Oshkosh Corporation (OSK) Earnings Call Transcript & Summary

All right. Good morning, everyone. I appreciate everyone being here. We're kicking off our, I think, 10th Global Credit Suisse Industrials Conference. With us today, I'm very pleased to have Oshkosh Corporation. We have Pat Davidson, who's the Vice President of Investor Relations; as well as John Verich, who's Senior Vice President and Treasurer. So I think for today's format, Pat will kick it off with a couple of prepared remarks, then we'll open it up for Q&A. I'll be happy to ask questions. We will also have someone walking around with the mic. So if someone in the audience does have a question, please make sure you raise your hand and we will get the microphone to you. With that, thank you very much, Pat and John.

Sounds good, Jamie. Thanks very much. And thanks, everybody, for being here. Some of you may have expected to see Mike Pack, our CFO, who was scheduled to be down here. And unfortunately, Mike is sick. Not so surprising these days, right, whether it's COVID or RSV or just the flu. And he did feel very bad and said, "Hey, tell everybody I said hi." He sends his greetings, Jamie, but we're going to do the best we can and kind of share some of the good news that's going on at Oshkosh Corporation. So just a couple of remarks before we get into the Q&A. There's a lot of pride at our company, right? We take a great deal of pride in making a difference in people's lives. The everyday heroes, whether it's the firefighter, whether it's our war fighters, whether it's the folks that are building our [indiscernible] or hauling away the garbage. There's a lot of technology and pride in what we do, and it motivates our people every day as they go to work and kind of drive that powerful purpose. We reported, I think, a pretty solid quarter. About a month or so ago, we had good strong margins in our Access Equipment segment, our JLG brand, which many of you follow. And we have good, strong, robust market fundamentals, a lot of our larger customers, especially the publicly traded ones, have been talking about strong demand with some of the infrastructure spending that's out there, the CHIPS Act, the Inflation Reduction Act, areas where our equipment will be used and consumed as construction occurs and infrastructures rebuilt. The backlog is very strong in Access Equipment, just under $4 billion at the end of September. We had a strong order quarter, if you will, and good visibility for customer requirements into 2023. Our Defense segment, which I think provides a lot of good visibility as well. We're the world leader in tactical performance wheeled vehicles. And we also made a lot of news about 1 year, 1.5 years or so ago when we won the U.S. Postal Service next-generation delivery contract. Those vehicles will begin shipping in the hundreds in 2023 -- late in 2023. That will grow in 2024 and ramp even more so in 2025 and beyond. That's a contract for up to 165,000 vehicles, battery-electric predominantly, but also some internal combustion engine vehicles and very excited about the progress that we're making down there at the facility in Spartanburg, South Carolina. We are expecting to hear sometime in early 2023 about the JLTV follow-on contract. We submitted our bid a couple of months back, and I'm sure we'll have some questions on that. So our defense business, good visibility and very excited about the things that are going on there. Our Fire & Emergency segment, our Pierce brand is the leader in custom fire trucks. We build most of those in Appleton, Wisconsin. We actually have a facility down here in Florida as well over in Bradenton, where we make predominantly commercial chassis fire trucks, with a few customs. So Fire & Emergency has been impacted by supply chain disruptions, probably a little more so than some of other segments, but those folks are working through the challenges and have made some very good progress. And finally, our Commercial segment, which is predominantly concrete mixer trucks and refuse collection vehicles. In the Environmental segment, there's some good things happening there as well. And I'm happy to answer questions as we go along, John here also, with any treasury or balance sheet questions. So it's probably a good spot for me to turn it over to you, Jamie.

Sure. So why don't we just start with supply chain? Can you talk to just -- like most industrial companies, supply chain has been a big issue. Can you talk about where you're seeing improvement versus not? Do we think the worst is sort of behind us in terms of Fire & Emergency had, as you said, experienced the worst part of it? Like just what you're seeing from that front? And do you expect that, like when you think about 2023, will you be managing for supply chain to get better? Or do you assume supply chain remains as challenged?

Good questions. So just to kind of take the last part first. Our going-in proposition for supply chain with 2023 is we're expecting it to be no better or worse.

Okay.

And that said, clearly, we're going to be working our tails off to improve it. And should it get better? It probably will, right? But our kind of going-in proposition, we need to assume that it doesn't get significantly better, but manage it to improve. So that said, there's a lot of activity towards alternate sourcing, right? One of the challenges, though, is that when you've got technology embedded sort of precision vehicles, we can't necessarily go to a new supplier next week, right? So it takes time. Generally you're talking 6 months or sometimes even longer to qualify new suppliers. But we've been doing a lot of those activities, and there are new suppliers on board that are providing better supply chain delivery than what we previously had. There's more dual sourcing going on.

Okay.

Advanced analytics is a set of tools and experience that we're using to improve kind of how we schedule things. So a good example would be, with supply chain disruptions, if you're not getting your components or your assemblies, it makes it hard to build, right?

Yes.

And you know that 2 days ahead of time versus 2 weeks ahead of time, it's not as beneficial. So the earlier we can kind of lock in and project what will be delivered or will not be delivered. That helps us to manage our schedules. So the advanced analytics are helping with kind of keeping the schedule on target and allowing us to not change the work and the workflow at late dates, right? So that's, I would say, helping in -- we're seeing some good results there. Supply chain, to your kind of base -- early question there, it's probably gotten a little better, right?

Okay.

But not significantly, right? We're not -- when we talk about on-time delivery, for the most part, we need to be in the 90% on-time delivery and above.

Okay.

And a lot of manufacturers are going to be like that.

And where are we now?

We're kind of pretty much high 60%s, probably mid- to high 60%s, maybe getting near 70% a little bit.

And where were we maybe 6 months ago?

Kind of lower 60%s, maybe high 50%s.

Okay. Okay. And then -- what was I going to say? Oh, and then one of the issues also, I think, with Oshkosh and a lot of industrial companies, which is labor. I remember we were on the road with Pfeifer and he was talking about people and management at very high levels, working on manufacturing [ floors ]...

Yes, sometimes going to supplier locations.

Yes, to make sure. So can you -- have we seen any improvement on the labor side?

Again, it's probably a modest improvement.

Okay.

A lot of the challenges we deal with supply chain, with our suppliers are their Tier 2 and Tier 3 suppliers, right? So up and down, it's getting the people and the materials in the right place, at the right time to build things. So our suppliers, they need to see improvement in their labor and their suppliers' labor. And again, it feels like it's kind of moving up a little bit, but it's not a sea change yet.

Okay. Does anyone in the audience have a question? No. Okay. So why don't we just shift over to macro because that will be topical, and then we can get into Oshkosh-specific stuff.

Sure.

Just can you tell us, obviously, we walked away from third quarter earnings. All the industrial companies were very bullish saying demand trends are still very positive and our side of the world is worried, you know what I mean that we're waiting for the downturn. So can you talk about where you have the best visibility in 2023? Since the third quarter, have you seen any cracks in demand, any order cancellations, just broadly across your portfolio? Where do you see the biggest opportunity for growth in 2023 versus which businesses do you think would be most at risk, assuming we do see some mini recession?

So quite a few questions in there and I'll be happy to answer them all.

I know. That's how...

Just keep us...

I've only had one cup of coffee.

So cancellations, we're not seeing any, right? Demand is strong. We've got large backlogs, and our order intake is very solid. For example, about $13 billion is our backlog at the end of September. It's a record. And it's a dual-edged sword, right? It gives us very good visibility, but it also kind of locks us in on some things. And with some of our customers, we've been able to reprice backlog, and they've seen what the input costs are. But like our defense contracts and some of the fire truck contracts with the cities, those prices are guaranteed and they're not changing. That said, with customers and visibility, kind of a different set of macro circumstances now is the mega projects, right? We'll hear the large national rental companies talk about mega projects consuming more equipment for longer bits of time, and that's very good. Gives them the visibility. Gives us good visibility. What have I missed on the...

So you went through -- Fire & Emergency, you went through Access, like Defense, I'm assuming it's still fairly secure and on the Commercial side as well?

So defense, we've said that, hey, 2023 will be a down year for lower scheduled deliveries of tactical wheeled vehicles. We will start to ship U.S. Postal, just a few hundred in the fourth quarter of 2023. But that will go to a few thousand in 2024, and Defense will grow again in '24, '25 and beyond.

Okay.

And U.S. Postal next-generation delivery vehicle, a good solid accretive contract for us. If we look at Fire & Emergency, the backlog extends out kind of between 24 and 36 months and sometimes even beyond that. Municipalities fund fire truck purchases with property taxes.

Okay.

And in our investor deck that's on our website, we've got a slide in there where we show the last 10 years or so of property tax increases. And it's been kind of low to mid-single digit. So municipalities have money. Their firetruck fleets are old. We've introduced new technology and new products and demand is very strong there.

Okay.

So -- and even on Access, let me just jump back on that. The backlog was just under $4 billion at the end of September. We took in just under $1 billion in orders in the quarter, but there's $1 billion plus of soft orders, if you will, that we didn't -- they're not in our backlog.

Okay.

We didn't take the order, but that's strong demand that's very front and center, and will be converted into orders in a shorter period of time rather than longer. Yes.

Okay. And then just on -- so it sounds like the demand outlook is still very strong, fairly broadly. But you have extended backlog. Some areas of your portfolio you can reprice, some areas you can't. So like can you talk to where you still expect margin challenges in 2023 given price cost? Because -- and then we have to factor in you have deflation, too, which will help you.

Right. Right.

But like it doesn't sound like there's as much pricing power in Fire & Emergency relative to maybe on Access, you can do more. So where -- I guess, where is the biggest opportunity for margin improvement in 2023 across your portfolio versus where would things still sort of be challenged?

Sure. So I would say that probably we'll take the challenge first, and then the opportunities second. So Defense and Fire & Emergency good, strong visibility. But probably margin-wise, not where they have typically been in '23, but certainly opportunities to improve from there going forward in '24.

Okay.

You've got Access Equipment, which, I think, has a good solid opportunity for kind of more back towards normal, kind of double-digit margins, if you will, in 2023.

Okay.

We're not guiding, obviously, but kind of trend-wise, if you look at where we were in the third quarter, we were a little over 11%. That's a good spot to be.

Okay.

We were behind in price cost Delta earlier in '22. But for the most part, we've caught up. But frankly, inflation is still there. We've caught up, but inflation is not 0, right? And we all know that the Fed is looking at that, and maybe inflation starts to tamp down a little bit, but it has not kind of gone back to recent history, that's for certain.

Okay. And what would be the lag time before you benefit? Is it 6 months? Like?

Hard to say. It kind of depends a little bit on the component. So we often get asked about steel, right? We use hot-rolled coil as well as plate steel across most of our businesses. Hot-rolled coil has definitely come down, right? You're kind of probably in that $700, $800 range and maybe even a little lower now. But plate is still pretty stubbornly high in the probably $1,600 per ton range. For us, when there's changes in steel prices, it takes probably 5 to 6 months to work its way from the market changing to our balance sheet and our P&L. So there's a little bit of a lag there.

Okay. Does anyone in the audience have a question? No. Okay. I'll keep going. So understanding, you said Defense margins in 2023 still sounds like there are some challenges there. But if we look out over the longer term, I'm trying to understand where Defense margins can go because it used to be a business that had teens margins. Now -- and I'm just trying to understand, with some of the new programs that you're on the Stryker or MCWS, like how does that impact margins over time? Is there an opportunity for a favorable CCA adjustment versus some of the headwinds we had this year? So why don't we start there?

Yes. So just more tactically, in the near term, we do expect favorable CCA cumulative catch-up adjustment this quarter.

Okay.

So we expect to get an FMTV contract and a JLTV contract. And basically, that will give us more volume to spread fixed costs over, and that gets applied to the entire length of the contract. And units that have shipped in prior quarters, then are assumed to have that higher margin, and we'll catch that up in the current quarter. So the last 2 quarters, to Jamie's question, have been negative catch-up adjustments because inflation has been higher than what was expected previously. This quarter, with contracts expected to come in, we think it will be positive. That said, there's always a contract adjustment for our defense business. Usually, it's not that material, maybe $1 million or $2 million, and it doesn't kind of stick out positive or negative. So it doesn't always get discussed. That said, Defense, if you look at our Investor Day back in May, we've put out 2025 targets. And those remain our targets. And in that investor deck and in that communication, we're looking at kind of 9% to 10%. So our belief is that the mix of business that we have going forward, and you mentioned the Stryker, MCWS stands for Medium-Caliber Weapon System. And it's a very strong program for us. It's a new category of vehicles for us. We had previously not done combat vehicles. And essentially, what we're doing is putting a turret on top of a Stryker. That's a contract. It will be 5 to 6 years, somewhere $900 million to $1 billion in total, but it's our entry in. And it gives us a nice opportunity to work on some additional contracts and programs with the DoD. If you recall, we acquired a company called Pratt Miller, back in early 2021. And they've got very strong technology and combat vehicle experience. And that really helped us win that contract with the DoD. There's another one I want to mention here, the Optionally Manned Fighting Vehicle. Now that's a number of years out for the final contract, but that contract, which will be worth somewhere between $30 billion and $40 billion, is in the -- currently, we're moving into the down-select for the engineering and manufacturing development phase. We've submitted a proposal. We believe there's probably 4 or 5 others that have also. There will be 3 competitors, if you will, 3 teams chosen sometime in the spring, probably April or May of 2023. And that will be a 3- to 4-year contract that will be probably somewhere between $600 million and $900 million or so over that period.

Okay.

And then the ultimate winner will be chosen probably '27 or maybe early '28.

Okay. Any questions in the audience? So then why don't we shift over to the Postal Service win, which was, obviously, a huge win for OshKosh.

Sure.

Just trying -- I understand we don't get to full rate production, I don't think until 2025. But I think when you bid the Postal Service project, you guys said it was like a good margin business. So I'm trying to understand how we think about margins for that business relative to the segment? And then, are there opportunities over time either through mix, if we go more EV or just efficiencies that margins can improve on that contract?

Yes. So very good business for us. It's our entry into the last mile delivery vehicle segment, if you will. This is the largest delivery fleet in the world. There's about 140,000 to 150,000 Grumman LLV units from the '80s that they've been maintaining and running for a number of years. I'm sure we've all seen them around neighborhoods, and they're inefficient and costly to maintain. And so this is a strong competition for this next-generation delivery vehicle that we won. It's a blend of traditional vehicles, internal combustion engine and battery electric. They've been moving towards a more battery electric vehicle, heavy mix -- that's great. We're happy with that. The initial indication was kind of a 90% ICE and 10% BEV, and it's at least probably 50-50 and maybe even more now. And part of that is the inflation Reduction Act calls for approximately $3 billion for electric vehicle purchase and EV charging infrastructure for the postal service. So that's a win-win all the way around. We're ramping up the plant, if you will. I've had a number of investors that have asked, "Hey, we'd love to go down and see the facility in Spartanburg, South Carolina." And hopefully, we'll be able to take an opportunity to visit that at some point in time. But right now, they're essentially outfitting it and getting ready for production. And as you said, kind of full rate production in '25. It will even go up in '26. So we should go above 10,000 units in '25 and even beyond that in '26. This contract basically goes out to 2030 or so and very exciting.

Okay. And then can you talk about, since you've introduced this product, are you getting interest from other customers? And when can we see sort of you -- other customers buy -- wanting this vehicle? And I guess, what are the restrictions that the Postal Service has on you in terms of selling this vehicle to another customer?

Right. So we won't be selling the exact next-generation delivery vehicle to other customers, but we can use the technology and some of the base chassis attributes and kind of modify that. So I think it's a great opportunity for us to engineer what's going to be a very successful vehicle into sort of the base for other vehicles. And there has been significant interest from last mile delivery and companies that will have fleet vehicles on the road. What we want to do, though, is really kind of first things first, is take care of the U.S. Postal Service and deliver an outstanding vehicle on time and what they're looking for and asking for, a purpose-built kind of heavy start-stop, start-stop type of a vehicle that's going to run hard during the day and charge overnight. So we are talking with other companies, but that's a little bit further down the road. And we want to get NGDV first, and we'll give updates when it's more appropriate. But it's a great question, and it's certainly something that focus on this, but we're certainly aware of that in the future.

Okay. And then why don't we just shift a little to capital allocation because, obviously, you're sitting with a pretty good balance sheet. And since Pfeifer's been the CEO, I feel like you've been a little more not aggressive, but you're talking more about M&A might be more relevant in terms of Oshkosh's story going forward relative to history. So can you talk about where your focus is? I know technology is a focus? Are we looking at adding another leg and just sort of max size?

Right.

You know what I mean? Like how big of a deal would you guys do or would you contemplate?

Let me kind of kick it off a little bit, and then have John speak a little because he is our Treasurer, kind of the keeper of the balance sheet and the [ first springs ]. But just about 2 weeks ago, right, we announced the acquisition of an Italian aerial work platform manufacturer, Hinowa. We've been working with Hinowa for 12 years. They've been building JLG Compact Crawler Booms in Italy, and it's a good, strong business. They've got great lithium-ion technology. About 70% of their business is in Europe and about 20% in the U.S. and 10% elsewhere. But they do some other products. They're involved in vegetation management. So it gives us a nice entree into some adjacent markets. And that's a nice bolt-on acquisition when you add that to MAXIMETAL that we purchased earlier this year. It's a Canadian fire truck manufacturer and Pratt Miller. I think good examples of bolt-on acquisitions, where there's good product, quality and good technologies that are attractive for us. So maybe, John, you can make a few comments on...

As Jamie mentioned, we have a strong balance sheet. Pat and I remember from the Great Recession, it wasn't always as strong. We've really had a strategy for the last 10 or 12 years to maintain that strong balance sheet to give us the flexibility. We're investment grade rated by all 3 agencies. And we think about sizing of potential acquisitions, that's a key attribute for us. We want to maintain that. So from a leverage perspective, we like being 2x or so or less. So in terms of modeling potential acquisitions, I wouldn't see us going much over 2x leverage for much more than a short period of time?

Okay. And again, is the focus -- you talked about what you've done, but you didn't talk about where you want to go? Like is the focus technology? Is it adjacent to -- product line?

It's a little bit of all of the above, right? We like technology and -- those of you that have met John, right, he's very passionate about technology and growth, right?

And growth.

Right. We've got a lot of great technology in our Oshkosh products. And if we can advance that, we will. And Pratt Miller does that, right? These guys are very strong in autonomy, robotics, active safety. We've made a number of investments in smaller firms that kind of add to what we can offer. So for example, in our environmental refuse collection vehicles, we acquired a Canadian firm called CartSeeker. And it's essentially autonomous technology that will lift the garbage can and throw it in the hopper. And it's part of our offering and will be a stronger part going forward. So there's definitely not a -- there's no bias against where the ideas come from or where the invention comes from. We've got over 800 patents. We've got a very strong engineering staff. Our Chief Technology Officer, Jay Iyengar, came to us from CNH earlier this year. And was part of our Analyst Day. And she's really working hard with our team to take kind of the technologies, electrification, autonomy, active safety, intelligent products and apply those with our vehicles and our products and our equipment to solve customer solutions. So we've got an always-on philosophy. And sometimes, there's companies that are actionable and some aren't and this most recent one is in the Access Equipment segment with Hinowa. And I think it's a good, strong kind of shot down the fairway because it's a company we know well and we've been working with, and it adds to what we can offer to our customers.

Okay. Any questions in the audience Yes, right back here. Thanks.

Have you quantified how much supply chain inefficiencies have hurt you this year, like whether it's premium freight or other buckets that are easier to track? And how are they trending today versus maybe out of the peak?

Yes, we have actually -- our 10-Q, we've listed, I got to be candid. I don't recall it off the top of my head right now. But the supply chain disruptions themselves will kind of impact us when we've talked about some of the manufacturing inefficiencies that result from that. So the sort of the 2 aspects that have been difficult that I think we've made some very good progress throughout the year is the higher input costs that we've then priced for, and we list our material and freight costs in our 10-Qs and talk about them in our conference calls. And then that sort of secondary resulting manufacturing inefficiency. And as I mentioned earlier, Fire & Emergency, where each fire truck is custom, that's where we've kind of felt it the most. Because if you're not getting the materials and the parts you need on time -- at the right time, oftentimes, you'll adjust the schedule to try to get productivity, keep it moving. But when you're adjusting the schedule, you're losing some of the I would say, sort of good run rate and momentum that you get when your factory is running kind of according to what you planned for. It's difficult on the people and it's difficult on the scheduling. I'd say almost think of it, if you're doing something at home, a project, if you got all the materials and your plans there, you can kind of run through and whether it's a cabinet or plumbing or whatever, but if you're missing something, then you got to go to the hardware store and then you come back so it's a little bit like that where when you're making changes and adjustments, that's when it hits you, so.

Anyone else?

I was wondering if you're seeing any impacts from a split Congress to your business, like any impacts on IIJA or IRA or the DoD budget that you expect?

So I think just how you're exposed to the Inflation Reduction Act.

Yes. So Inflation Reduction Act, there's $3 billion there for U.S. Postal for charging infrastructure and for battery electric vehicles. That's great. The Infrastructure Act, I think we're looking at -- I believe it's 5 years, $110 billion a year, right, for roads, bridges, other things. And that's one where our customers have the -- obviously, the most direct exposure, but we supply them with equipment. So we're very excited about that because that's 5 years of spending. And we all know that there's a lot of different infrastructure in the United States that's dated and needs update and repair. So that's going to happen. The CHIPS Act, which is very exciting, I began my career in semiconductors many years ago, and I can tell you, when I was down in Austin, Texas, everything was Texas, Arizona and California, right? Now with the Chips Act, we're going to see a facility built in Columbus, Ohio, which is kind of mind-blowing and good to see, right? And for semiconductor fabrication facilities, those take a number of years to build and they consume a lot of equipment. I can tell you the announcements for lithium-ion batteries and any other battery plants. Those are exciting too because they use a lot of our equipment for their steel infrastructure and to finish these units. So a few years back, when the Gigafactory was being built in [ Storey County ] Nevada, I often was sent pictures of the facility or facilities as it was coming up with our JLG equipment. So whether it's pouring concrete, or erecting the structure with telehandlers and aerial work platforms and even taking the trash away with in [ construction ] vehicle. There's a lot of work that will involve our equipment. So the numerous government acts that have been passed into law, I think, are beneficial for our company and quite a few others.

Yes, you're not seeing it, though, because it's interesting because [ Gere ] reported last week and within their C&F business, it's the first time they said they're starting to see stuff from IIJ, -- so people are...

Yes. It's so hard to [see as ]...

Yes, because you're selling to the rental customer.

They will make the order and say, "Hey, this one is for the IIJA and the -- but it does feel like it's starting to feather in...

It's starting to Trickle.

Yes, trickle in.

Okay. So just -- how do I say this? All right. So your guidance this year, I think, is $350 million. We put out our long-term targets for 2025. I'm just trying to understand the bridge from the earnings trajectory. Is it going to be more back-end loaded just because of where we're sitting in 2022 or as we look at 2023 because of some of these in efficiencies and price cost challenges go away that you'd see a bigger ramp? Just how would you frame the path to 2025 given where we are right now?

Right. So we haven't guided and we're not here today to provide guidance for '23. However, I would say that I mentioned earlier, our going-in proposition is that the supply chain doesn't improve significantly. So we'll have to deal with that. That said, our teams have done a good job at working with customers and raising prices appropriately to cover input costs -- and nobody -- no customers want to see higher prices, but they understand it and then they see where price -- costs are. So the cost challenges are out there. I think that we've got the right approaches to overcome those. I would say that maybe on our conference call, you asked a similar question.

I did, and I was surprised by the answer.

Well, I would say that, yes, the answer is a non-answer, right? It's a...

It was actually more positive than I would have thought because I thought I said something like do we look at the back half of 2023 as more of a base as we're thinking about 2023, given the Street is at 640 or around there. And I thought the answer was yes.

Certainly, the back half of this current year is a lot more similar to what we expect in the first half. The first half lot of price cost headwinds, right? And the cumulative catch-up adjustments that are negative with our Defense business, knock on wood, as long as inflation doesn't sort of stay crazy or go crazier. We should be in a good position because you've got to estimate where those costs are and then kind of bring them back against the contracts that you're executing -- and I think we're in a good spot, but it's a lot of hard work involved, and we've got to kind of stay very diligent on it.

Okay. We have 1 minute. Does anyone have a question? If not, I can ask the last one. All right. So why don't we just finish off with JLTV. I know you mentioned it earlier in your prepared remarks, you expect, I think, an indication in early '23. Can you talk about your confidence level in the recompete? And how do you sort of balance the visibility that, that contract potentially gives you versus the landscape, which could be more competitive and could pressure margins?

Right. So we're -- we designed the JLTV. We've been building it for a number of years. We've improved upon it significantly. Frankly, as all of us -- any of us that are U.S. [ TAC ] players, I think we're getting a very good JLTV, technology is outstanding. Our manufacturing execution is excellent. Our teams [ have done a ] great job. We introduced an electric version, the e-JLTV. Now it's not part of the formal contract. But certainly, that technology insertion is a capability that our U.S. DoD customer would get at some point in time if we win the follow-on contracts. So we're confident but not overconfident. And they're interested in manufacturing capability, value and technology insertions. And we think we kind of check those boxes with it, maybe a check plus and a gold star on each of them, but we've got to wait until a decision is reached. And if we win the JLTV 2 contract, it's somewhere around 20,000 vehicles, probably $9 billion, plus or minus a little bit and would take us into the early 2030s, so. Yes.

Okay, well, I think we're out of time. Pat and John, thank you very much for your support and coming to our conference. And great job. Thank you.

Thanks for having us. Appreciate it. Take care, everyone.