think about our products and so forth. So there would be some knock-on effects if this extends for an extended period of time. Know, not huge numbers, but certainly, you know, something that I would watch for.

Mike Shlisky: Thanks.

John C. Pfeifer: Thanks, Mike.

Operator: Next question comes from Kyle Menges with Citigroup. Please proceed.

Kyle Menges: I think NGDV sales of $146 million in the quarter was a little bit below your expectation. And sounds like fourth quarter are gonna be a little lower than initially expected. So just curious what's driving that. What have been some of the challenges in increasing capacity. And then don't wanna put words in your mouth but got the sense from the prepared remarks that perhaps a walk back of the earlier guidance to get to annualized full run rate production of, I think, 16 to 20,000 units by year end. Like, is that still feasible in your mind? Yeah. We would just love to hear an update on that. Thank you.

John C. Pfeifer: Yeah. I'll start with the 16 to 20,000 units as an annualized number. And so let me let's start from the top. I'm gonna start with talking about the product, the NGDV or the new postal vehicle. It's an amazing product of feedback that we continue to receive with now over 4 million miles, driven in delivery operations by postal carriers is really positive. We as I said on the call in my prepared remarks, this is a brand new plant. With a brand new product. And highly automated processes. It's a fantastic plant. We have made progress. You can you see the revenue growing there. But not to date. At the pace that we want it to be at.

So we're working really hard. We've got great people in place. That are working on continuing to drive production increases till we get to full rate production. We expect to grow revenue sequentially and believe we will exit 2025 in a good position to support our plans for the United States Postal Service in a really strong 2026. So that's kind of the state of the program. But, for you.

Kyle Menges: Got it. And just curious, I guess, when you would expect maybe now to hit that full annualized run rate production? And then, yes, my follow-up is just going to be on the lowered CapEx guide like you brought it down $50 million. So curious what drove that?

John C. Pfeifer: Yes. So I'll start by the full rate production. We continue to target full rate production by the end of this year. Wanna say that's not without challenges, of course, as I just mentioned previously. We have constant communication with the United States Post Service to the highest levels. We're doing everything we can, but our plans are to get to full rate production by the end of the year. Matt, do you wanna talk about the 50¢?

Matthew Allen Field: Yeah. The reduction in CapEx reflects twofold. One, stricter spending controls in this environment, but then two, just timing of spending.

Kyle Menges: Got it. Thank you. Kyle.

Operator: Thank you. Our next question comes from Angel Castillo with Morgan Stanley. Please proceed.

Angel Castillo: Hi, good morning, and thanks for taking my question. Just wanted to go back to some of the discussion around access. You just clarify, I guess, is the greater cautiousness that you talked about, you know, from your customers reflecting itself purely in just kind of the low ordering or the low book to bill this quarter? Or are you seeing any kind of order cancellations or delivery push outs here in if you could add a little bit more color as part of that, you know, kind of how the behavior maybe differs between the nationals and independents.

John C. Pfeifer: Yeah. So first, Angel, thanks for the question. Know, we had a point six book to bill. That's a normal that's a normal book to bill for a third quarter if you look historically. You know, that said, the market's been a little bit softer compared to last year. As I already mentioned. I wanna emphasize that end market demand in this here is healthy. You know, the equipment utilization is healthy. In the market. Used market is healthy. That's all really good signs. You know, what we're seeing in the dynamic market with shifting tariffs, prolonged higher interest rates, that's caused a lot of customers to say, hey. The market's healthy.

But I just in the very near term, I'm just gonna kinda hold back on my CapEx until I get a little bit more clarity as to how this is gonna evolve, see the Fed continue to drop rates, things like that. That's really what we feel is happening in the market.

Angel Castillo: That's helpful. Thank you. And maybe just related to that, I know it's still early for fiscal year twenty-six and a lot of moving pieces here, but given, you know, just your ongoing kind of discussions with customers, whether on kind of the near-term environment or next year, can you just talk about the magnitude of the price increases that are currently being discussed for next year? Whether that kick kicks in kind of January 1. And just kind of overall, you know, discussion of that those negotiations because if I'm not mistaken, on the discounting part, it seems like discounting may have stepped up from two to 3% to three to 4%.

If you could just kind of help us understand perhaps of increases expected in gen one.

Matthew Allen Field: Yeah. It'd be preliminary to talk about price for 2026. On the quarterly basis, it's really what you see there is some seasonality and in how we go to market.

Patrick N. Davidson: Thanks, Angel. Thank you.

Operator: Thank you. The next question comes from Timothy W. Thein with Raymond James. Please proceed with your question.

Timothy W. Thein: Great. Thank you. Good morning. Just lots of dialogue here on access, but maybe I'll ask yet another one. Just with respect to your expectations, John, for kind of order activity here in the fourth quarter and specifically maybe the composition I would imagine, you know, more of your NRCs are the ones that they take up the order slots in the fourth quarter that are booking orders rather. But maybe just any kind of guardrails as to how you're thinking and maybe how the initial discussions have shaped up just with respect to, you know, how we should be thinking about order activity. Obviously, that'll be important as to how we think about 26.

So maybe I'll start with that one, and then part b of the question is just on the vocational segment. And just on fire and emergency. Obviously, that's a big part of the nice margin improvement that you have lined up into that twenty-eight target. As you talked earlier about more stock units and the Build My Pierce, does that have any implications that we should think about from a product mix standpoint? So that's two long questions. Thank you.

John C. Pfeifer: Yeah. So one on access, one on the fire industry and our fire truck business. Pierce. Start on access. I mean, you kinda hit the nail on the head, Tim. The reason that we went from an $11 guide to a $10.50 to $11 guide is primarily orders in the fourth quarter for access. And when I say orders in the fourth quarter for access, I'm talking about orders in the fourth quarter for delivery in the fourth quarter.

And right now, it's you know, it's in terms of how much equipment our customers, I'm talking from the thousands of independents, to the big guys, are going to take in the fourth quarter, that's why there's a bit of a range there from ten fifty to 11. You know, if it's as we expect, we'll be around $11. If it's you know, they're not gonna take quite as much equipment in the fourth quarter, then it could come down a little bit. With regard but hey. I want them. Continue to emphasize how well our people at Axis Equipment and JLG are performing in this very dynamic market. Know, we're performing extremely well. We'll continue to do that.

In this environment, but, again, we see nice growth on the horizon ahead of us. As we've talked about through the year. On our Pierce business, the fire truck business, we're continuing to get improved output. We'll continue to get improved output as we go forward the next few years. That'll continue to draw the backlog down. The Build My Pierce and more of the off-the-shelf fire trucks are great products. We don't see a specific margin differential between whether or not we're shipping Build My Pierce units or we're building our fully customized unit.

Operator: Thank you. The next question comes from Steve Barger with KeyBanc. Please proceed with your question.

Christian Zyla: Good morning. This is actually Christian Zyla for Steve Barger. This is a follow-up maybe to Tim's first question on access. I heard your comments about the near-term uncertainty your customers are facing. Just historically, 4Q was a big sequential order quarter for Access as your customers plan for next year. So do you still see a normal step up or in 4Q, or is that more of a 1Q event now? And then is your access backlog split evenly, or does this skew one way between bigger nationals or the smaller independents?

Matthew Allen Field: Hey, Christian. It's Matt. So the way to think about Q4 is you're right. Traditionally, the book to bill would be higher. You know, honestly, I think it'd be presumptive of me to assume that's the same, as you end up with price negotiations. Some of that might slip to January versus December, but, honestly, it's too early to make a call like that. So you know, traditionally, it would say it's higher. How it's gonna shape up this year is unclear.

Christian Zyla: Got it. Okay. And then just switching gears to your defense-related business. It seems like the industry is wanting more transport type vehicles. Is that what you're seeing as well? It may be a pitch for the CTT program, differentiates your portfolio capabilities versus the other bidders in that program? Thank you.

John C. Pfeifer: Yeah. Thanks for the question. Sure. I mean, what's really differentiating us in this market today is our technological capability. As well as our quality. We've got a really strong quality and service reputation. So they know what they get when we supply them with tactical wheeled vehicles. But going forward, as I talked in my prepared remarks, it's a lot about things like autonomous functionality or full autonomy. And that's why you see a lot of our products moving that way with the technology that we have. And that's kind of what we see as the future of this.

And it's why we stand out in that industry is that reliability and the technological performance and capabilities of our vehicles that get better and better and better as we go forward.

Operator: Thanks, Christian.

Patrick N. Davidson: Thank you. Our next question comes from David Raso with Evercore. Please proceed.

David Raso: Hi, thank you. Of the defense revenue cut by $200 million, how much of that was the postal truck?

Matthew Allen Field: It was all on the delivery side, David. All of it. Yep.

David Raso: And when it comes to that, is that the ramp-up of the BEV truck that's giving you a little bit of, you know, struggle to ramp up, or is it the ICE truck as well?

John C. Pfeifer: Oh, it's unrelated to ICE and BEV, David. The vehicles are produced on the same line. It's just continuing to dial in all of the autonomous functionality of this manufacturing plant and its normal ramp-up challenges that we're addressing, and we will get to full rate production. But it's not related to ICE and BEV.

David Raso: Just so I know how much this you feel is under your control because 35 to 40% of the EBIT cut actually came from defense. And that program is hugely significant next year for driving defense profits to take say, take a little pressure off of access. So it's not immaterial. I think most people feel vocational, that backlog should carry you, but that interplay between transport, defense, and access is not immaterial. So can you be a little clearer on when do you feel you'll have the ability to ramp that you know, I was looking for revenues getting close to $300 million a quarter at some point, not too far in the future.

So apologize to push a little bit, but just a little more clarity. It's very important for 26.

Matthew Allen Field: which was in our guidance, the warranty. However, would flow through to Eli. So you shouldn't look at the top line change in revenue as the full impact on the OI.

David Raso: Okay. The licensing was in the guide. Okay. Thank you.

Matthew Allen Field: Yeah. It was. We were expecting that. That was under negotiation when we set up our guidance for the year previously.

John C. Pfeifer: And, David, I will just say your expectation for quarterly revenue on the is in line with ours.

David Raso: Okay. That's important. Alright. I appreciate it. Thank you.

Operator: Thanks, David.

Patrick N. Davidson: Thank you. At this time, I would like to turn the call back over to Mr. Patrick N. Davidson for closing comments.

Patrick N. Davidson: Thank you, and thanks for joining us today. We'll be meeting with investors at several conferences during the fourth quarter in Chicago, Florida, and New York. We'd be happy to connect. And in early January, we'll be showcasing our technology at the annual CES show in Las Vegas. We encourage you to stop by our booth and learn about technology that supports airports, job sites, and neighborhoods of the future. Take care, everyone, and have a great rest of the day.

Operator: Thank you. This does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation, and have a great day.