Terex Corporation (TEX) Earnings Call Transcript & Summary

Okay. Good morning, everyone, and thanks for attending Deutsche Bank's Industrials Conference. Welcome to Day 2. We're ready to kick it off with Terex. I'm hosting a fireside chat with both John Garrison, President and CEO; and Julie Beck, CFO. We also have Paretosh in the room, who's Head of Investor Relations. So I think Terex is going to kick it off with a few slides, and then we'll open the fireside chat. If you have questions that you'd like me to ask on your behalf, I'm happy to take those, just e-mail them to me. This is Nicole DeBlase, by the way. I'm the Lead Analyst for Electrical Equipment, Multi-Industry and Machinery at Deutsche Bank. And for those in the room, just raise your hand and get my attention, and I'm happy to let you ask your question. So with that, John, over to you.

Thank you, Nicole, and good morning, everybody, and thank you for your interest in Terex. We do have forward-looking statements, so I encourage people to take a look at that. At Terex, we start all of our meetings with our Zero Harm safety culture and our overall safety performance and an example of our Terex Way values. We've made substantial progress over the last several years in overall safety performance. But what I call attention, you see the rate of progress has actually slowed. And part of that is associated with the disruption that we continue to see in our manufacturing operations. We talk a lot about that. But when you're multiple -- dealing with equipment multiple times, multiple handling, it creates an opportunity for injuries. So we're working hard to overcome that. But that's 1 example that you see of the impact of disruption to manufacturing operations. You don't see the steady progress that we've been making in the last couple of years in our overall safety results. And so we're really focused on that as a team, is creating that environment despite the challenges we're having with disruption to continue to drive to a Zero Harm safety culture. A lot of work on ESG. I will encourage investors to -- we published our ESG report this past week. There's a lot going on in the environmental, social and governance side. For Terex, we believe it's basically in our DNA in terms of what we've been doing for a long time. So we encourage investors to take a look at that as well. So if we look at Terex, first of all, it was pretty substantial restructuring of the portfolio over the last 5 or 6 years. And what we've ended up with is some very strong brands, industry-leading positions in the respective segments that we compete in. We serve diverse end markets. Yes, construction is clearly important, and we'll probably talk about that. But we serve beyond just nonresidential constructions around the globe. From a product and a geography standpoint, we like our balance between North America, Europe, Asia Pacific and even South America. And we have invested over $600 million last 5 or 6 years in capital and CapEx. So we believe we do have the capacity to support the growth as we go forward. We've ended up with 2 very strong segments, our Materials Processing and our Aerial Work Platforms segment. And if we look at the macro environment, I know we're all concerned about the macro and a rising interest rate environment, right? But if we take a step back and look at kind of the underlying drivers of our business, we have substantial infrastructure bills here in the United States. There's 3 different bills that are going to provide some multiyear tailwinds as we think about the business. I would also say, globally, governments have frankly done a better job than we have in the States of consistently investing in infrastructure, and we've seen that in both our Materials Processing and our AWP business. We're also involved in the circular economy with recycling. We've built out an environmental business the last couple of years. A lot of the technology that we have in our materials processing business from the traditional aggregates market can be used in recycling style applications. We highlighted 1 of those in our quarterly call in India this past quarter. And again, that's an application of technology creating a different market segment for us that gives us the opportunity to grow. And our MP business has really done a great job of that. Aggregates is critical to any level of investment. And we also talk about silicon sand for microchips. And so the aggregate side of the business has been quite strong for us. Industrial has been strong. And obviously, that's the question going forward, what's going to happen with nonresi construction. But if you look at certain elements of nonresidential construction, they continue to grow pretty dramatically, data centers, the Chip Act here in the United States, when you look at its multibillion-dollar, multiyear programs for the development of those chip manufacturing facilities. And then the grid. When we talk about net zero, we talk about electrification. The investment that's required in the electric grid, both transmission, distribution and frankly, generation, multiple source generation, is substantial, coupled with 5G rollout, especially in rural America. For us, any time they have to put a repeater -- a 5G repeater on an electric power line, it has to be done with insulated equipment. And so that creates opportunity for our utilities business. The other dynamic that's out there, is again, the macro environment is a question. But when we look at dealer inventories in our MP business, about 70% to 75% of the business goes through distribution, when you look at dealer inventory levels, they're quite low as well as dealers' rental fleets, because they do a lot of RPO type transactions. And so their inventories are low, their rental fleets are low. And then likewise, if you look at the AWP side from a replacement cycle standpoint, the fleets have aged, because of the constraints of the supply chain in the environment. And so yes, the macro environment is uncertain in a rising interest rate environment, but we think there's some tailwinds that could carry us through this -- the uncertainty of the macro environment. And we're not pollyannish. You know the way we have to look out. But right now, we'll talk about -- I'm sure we'll talk about backlogs and things like that, we're seeing, which is the next slide. That's the first thing. So if you look at our backlog, it's up over 33% year-over-year. And for the first -- and we also, normally, we only talk about backlog for delivery within 12 months. We've got almost $700 million of backlog beyond 12 months. And so that just speaks to the level of backlog that we have and how historically high it is. In our MP business, our backlog is 3x its normal level. And so yes, order rates, and we'll talk about that, ameliorated somewhat. But when you look at the overall level of backlog, it's up to historically high levels. You saw the sales in the quarter, up 21% on an FX-neutral basis. And our sales have been constrained by the supply chain. And I'm sure you're going to ask me Nicole, about 2023. We're not going to provide 2023 outlook. But we are going to say, 2023, we believe, is going to be constrained by the supply chain. And we're continuing to see supply chain constraints, and I'm sure we'll talk more about that. But that's the governor right now. It's not demand. We've driven some gross margin improvements in a tough environment overall. And we've been very disciplined about our SG&A as a percent of sales. And now with that said, we're continuing to invest in digitalization. We're continuing to invest in our product development, but we've been very rigorous on our SG&A expense management. And as a result, you've seen our OP, operating profit, up over 60% and EPS up almost 80% on a year-over-year basis, which enabled us to be able to take our full year guidance for 2022. I'm sure we're focused on 2023, not 2022, enabled us to take our full year guidance up for 2022. And then finally, so just a quick summary. We really believe that we have great businesses with very strong brands. And we're a market leader in the specialized segments that we compete in. I think the team has done a good job and we improved our execution over time with our executing and innovating growth strategy. It has been an incredibly challenging environment, and it remains a very challenging environment from an operational standpoint. We haven't talked about our balance sheet a lot. But if you look, we've paid off -- we paid down over $1 billion of debt here over the last couple of years. Our leverage ratio is down at 1.44. And so we've got a very strong balance sheet, good cash flow generation. So it gives us the opportunity on the M&A side that -- and we have done some smaller transactions here in the last -- and we can talk about that, in the last couple -- the last year. So we've got a strong balance sheet that we think we can augment the organic growth with potential M&A. We'll be disciplined as we have been, but we think there's an opportunity there. We talked about the industry tailwinds. Yes, the macro is clearly uncertain in a rising interest rate environment, no doubt about it. But there's some pretty strong tailwinds that we think that could carry us through this period of time. Continue to drive innovation. We think that's critical. That's why we have leading brands. That's why we have leading market positions, is bringing solutions to our customers that help them achieve what they're trying to accomplish. And we're doing a good job of that. And then we're investing for long-term growth. As I said, we're going to invest through the cycle in R&D. We're going to invest in the cycle through capacity. We realize it's cyclical, but we will invest prudently through the cycle, so that we're always prepared for, frankly, the incredibly strong markets that we're in right now. And so that's a little bit about Terex and welcome your questions.

Thanks, John. Good overview. Okay. So you're right, I am going to ask about supply chain. I don't know how you guessed. Is there any sign of improvement out there, any green shoots? And I mean, especially with, I realize electronic components, semiconductors are probably still a problem, but the other areas.

So it's a good question. And so the short answer is we think one of the better indicators is what we call hospital inventories. So for the first thing, we're talking about hospital industry -- inventory, which we never used to talk about. We were $63 million at the end of Q2. We were $63 million at the end of Q3. The mix changed a little bit. But I think that's a good indicator. Have we seen some modest level of improvement of supplier on-time delivery? Yes, modest improvement. But in manufacturing, we're 100% solution. And 98% in most industries is an A. For us it's an F. And so we've seen modest improvements, but it's not at the level that's sustainable, where we're keeping our lines running at a constant rate. And you're right, electronic components continue to be a challenge. Hydraulic components continue to be a challenge, especially hydraulic control systems as well as the cylinders. Engines have been a constraint tied back to electronic constraints as well. So those are the areas that we've seen -- continue to see disruption and really strong demand. So it's difficult. The suppliers are giving us what they can. We continue to seek more, but modest, very modest improvement, but not to a level where we could substantially exceed what we've been doing here recently.

Okay. Okay. Got it. And investors are obviously digging for signs of weakness. And I think that's kind of been focused on Europe because that's expected to be the area that goes into a downturn first. What is Terex seeing? Is there any signs of -- any reasons to be concerned whether it's order books or otherwise?

Yes. Great question. And to be honest, we're pleasantly surprised, because we were anticipating a similar factor. And so order rates have stayed relatively constant. Backlog is up strongly. Where we have seen some slowdown specifically in our Handling business, our Fuchs business in Germany. And so we did see a slowdown in orders there. We'll see coming out of bauma, it looks like it's picking up a little bit. And I will say the attitudes at bauma were far more positive than you would have anticipated given the macro environment in Europe. So we've seen a bit of a slowdown in our handling business in Germany, but that's been made up in North America. And then our tower crane business, again, a bit of a slowdown in Europe, specifically Germany. So we have seen a slowdown in Germany in order rates. But again, it's been made up in other parts. So we are watching that very closely, and we're pleasantly surprised we haven't seen more of an adverse reaction.

Right. Okay. Okay. Got it. So China, shifting to a different part of the world. You guys have talked about a more competitive environment there recently. At some point, does it make sense to be in the China market as a western player? And I guess, secondly, are you seeing emerging Chinese competitors that could legitimately at some point, try to sell their product in the West?

Great question. So if we look at it from an AWP specific, AWP because we produce Genies there as well as some of our utility trucks for the grid. So the China market is a vast market. It has grown incredibly rapidly, and it has slowed as a result of the COVID and COVID-related policies. We saw the pricing in the Chinese market get frankly, absurd. And because we're constrained around the rest of the world, we made the decision to not bid or bid, but not follow up on several large national account orders, and we used that production elsewhere. And so for us, China, the market, it is still a growth market, but it's highly competitive right now. We have a manufacturing base upon which we can export out of China to Asia and Europe. In terms of Chinese manufacturers around the world, we believe you've got to be able to compete on a global basis. So we have to be able to compete with the Chinese. We believe we offer the value added of our brands and the capital goods, the residual values, we think that total value add helps us. And we were successful as an industry of preventing the Chinese from dumping into the North American market. So we're definitely not seeing the Chinese in the North American market because they were dumping and tariffs were applied. And so, we believe we'll have to compete against the Chinese around the world. One way to compete is to make sure you're in their market, understanding what they're doing. And so it may not be the rapid growth that we once had anticipated, but it's still a market that we think we need to participate in.

Okay. Okay. Understood. Maybe shifting back to the home market. So have you started to see any evidence of U.S. infrastructure funds flowing? Or is that more of a 2023 dynamic do you think?

I think it's more of a 2023, '24 and '25 dynamic. That's one of the tailwinds that we think we're going to see because the projects are just being let, construction contracts are just going out. And you see a great demand environment for the rental companies really across the globe, but especially strong in North America. So we think that's the tailwind, not necessarily the work that's being done. They're in the contract letting phase, not contract execution phase, at least on the ground execution.

Okay. Okay. Got it. Maybe a similar topic. I mean, we've seen resi construction weaken in the U.S. Historically, nonresi has followed resi. Do you think that with what we're seeing with infrastructure investment, resi can kind of buck the trend of -- or sorry, nonresi can buck the trend of resi?

I think the tailwinds -- I think the answer is yes, if you look at the components that make up non-resi. So yes, high tower buildings in New York City, probably are going to slow down a little bit. But if you look at the public sector, non-resi spend, if you look at things like data centers, that Chip Act, that's going to bring billions of dollars. And we're going onshore. Every one of those plants is $20-plus billion a piece, in 2 to 4 years of construction time alone. So I think there's a plausible argument about the tailwinds of the infrastructure. This is the first time we've had an infrastructure bill in the United States in 20 years. We've talked about this for 2 decades and it finally is in place. And so when -- if you look across the segments, the level of infrastructure that's required, I think it does set up for a decent tailwind in the face of the macro uncertainty that we're facing.

We would agree. Okay. Could you just remind us, your resi exposure, it's very small for you guys, right?

Yes. On the residential side, and obviously, we've seen residential rollovers, mortgage rates have gone to 7%. But I would remind investors, we were at 300,000 to 400,000 units for a decade.

Yes, true.

So we're far away. We're a long way from -- we're not at 1.4 million like we were, but we're a long way from there. So on the residential side, for us, really it's our concrete, our front discharge Terex Advance business that we -- but again, we've continued to see good order rates there. Again, because the supply chain has been constrained, that customers need to roll their fleets, their fleets have aged. So that will be the area. So residential construction for our Terex Advance mixer truck business is where we would expect a bigger part of the impact. Genie, smaller booms, smaller telehandlers, yes, it goes in there, but it's not a main driver of the business.

Okay. Okay. Got it. Maybe just shifting to AWP specifically. So I think you're in the midst of your national account negotiations with the rental companies. I would expect 2023 to be a good year of rental CapEx, but is there any reason that conclusion could prove overly optimistic?

No. I think the reality of it is the CapEx is going to be constrained by this budget. It's not going to be constrained by demand. The conversations we're having right now and negotiations we're having, it's more around what can we provide and what we can provide isn't necessarily what they're asking for. So again, I think it's going to be constrained again by the supply chain. Hopefully, it begins to improve in the back half of next year. But right now, supply chain constraints are going to be driving CapEx, I think, for 2023.

Okay. And I feel like everyone in the room, we have a good grasp on what the national rental companies are saying, because we have public company data points, but are you hearing the same thing from IRCs too?

Yes, especially the mid-market, larger IRCs, yes. I mean they're seeing strength in their business and then the small regional players likewise. And so overall, right now, the rental business is in really good shape. It's very -- that's the other thing. That business is not the same business it was when we went through the great financial crisis. When you look at the major players, the consolidation in that industry, these are incredibly well-run, well-managed companies that have invested a lot of time, money and effort in their digital systems and forecasting. And so it's different than it was 15 years ago with the consolidation in the industry. So I think it's going to help stabilize the industry as we go forward and they've done a heck of a job.

Yes, agree. Okay. So replacement demand, if you guys look at your own replacement demand model, I'm sure you have a robust one. Would you say -- we're all guessing here. Would you say that 2023 could be kind of the peak year for replacement demand? Or could we see maybe still a growth in '24?

I would say, based on what we see right now, and again, the underlying supply chain constrain issue, I think it extends. I think it's been pushed out. It should have started and it's been constrained. So I think it's going to extend.

Okay. I have to ask the question. So orders have been down year-on-year in AWP for the past 2 quarters. I'm hearing concern about -- from investors. Would you say that this is a cause for concern? Or is it just really about tough comps?

It's tough comps. We're up -- our backlog is up 44%. We've got more forward visibility than we ever have. And so it's tough comps, and I don't want to go on to say Q4 and Q1. We booked $1.8 billion in Q1 of last year. That's going to be a tough comp, but again look to the backlog and the backlog is frankly too high. I don't -- our lead times are too long. Backlog is too high.

Okay. Okay. Fair enough. Let's say we do move into this recession that we've all been waiting for. Do you think equipment rental -- do you think equipment rental companies will behave differently with respect to CapEx? Or do we see what we've always seen in the past, which is the economy weakens, CapEx gets pulled back?

That goes back to, I think, the change in the industry and the consolidation. I mean, we've got some very strong major players. And so yes, is CapEx a lever, they're always going to play? Yes, but these larger companies are now looking out what do they need? We're having conversations about what they need for the next 2 to 3 years, not what they need for next month. 15 years ago, it was what do you need for next month, we've gotten a lot. Oops, I don't need any. That's not the way the industry has gone with the consolidation and the modeling and the economics that they're applying. Yes, make no doubt about it. It will always be a lever that they can pull, but it's not one that they're going to jerk down when they look out what do I need for the next 2 to 3 years, not what do I need for the next month.

Okay. Okay. Got it. So we have to talk about price cost. So I guess if you think about the pricing actions that you've taken in AWP this year, any sense of quantification for the carryover benefit into next year?

I knew you're going to ask this question. So we're not going to provide an outlook for 2023 at this time, other than what we talked about on the supply chain. But clearly, we should have some carryover, especially if we think about our AWP segment, we were underwater for the first half of the year. So we were price cost negative for the first half of the year. In Q3, we went price cost positive. We're anticipating being price cost positive in Q4, such that will be price cost neutral for the full year, and we would anticipate that going forward as we go into 2023.

Okay.

And our MP segment has really done a really good job. If you look at their operating margins through the cycle, they've been very dynamic in their pricing. And they've been pretty close to price cost neutral, ebbing and flowing, but pretty close to price cost neutral throughout the year, and we would anticipate that in 2023 as well.

Okay. That's helpful. And just 1 more question on this. Have you guys actually started to see your COGS moderate with what we're seeing in raw materials or less so because you buy a lot of purchased components?

So well, one, it takes time through the cycle, right, to go through the P&L. And so on the positive side, North American HRC, hot-rolled coil has come down. Plate is still astronomically high. So on the positive side, we have some -- seen some amelioration. It will take time to work its way through. But the other components that you're talking about, no, the rate of increase coming down slightly, but still a fairly substantial increase, especially compared to what we're used to historically.

Okay. and the HRC versus plate situation, which of the 2 do you buy more of?

It's -- well, it's 40%...

So MP is [indiscernible] actually -- and for the AWP business, they use some HRC. And so the steel they use that as well as [indiscernible] steel.

Okay. Okay. understood. So maybe let's talk about longer term. AWP margins have been on an improvement journey for some time. Is there any reason why segment margins can't move back to prior peak levels, which is kind of like the mid-teens range?

So I think the AWP team and AWP was our Genie business and our Utilities business. And so if we look at the Genie business, they've been very aggressive at taking -- making the hard decisions, taking costs out of the business. The team has done a good job of that. And we've seen our -- despite the price cost headwinds we've seen some margin improvement. The big margin improvement for the Genie business going forward is our new plant in Mexico. And 2023 is going to be a transition year as we're moving more product in that we open it and move more product into there. And we -- by 2024 into 2025, so in the 2-year time frame into 2025, we're anticipating a 200-basis point overall margin improvement. So if you put that on, on top of where we are, good, solid double-digit and then growing up to that level. Now I will say at the prior peak, the other thing that was going on there is the exchange rate was like 140. And so that really helped the Genie business. So we'll continue to drive margin improvement. The team is focused on consistent double-digit margin first and then getting -- but we do believe 200 basis points by that 2024, end of '24 and into '25 time frame. And then the other pieces are Utilities business. And so our Utilities business of all of our businesses has been adversely impacted the most by the supply chain because they've had to deal with the chassis issue as well. And so our margins there have not, they have actually been less than the overall segment margin. So we'd expect to see those margins to recover to the low double-digit range on the Utility side.

Okay. Okay. Got it. You brought up FX, and I've had a number of questions from investors clarifying why you guys have translational impact. So if you could just make that clear. And also, is there a point where Terex product could become less competitive? Are you guys have to get more competitive with pricing because of that FX shipment dynamic, if that makes sense?

So the translational is just simply -- we're taking our sales in currencies, particularly the pound and the euro, which have been impacted the most and doing a calculation if the exchange rates were the same as last year. So we translating it at a different rate. And so that's the translational impact. This year, that's a $0.45 per share impact on our EPS. So -- and then we have a transactional foreign exchange. So we do have North American production that's being sold into Europe. And we have European production being sold into the U.S. So from the European side, that would be more of an advantage at this point and North America to euro is a slight disadvantage. But today, everybody is operating in a supply chain constraint environment. So that makes it more difficult for it to be a competitive advantage at this point in time for any one person.

Sure. Okay. That's a good point. All right. I think we've done a good job with AWP. And maybe let's move on to MP for a few minutes. So I think there's -- a lot of investors don't understand the MP business as well as they understand AWP. How economically sensitive is this business, particularly with the infrastructure dynamics that we talked about earlier?

So the MP business, and it's a gem of a segment. I mean it's 60% of our operating earnings. And if you look at how they performed through the pandemic, they bottomed out at 11% operating margin. And they've been consistently in that 14% to 15% range, and we anticipate that going forward. So it's a consistent performer, both from a revenue growth standpoint as well as a margin perspective. That's led by -- it's a global business, and we serve different markets around the world. The biggest part of that business is our Aggregates business. And it is a good business for us, both from a growth and a margin standpoint. We are investing in other businesses there. For example, our recycling and our environmental business. Those are smaller but growing at a more rapid rate. We do not yet enjoy the overall segment margin. So it does pull it down a little bit. But I think if you look at that business through time, it's very consistent. It's global, serves multiple different industries. So that consistency through time we think is really important. And fact of the matter is we don't think -- and that's our job, and we got to do a better job of explaining the MP segment, because it is 60% of our operating earnings. And like -- just like we started today, we'll spend 90% of our time talking about Genie and we're working to change that.

Okay. Got it. And the business, you mentioned dealer inventories when you were going through the slides. Is there a restocking opportunity here?

So great question. And so part of that tailwind, we think, is we think historically, what happens, right? You go into a downturn, dealer inventories are bloating, production down dramatically. We're going in -- if the macro headwind of the rising interest rate environment, we're going in with depleted inventory. And so yes, there's a stocking opportunity just to give dealer inventories and their rental fleets, especially rental fleets up to more normal level. And that's on a global basis. And so that is also one of the tailwinds that we believe will help to offset some of the macro headwinds that we have. Now obviously, we're watching it very, very closely. But again, the challenge we have there, and the challenge/opportunities is that our backlog is 3x as high. This is normally a business where if we have a quarter forward visibility, that's a lot. We have a lot more than the quarter forward visibility right now.

Okay. So margins here, as you mentioned before and very fair to point out, you've been really strong for a long time, kind of in that mid-teens range. Is it fair to say that there's less opportunity for margin improvement from here?

Now, Kieran Hegarty, my segment president, does an awesome job, would say that John was pushed back on it. Yes, I mean we always believe that there's opportunity for improvement. But if you look at the overall level of margins, operating margins in that segment, it's a good, solid, that 14%, 15% range. We are also investing in that business, technology investment, capital investment, other businesses like our environmental business, it's growing at twice the rate of the overall segment. It doesn't enjoy the same level of margins today. But over time, we do believe it would be a contributor. So we do believe in pushing the incremental margins in that segment, perhaps not as forcibly as I am on my AWP segment, maybe I'll put it that way.

That's very fair. All right. So maybe let's spend our last few minutes talking about free cash flow and capital allocation. So maybe just starting with free cash flow, it's taken time to kind of build inventory to a level that's above normal. How are you thinking about the path of bringing inventory back to normal levels? I assume this is going to take some time.

It will take some time, certainly. As I mentioned...

I see, of course you're not happy with my inventory levels.

No, not. And to John's point earlier, it's because of the supply chain disruption. So the hospital inventory at $63 million, we're not assuming by year-end that, that clears up. And so that's -- we do need to clear that out. And we'd like to get back to more historical levels. But I assume that because of the disruption we've all experienced, we will probably build a little bit of a buffer. And it won't go all the way down to what it has been before. We'll probably carry a bit more to allow for some of this disruption and to try to get back to some more just-in-time and efficient manufacturing processes.

So right now, just-in-time has proven to be just late. And so -- and that's a good -- as Julie said, I think inventory is needed throughout the channel to absorb the standard variation that we've seen. We've just seen such dramatic variation right now. There's really not a lot of inventory you could build. So as Julie said, we think there's going to be more inventory needed but we can do better than we're doing now, given the level of disruption we're experiencing.

Yes. Okay. That's clear. A couple more. So CapEx is up a lot. I think that has to do with the investment in the Mexico facility. Has CapEx peaked or with the cadence of the Mexico facility build-out, does it continue to stay high or go up further next year?

So we're a part way through getting that facility. And so although we're not giving 2023 outlook today, Nicole, we would expect we would continue to invest in our Mexico facility for next year. And so our maintenance CapEx is maybe about 1% of sales or so, is the way to think about it. And of course, we have that growth project and capacity expansion in Mexico for next year.

And just on that, we do believe that these investments, we invested over $600 million in the last 5 or 6 years. We're at 20%, a little bit north of 20% return on invested capital. So that's -- we've got a pretty good margin between our cost of capital and our return on invested capital. So we'll make prudent investments where we think it makes sense.

Yes, right thing to do. So last topic, acquisitions. Guys, you have definitely had greater interest in acquisitions recently than I've ever seen in your history from covering the stock. So how is the pipeline looking today? And is there appetite and ability to get deals done in this macro environment?

You can start and then I'll jump in.

Sure. So we have a very active pipeline. And so we'd be looking at things for our MP and Utilities business, in particular. We'd be looking at technology investments, new product lines and maybe something in parts and services and those types of businesses. We think that we might have a -- we have a strong balance sheet and the leverage. So we have the opportunity to grow. We'll have to make prudent investments, though. We want to make sure that any investment we make is accretive to earnings per share after the first year in purchase accounting adjustments. And also, we want to make sure that any acquisition out earns its cost of capital within the first 3 years or so of ownership. So we'll be prudent. We have the capital structure to make an investment. And frankly, lately, it's been difficult for a strategic to compete with some of the private equity bid. So it's possible now with real interest being charged that we might become more competitive, the strategics will be more competitive. We have synergies, et cetera. So we look forward to looking at more things.

Okay. Perfect. Well, the cost just hit zero. So we nailed it. Thank you, John and Julie. Really great to spend some time with you, and thanks to all of our audience.

Thank you for your support.

Thank you for your support and thank you for your interest in Terex.