Terex Corporation (TEX) Earnings Call Transcript & Summary

Good morning, everyone, and welcome to Terex's 2022 Investor Day. I'm Jon Paterson, Vice President and Treasurer of Terex. We want to thank all of you for being here today, both in person and virtually via the webcast and we're excited to speak to you today about the opportunities we have here at Terex and the road ahead. Let me first begin with a few housekeeping items. First, a reminder that we will be talking about forward-looking statements, and there's a disclaimer behind me on the screen as well as at the beginning of the presentation that has been posted on our Investor Relations website. Second, we'll be conducting 2 Q&A sessions in a hybrid format. For those of you that are with us today in the room, we will bring a microphone over to you. And for those of you that are participating online, you can enter a question in the Q&A webcast box and that we will receive that. I'd also like to ask folks in the audience if it's possible if you could silence phones just because we're going to be streaming this through a webcast, that would be appreciated. And when asking a question today, we would like it if you could announce your name and the firm you're with and then if you could limit your questions to one and a follow-up because we want to address as many as possible. Our first Q&A session will be at the end of the Materials Processing segment where both John and Kieran will be on stage to take your questions, and that will be followed by a 10-minute break. The second Q&A session will be at the conclusion of Julie's remarks on the financial outlook for the company where the -- all of the speakers will be up on the stage. We also want to highlight that we're proud that the industry-first all-electric bucket truck will be on display in front of the New York Stock Exchange between 1 and 3 p.m. today, and we're hoping that you'll join us out there to view it. Let me briefly walk you through the agenda. First, our Chairman and Chief Executive, John Garrison, will share more about the investment opportunity at Terex and how we've transformed as a company and are positioned for growth. Kieran Hegarty, President of Terex Materials Processing, will walk you through the successes that we've had in the MP segment and how we plan to capitalize on growth opportunities in that area. Simon Meester, President of Genie, will discuss our measures that we've taken through recent years to reduce costs in the segment and to increase profitability through the cycle. Then John will come back to the stage to cover how recent investments in our utilities business have positioned that for excellent growth in the future. And then finally, Julie, Senior Vice President and Chief Financial Officer, will come to the stage, speak about the financial overview and our 2027 targets. Right now, we'd like to start off with a short video about Terex. And then John will come to the stage. Thank you. [Presentation]

All right. Well, good morning, everyone, and welcome, and thank you for coming. It's a bit like church here. No one wants to sit in the front row. But again, on behalf of the entire Terex management team, thank you, those here in person and those on the webcast. We know your time is valuable to spend a couple of hours with us. We truly appreciate that. For our investors, thank you. Thank you for the trust that you've given us, and we look forward to building and maintaining that trust as we go forward. Before I get started, there are a couple of folks that I would like to recognize, and I think it shows the support that we have, which is 3 directors here. David Sachs, who's our Lead Director and Chairman of the Governance and Nominating Committee. David's back there. Paula Cholmondeley is the Chair of our Audit Committee. Thank you for being here, Paula. And Don DeFosset is the Chair of our Human Capital and Compensation Committee. And I think what that shows is tremendous support that we have as a management team with our Board of Directors. So I'm going to start with why we believe as a management team that Terex is a compelling investment opportunity. And this will kind of be the road map for our discussions this morning. First and foremost, we have a transformed the company and the portfolio that we have. We now have a strong portfolio of diverse market-leading businesses that operate in attractive growth markets as we go forward. And we believe we are well positioned for profitable long-term growth. We also believe and we'll talk about the growth can be bolstered by this concept of megatrends. And so we'll highlight a couple of things here that we think will provide us good tailwinds over the coming period of time. The other thing that we've done as a team has implemented an operating system, an operating system that helps us drive consistency and profitability and improvement in profitability, perhaps most important return on invested capital. We think that is important to get that return on the capital that's entrusted to us by our shareholders. As a result of this, we've dramatically improved and strengthened our balance sheet, and we have the cash flow to support growth as we go forward. And finally and perhaps most importantly, to me, it's been an incredible privilege to lead the team that we have. We do have a global experienced leadership team. And I would say it's -- and I'm going to say this a couple of times. It's a team that's been adaptable and resilient to overcome the challenges we've had. And this is a team globally that has clearly demonstrated the ability to create stakeholder value. And that's why we think we're a compelling investment opportunity as we go forward. So well, we start with our purpose is important. And our purpose is to help improve the lives of people around the world. And we actually use this purpose as we work through the transformation because we knew we needed to improve if we were going to be able to fulfill our purpose. And so it was important for us as we go forward. If you think about the products and the solutions that we provide our customers and what our customers do with that they do make the world a better place, and we think that's incredibly important. Our mission is really focused on our customers. We have to provide our customers a superior productivity solution and return on their investment. These are capital goods. They need a return on their investments. So that's what we're focused on from a mission standpoint and on our customers. Next, and I'll talk about this several times is from a team member standpoint, we want to be the safest place to work and the best place to work. It's a hypercompetitive environment out there, and we want to be the place to work for our team members. Next being, most customer responsive. We're in the capital goods. Our equipment goes to work, we have to be responsive to our customers to win in the marketplace and the things that we do to increase that responsiveness so that we're always on top of the needs of the customers going forward. And then finally, being most profitable as an equipment manufacturing company, an industrial equipment company, we still think return on invested capital is important, and we need to earn a return on invested capital for the capital that our shareholders entrust with us. Now our team, it's strong, experienced, it's global. One of our Terex way values is servant leadership. This is a team that exhibits that servant leadership all over the world, every single day, helping their teams drive to accomplish the objectives that we've set out. You're going to be hearing from many of these leaders in the room today, following me. All the leaders are in the audience, so please reach out during the breaks and introduce yourself as you go forward. And again, this is a team that has demonstrated the ability to overcome unprecedented challenges of the last 3 years and delivered value for all stakeholders. So I said I would mention safety, and we will. It is the most important thing that we do. We have a relentless commitment to safety through our Zero Harm safety culture. We fundamentally believe that we have to create an environment as leaders, where our team members, our customers, our suppliers can come to work every single day and go home safe and sound to their loved ones. And the good news is we've made significant progress over time. The challenge is we're not at 0, and we know we can be at 0 because we have teams that have delivered Zero Harm for many years. So we know the objective of Zero Harm is possible. Again, made great progress, much more progress needs to be made. Next area is around our Terex way values, where we say responsible, ethical leadership, and we think that's important. One of the things we say to our teams is, listen, our values are not meant to be slogans on a wall, but it's how do we interact with team members every day, how do we interact with our suppliers? How do we interact with our customers? We think that's incredibly important. And one of the last values there on the right here is citizenship. And I'd tell you as a leader of an organization that's gone through like many organizations around the world in an incredibly challenging period of time. Heartened to just see what our team members were able to do in their communities, stepping up looking after themselves, their families, their other team members and their communities, truly a great example of citizenship throughout Terex. So our team members are our greatest asset. You'll notice we don't call them employees, and we don't call them associates. We call them team members. Why is that? It's been going on for a long time. We actually think, the manufacturing is the world's greatest team sport. Now some people may argue because FIFA World Cup is going on. But if you think about everything that has to go well in the manufacturing environment, it is the ultimate team game, and that's what our team focuses on, especially around the safety side of the business as well as the environmental improvement side. I'm responsible for my safety, I'm also responsible for my team members' safety. Committed to diversity, equity, inclusion, really stepped that program up. I'll talk a little bit about women in Terex in a second, but really stepped up our D&I initiatives. And for us, we're a global company. We're trying to drive that inclusiveness around the world for the entire organization. And we realize it's a very competitive labor market around the world. We have to invest in our team members so that they can achieve their career aspirations and achieve those aspirations with us at Terex. So in terms of ESG, 5, 6 years ago, we didn't talk about ESG. Now we absolutely have to talk about it, but we've been doing ESG activities. It's been embedded in our DNA for quite some time. On the environmental side, the biggest impact that we can make is really what we provide our customers and their ability to achieve their net 0 in carbon reduction targets. And that really is with the products and solutions. Over 60% of what we currently offer today is offered via electrification. We also have an obligation and responsibility to improve our operations. And so we have some near-term goals outstanding to reduce greenhouse gas emissions. I'd also call your attention to we did publish our ESG report. It is out on our website, and I encourage you to take a look at the things that we have going in that environment. Next is social responsibility. And I think it starts for us on the safety side, but also engaging our team members. Been quite proud of the very active women at Terex program. I think Amy is in the background there. She's led that program for many, many years. And now she's our CHRO. You have to work hard. We have to work hard to attract talent to the organization, especially diverse talent. And that's been very active and we will expand that now into our DEI program, and we're accelerating that with global affinity groups, again, to drive that inclusiveness that we need in this hypercompetitive environment, we want to attract and retain the best team members that stay and have a successful career with Terex. And last and certainly not least, is strong governance, as I think we exhibited here today, very strong support from our Board, very engaged. We have a diverse independent Board of Directors. And they are active, not just in our ESG program. They're active in everything that we do at the company. I thank the board for the support that they've provided. And last is responsible ethical leadership around our Terex way values. What you see there is living our values. Again, not meant to be slogans. And we're really pleased that just here recently, Newsweek announced that Terex is one of America's most responsible companies. And we think that speaks to the journey that we've been on, and frankly, long term how Terex is operated in the marketplace. So ESG is incredibly important and will be as we go forward. So now let's talk about just a look back because really we want to look forward. We don't want to look in the rearview mirror, but it is important to understand where we came from. And we have truly transformed this business with the focus, simplify and execute to win. Focus was really about focusing on some great businesses that we've had, and we'll show these 2 businesses that had the ability to help earn our cost of capital, drive profitability, drive growth independent of what the cycle was. We had businesses that only returned their cost of capital at the peak of the cycle. And those are the businesses that are no longer with us as you can see on the chart. And we've also migrated on the focus side to simplify and simplify was we were pretty damn complex. So we looked at how could we simplify everything that we could do in our operations through our operating system. And I think the best metric for that for us was really our SG&A as a percent of sales and the improvement that we made there. And finally, execute to win. It's that foundational element of how you drive operational improvement in your business. And it really started with a simple concept, understanding accountability and knowing the score, and having the people, the process and the tools to drive the outcomes that you're looking for was the basis of our operating system, execute to win. Now over time, that's transitioned to execute, innovate and grow. And Simon and Kieran and I will talk more about how that's factored into our plans as we go forward. And finally, here in the last -- since January of 2021, we've relaunched our mergers and acquisitions apart. We've made 7 investments over the course of this time, investments in technology, investments to expand capacity and investments to extend our product offering into near adjacencies over the course of the last 18 months. So what has it done? And I think the ultimate proof of the team's hard work is in the financial results that we have delivered. We have dramatically improved the financial performance of the company. We've increased the operating margin by more than 400 basis points. We've more than tripled the EPS, and on just a plug for quality of earnings, those are GAAP EPS, not adjusted. And we more than tripled return on invested capital over a 1,300 basis point improvement. We think that's pretty important. We were at a period of time where we weren't covering our cost of capital. And now we've got a margin significantly above our cost of capital in a world and a rising capital cost environment, we think that's important. And again, the team has confidence from what we've done but we realize there's much more to do as we go forward. But we do have to look back and say, we delivered on the commitments that we made. The other area that we delivered on the commitment that we made was around capital and capital allocation. We committed to return between $1 billion and $1.5 billion to shareholders via share repurchases. We've done about $1.6 billion. We've returned about $200 million to shareholders via dividends and then we've paid down about 60% of our outstanding debt. We've done that while investing over $600 million of capital in the business. You asked me one of the things I missed a couple of years back was the level of capital that was required. But we've invested over $600 million of capital in the business while improving the return on invested capital. And then, as I said, since January of '21, invested about $100 million in investments and acquisitions to build the portfolio going forward. So the investments, where do we make them, Watertown, South Dakota, I'll talk about that during the utility, significant investment in a market that we like. Simon will talk about Monterrey, Mexico, but we've also made investments with Kieran in Northern Ireland. Our Hosur India plant has been a great plant for Terex. And Simon and the team have done a great job there over the last decade for business within India, but also as an export center out of India. And we made an acquisition in Jiading, China. If you're going to sell in China, you have to produce in China, and we did that in our aggregates business. Just an example, we've also invested in technology and our IT systems over the course of time as well. So what has all this led to and the changes. Where are we? It puts us in an advantageous position, which we believe is a well-diversified portfolio, both geographically and among end market customers. Our MP business now comprises 44% of our sales. But as you heard me say on the video, 60% of our operating profits. When you look at our global. We still are a global company with global reach levered towards the U.S., North America, I think that's going to be important given the investment that's going to happen over the next 3 to 5 years, but with strong presence in Europe, growing presence in Asia, so a true global company. And then finally, customer applications. No doubt general construction is important to us, but we also serve the infrastructure, infrastructure maintenance businesses, Kieran is going to talk about scrap and recycling in that business and how that world is changing. That's going to be an opportunity for us. Simon will talk about Genie products just don't get used in building things, they get used in maintaining, all right, and operating as we go forward. And clearly, the electrification side, we think, is a market that's going to continue to grow as we go forward. So Kieran and Simon are going to talk more about this, but the takeaway here is that we are in market segments, verticals. And in those segments, we are market leaders. That creates that competitive moat that you're looking for as you go through time. Every one of those businesses, not only are we leaders, we help to create many of these businesses. On the aggregate side, mobile crushing and screening, our Powerscreen and Finlay brands started that industry 60-plus years ago. Material Handling, our Fuchs business, that's a 100-year-old brand, and Genie really helped to create the work at height aerial industry as well as our utilities business. And so that's the TAM that's supported. We think it's about $34 billion, also underpinned by a sizable opportunity in parts and service, which is critically important to our customers and critically been important to us because that helps drive on profitability and consistency in revenue as we go forward. So let's talk about this concept of megatrends and how we think that can provide some good tailwinds for us going first. At the center of that mega trend is sustainability. We fundamentally have to change the way in which we operate around the world. And then so that key megatrend of sustainability, what else does that drive? If you look at electrification and net 0, all right, that's substantial investment required to achieve the net 0 objectives that people have set out. Waste and recycling, that world is changing, it's a big space and Kieran will talk more about it. But a lot more regulation on what can and cannot go into landfill and what has to be recycled, and we think there's going to be an opportunity there. And then infrastructure and infrastructure investments, how is that time to sustainability? Very simply inefficient infrastructure does not help your sustainability objectives. The good news for us has been, around the world, there's been a lot more consistent investing in infrastructure. United States, we've been a little slow and I'm going to talk about that in a second. Massive infrastructure bill coming, which we think is going to provide strong tailwinds for us going forward. And finally digitization. Everything is digitized that required substantial investment, that curve is not going change. That's still going to -- big growth curve and we'll be involved with our equipment in the digitization. So we think that we're well connected to durable drivers of sustainability going forward. And that can bolster or provide some tailwinds for us as we move forward. So we're a global company so I shouldn't put a slide up, there's just about the U.S., but we did. And we did because it's important. For 20 years we've talked about an Infrastructure Bill and it never happened. Well, now we actually passed the Bipartisan Infrastructure bill. And that work is just starting. And we think that's going to provide a good tailwind for us going forward. The Inflation Reduction Act is also there's things in there around, green energy and energy-related programs that will help. And finally, the CHIPS Act. This is substantial. The onshoring of chip manufacturing back to the United States is going to require billions and billions of dollars of investment in multi-years. It also may be starting a trend of more onshoring of other industries as we deal with the geopolitical challenges of the world. So tremendous physical spend in the United States coming up over the next 3 to 5 years. And we think that provides us a good tailwind as we go forward. So our strategic framework, execute, innovate and grow consistently through time, safety at the top of that pyramid but driving commercial and operational improvement. You notice we also put team in there, improving our DEI programs, our talent development programs are part of our execution plan and the scalable company operating system. That's how you operate your business and drive that continuous improvement that's required as we go forward. Innovation, sometimes we put the word purposeful innovation in front of that because we think it's important. It's got to be purposeful. How are we helping our customers achieve what they're looking for. Product development, life cycle solutions, electrification and digitization, not just of our products but of our operations in our interface with customers. And then the growth side. And we like a wheel because you execute improvement, you drive innovation, drives growth and it builds on itself as you go forward, around superior customer life cycle experiences, expanding our addressable markets. You're going to see what Kieran and the MP team has been able to do to grow and part of that growth has come from expanding their addressable market. and then portfolio development. As we go through time, as we achieve our financial targets, we're going to have cash that we're going to be able to deploy to continue to grow. So what are the pillars as we think about pillars or themes about growth and as we go forward. The first is this concept of capitalizing on the megatrends. The circular economy. Kieran will talk about that. Electrification, really ties to utilities and other aspects of the business and then the Infrastructure Bill supports all of us. I shouldn't say grow materials process. It just can continue the growth of our material processing segment as we go forward, and Kieran will talk about that. Optimizing Genie through the cycle, both the revenue and the profitability. Simon is going to discuss that in detail on how we can take a really good business and make it a great business as we go forward. Strong foundation on the utility side, given the investment that's needed, the investment we've made, we think and we know there's going to be opportunity for growth there. And finally, parts and service because at the end of the day, that's critical to the customer and critical to us. So we believe we've got multiple vertical ways in which we can grow this company going forward. So what does it mean? So these are our financial targets, our financial objectives. The first thing is we're excited because we think this can be a $6-plus billion revenue business over the next 5 years. We think that's an achievable target for us as a company. That CAGR is about 7%. I was just chuckling, [ Jamie's ] out there somewhere and my comment is, it probably won't be linear. All of us have been around long enough to know it probably won't be linear, but the starting point and the ending point, we absolutely believe is achievable. We acknowledge there's some negative market cross currents out there, no doubt about that. Julie will address some of those in the financial segment. So we believe we can drive revenue growth but as important, we believe we can drive margin expansion with the activities that we have, principally in our AWP segment, but Kieran and the team will continue to drive margin expansion as well. So we think we have the opportunity to drive revenue growth and expand margins, and margins just above greater than what you'd get from your revenue growth is what we're saying here on margin expansion. So at the end, we think we can be a $6-plus billion and this is organic, $6-plus billion company with 13% to 14% operating margins is the target and the objectives that we've set out for ourselves. So with that performance, there are going to be -- we believe there's going to be inorganic opportunities. And so where are we looking to expand our portfolio because we will have cash to deploy when we deliver on those objectives. First is around utilities and infrastructure, specialized equipment, specialized applications in that space and global. Our Utilities business is principally a North American business. We think there may be opportunities in that space. In minerals, aggregates and concrete, a lot of opportunities there, we believe several verticals in that space are fragmented. We think there's going to be some opportunity over time for some consolidation and growth there. And then on the waste and environment, it's a huge scope. And so what we have to do is target where we're going to compete, but that is as part of that sustainability, that is going to continue to grow. And then on digital and electrification, we've made 2 investments on the digital and electrification side, we're looking to advance our technology, our product offering, and we will make investments in companies that help us to do that as we go forward. We'll talk about [ biotech ] and Aculon, 2 examples of that acquisition. And then last but not least, as we look around what do our customers do, job site productivity and services around that job site productivity is an area of interest for us. Anything that ties to that parts and service life cycle solutions of that product over time is something that we're keenly interested in. So we do think there will be opportunity for us as we go forward. And so before I turn it over to the rest of the team, I just wanted to revisit this slide. And the key message is we have transformed the business, but we know there's continued opportunity for improvement. We're not stopping but we have dramatically improved the performance of the business. We have demonstrated the ability to create shareholder value for our shareholders and our team members and our customers. And from that experience, the team has confidence that we can continue to drive improvement as we go forward. And with that, I would like to share the stage now or turn the stage over to Kieran. But before I bring Kieran up, we're going to roll a video, and let me just talk real quick about Kieran. Kieran has been with us 30-plus years. He was -- came with us from the original acquisition of Powerscreen, a true industry expert knowledge. You'll hear when Kieran starts to talk. He's not from our side of the pond, but a true global executive, and he spends his life on an airplane as he travels around the world, adeptly leading our Materials Processing segment. So let's roll the video, and then Kieran will be up. [Presentation]

John, thank you very much. As John said, my name is Kieran Hegarty, and I've been with our Terex now for over 30 years. So if you're wondering, I started, when I was about 10. But so -- but look, I suppose you've heard us some speak many times and John mentioned about the breadth and the diversity of the material processing portfolio. And I think you can really see this in that slide, right? And that's really that diversity is really part of our story, right? Not the story I want to get across to you today. We are organized effectively into what we call 5 verticals, right? Our aggregates vertical, our environmental vertical, a concrete vertical, material handling and lifting. And whilst we have a diverse portfolio that really creates this diversity creates, in our view, multiple opportunities that each of the verticals are focused on, right? But one of the common themes is all of the verticals we believe are favored by similar megatrends and tailwinds. And while some of these mega trends might directly impact some of the verticals more than others. Overall, the segment, these tailwinds and macro trends are important. The other thing as well is whilst we run a diverse portfolio of businesses, we also utilize a common operating system, right? And I'll talk about that in a moment. And that's really important, right? So whilst we have common operating system and common KPIs, we also maintain deep specialized knowledge, product knowledge, market knowledge within each of the verticals, right? And that's one of our core strengths overall as a segment. We also strong channels, and I'll also speak about that in this presentation. We believe that's a significant asset and also a significant competitive advantage. Our go-to-market strategy and our go-to-market methodology is really important and is a key part of our story. And as John pointed out as well, we also have a strong and growing parts business. And again, that's important for our customers, but it's also important for the financial performance of Terex given that it creates a steady income. Diving a little bit deeper into the MP portfolio. Our 2022 outlook, as John pointed out, circa $1.9 billion of revenues, right? That represents about 44% of Terex's revenues in 2022. But again, a key stat here it -- to MP represents approximately 60% of the Terex operating earnings. So whilst we make up 44% of the revenues, we're contributing 60% of the operating profit. If you look at the actual verticals that we're in, aggregate, and we do have a very strong leading position in aggregate, makes up approximately 50% of the revenues. But again, across the rest of the portfolio, we believe we're well balanced across the other verticals in concrete, environmental, lifting and handling. We also emphasize balance in the geographic markets that we serve, right? Whilst Terex overall, I think the stat was around 55% in North America that's probably skewed given the utilities business and our Genie business, right, from an overall segment point of view, we are probably much more balanced, right? But 40% of our revenues come from North America. 35% coming from Europe -- from Western Europe primarily. But we also have good spread in India, Asia and other markets, right? And that's important as well, right? Not just because -- and you're going to hear this theme today from myself, you're going to hear from Simon, one of the key drivers as well as the macro sort of market drivers, adoption story, right, the fact that people -- the solutions that we make, whether it's in crushing and screening, whether it's in environmental, whether it's in material handling, adoption and growing adoption across the globe is really, really important, right? And then again, and that adoption, for example, we've got a very strong and growing position in India, and that story is all about adoption. They're adopting our technology and practices because it's efficient. And then we also talked about, a moment ago, I mentioned about our channels, right? But 55% of our revenue goes through what we call specialized distributors, and I'll speak to that in a moment. About 20% goes to the multiline dealers, but about 25% of our revenue, we also sell direct to the end user, right? And the key thing that I want to get across here is we have a flexible go-to-market. Flexibility is the key, right? We're not tied or not vetted to a single distribution model, we have flexibility depending on the product line, depending on the market, right? So a key word I want to emphasize here is flexibility. If you look at some of the verticals, right? And in a moment, I'm going to give you what I consider to be, again, a compelling story in terms of where the MP growth has been over the last number of years. But we've enjoyed growth in our verticals as well, right? If you look from 2016 to our 2022 outlook, we've enjoyed 9.5% CAGR in our aggregates. Our environmental segment, whilst it's one of our smallest -- it is our smallest vertical at the moment, it's enjoying over 14% CAGR over the same period. And again, we see huge opportunities in the future in that environmental sector. And then our other businesses across lifting across concrete across handling have also grown at a 7% CAGR as well, right? So again, within the verticals, we're seeing growth across all the verticals. And then if you look back from 2016, again, John give you the stats of the data from Terex. Again, MP has gone from a $1.2 billion revenue segment to $1.9 billion, right? And again, we've enjoyed 8.7% revenue CAGR, 17.4% operating profit CAGR. And over that period, we've improved our operating profit by almost 600 basis points. And another key thing I want to point out as well, we were all affected by the pandemic. We had factories closed. We had customers were shut -- it had a significant impact on our industry as it did across many industries. But in the depth of the pandemic and for that full year, we still delivered double-digit operating profit. So again, an important -- again, speaks for -- the resilience, we believe, of our segment of the products we're in, and it really speaks for the team members, for the team that we have to deliver what I consider to be a very strong performance across on a multiyear period. So again, it's -- we're not a flash in the pan, as they say, we are a consistent performer for Terex. And that's an important part of our story. And then if you look at -- I talked about earlier, John talked about drivers, macro drivers, tailwinds, right? We face -- and again, depending on our vertical, obviously, if you look at some of the data in terms of forecast data, aggregate consumption globally, '21 to 2030 is considered -- is assumed to grow at 5.7%, construction and demolition, waste recycling, again, we enjoy a strong CAGR. Concrete, on a global basis, scrap steel, all these drivers that for example, scrap steel impacts our Material Handling business. But I also want to emphasize, a lot of these drivers are crosscutting, they cross-cut our verticals. For example, construction and demolition as a great example of more and more of the world's aggregates today are being produced by recycled material, right? And that really favors the type of product -- it favors the products that we have in our crushing and screening business, in our Terex Washing business. So I want to really emphasize that a lot of these drivers are cross-cutting, right? As the growth in the circular economy is a significant tailwind, not just in our Environmental segment, but it's crosscutting across our segments. And then John also mentioned to hit a full slide on the investments that are going to happen in North America as a result of the Inflation Reduction Act and the infrastructure. Again, that's really important given that 40% of our revenues come from North America. But I also want to talk about that infrastructure investment also is happening in India where we have a very large exposure as well, again, across our verticals, right? So I do want to -- there's multiple drivers, crosscutting, some that -- a bit more specific to certain verticals than others. But it's this -- all these drivers collectively are driving the MP growth. And then just in terms of -- I also want to reemphasize it, there's some significant overall underlying trends, right? We talked about adoption, right? We're seeing increasing adoption of our solution in the developing economies. They're already well established in the developed world in Europe and North America. But that adoption, which has been a consistent story over a multiyear, it's going back now a number of years. The adoption is global, right, and it's accelerating and it's increasing. And the reason why we're driving adoption is the solutions that we have, whether it's mobile waste processing machines, mobile crushing and screens -- our crushing and screening equipment, whether it's material handling, whether it's a special hefty Pick & Carry crane, they're the most efficient solutions that customers can use to do their job. We also have an increasingly growing installed base, right? And again, that installed base demands specialized service and parts. And again, you'll see in a moment, we are investing significantly, like the rest of Terex and have invested and we'll continue to invest, how we deliver parts and service to our customers. And then lastly, I want to talk about regulation, right? And this is really, really important, right? Because again, I think this is a really a really strong driver across our business, whether that's regulations and safety and emissions, quality, and I'll talk in a moment about recycling, but I want to give an example of safety, right? In Australia, we have a dominant position in the Pick & Carry market with what we call our Franna crane, which is a crane that lifts material and can move, right? We have about 90% of the Australian market, right, which is circa 300 cranes a year. However, the biggest crane market for Pick & Carry in the world is India, which has an annual volume of about 9,000 cranes a year. right? And we've now recently launched the Pick & Carry into India. But the value proposition that we're bringing to India is not just our Pick & Carry, it's that we're actually bringing safety, the Indian customers actually refer to the Franna crane as a safe crane. And you're seeing now this focus on safety, all developing markets are actually making sure that there's a general trend that make workplaces safer, right? So just like Terex have a huge focus on safety. A lot of other companies do. So again, these are some of the drivers. And then environmental regulations, right? We talk about the circular economy. Europe is well established in terms of recycling, right? They've got a huge percentage of waste, is diverted from landfill, right, that sits our machinery, our processing machinery. Those regulations are spreading. Canada, for example, recently adopted fairly stringent regulations regarding landfill diversion. We've seen huge growth in our environmental business in those markets, right? So again, that focus on the circular economy is really important and a key driver across our businesses. So we believe -- look, we're uniquely positioned to win, right, at Terex. We believe, as I just mentioned a moment ago, our solutions are the best. They're the most efficient, whether it's a concrete mixer truck, whether it's a Pick & Carry crane whether it's a mobile crusher, we believe we make -- we have the best solutions. We also believe our distribution model offers us and how we go to market. We have strong application knowledge that we can apply to our customers. And that's why our customers give us business. And again, I just mentioned that on the distribution. We also believe we have crossed while we are a diverse portfolio in terms of product diversification, our robust operating model is important to delivering financial results. We have deep business knowledge within the verticals. We run a GM style model in terms of each business units accountable for their own business line performance. And that's something that we've applied consistently over a number of years. But I also want to also comment on the fact that whilst we are a diverse portfolio, we do leverage multiple synergies across the business, right? We -- synergies like central sourcing platforms, when we develop digital tools. If they're applicable across the unit, we apply them across the unit. We share engineering resources in areas like electrification, we share manufacturing footprints. The new factory in Campsie in Northern Ireland, again, is a multi-brand site similar in India. We share parts and service infrastructure, warehousing across the globe. So again, on this parts and service focus again, strengthens our long-term relationship with the customers. And again, as you'll see in a moment, it's a growing part of our business. And really, it's a business of us focusing on that there, not just for the benefit of customers but also to generate consistent revenue streams for our customers. Look, as I dive deeper into our aggregate solutions, right, which is, as you've seen from the slide earlier, approximately 50% of our revenues. Now historically, we have been very focused on mobile equipment. We were the pioneer of mobile equipment in 1950s when John Finley came out with the first little self-contained screen with a small diesel engine, and then that's spawn power screen. So we spawned the concept of mobile crushing and screening, right? And then that mobile crushing and screening, there's a growing percentage of the globe's aggregates are produced by mobile crushing and screening. And the reason why that is, is we have invested in continuing developing the technology. We make our machines larger, we've got more capacity. So it's a much more flexible asset than traditional stationary. However, we still operate in stationary. We designed modular equipment, and we have a number of different brands within our portfolio that make us #1 in the aggregate sector. I also talked about the recycling. So not only does recycling -- producing aggregates from recycling favor our -- or crawler tractor Powerscreen or Finlay and our EvoQuip business. But also like businesses here, you can see down here on the right-hand side. This is what we call the urban quarry, right, where this is actually just outside Geneva in Switzerland, where we are taking waste excavation material, right, in a suburb of Geneva and producing high-spec quality aggregates by washing them, right? And this plant, we even -- we talk about recycling, right? It's a closed loop, we even recycle the water that's used, right, in a closed loop process, right? So again, dominant position, continue to invest in ongoing product development in our aggregates business. Closer look at our environmental business, a relatively new business for us, right? We really only built this vertical starting in 2015, right? And we've seen tremendous growth here. And whilst we say what today, it's our smallest segment. I'm really bullish on this area of the business, right? Because again, the mega trend is the world, our customers, we're all embracing the circular economy, sustainability. And the products that we make are right at the heart of what we do. And again, when we talk about leveraging synergies and moving, John talked about moving into logical adjacencies or purposeful adjacencies. A good example here is the technology that we were market leaders for or known for in our crushing and screening business. For example, our crawler tractor and our mobile business, we applied the same knowhow and logic to our waste processing machinery. We use the same technology, the same engineering competencies and applied them to those businesses. So in the space of the last 7 years, we've -- within the environmental, we have the CBA, a business unit focused manufacturing in North America, focused on primary wood processing. Ecotec, which we started up, focused on mixed waste, construction demolition. Recently launched Terex recycling systems because, a lot of recycling of waste actually also happens indoor, right? And typically indoor, you don't need a mobile solution. So we also identified that as an adjacent site that we could move into and recently launched TRS. And then earlier in the summer, we acquired a company in Helsinki, Finland called ZenRobotics. Now ZenRobotics are the pioneers in artificial intelligence that can sort and identify different waste types, right, by using technologies above my head, right, to be almost, right, but different types of identification, infrared technology, x-ray technology. And what that does is it picks waste by eliminating the need for human beings, the stand over a belt and physically pick waste, which is the common methodology in much of the world. That's dirty, that's dangerous. And that's not cost effective, right? So by aligning these products to our TRS business, we believe we can build a really, really strong franchise in our environmental business. And then the other parts of our verticals as well. I would talk about our concrete segment, again, very much -- with a very big focus in North America. We've got a very market-leading position in front discharge concrete trucks, which is, again, the most efficient -- we believe the most efficient way for our customers to pour concrete. We have a market-leading position in bridge pavers. We just wish that the market for rippers was much stronger. And then earlier in the summer, again, we acquired a business based in Canada, a company called ProAll that makes volumetric mixers and basically a volumetric mixer is a mobile concrete batching plant. When you drive on site, you program the product and it can make specification concrete to your needs, right, on the site. And again, we actually believe the ProAll business has got very strong international opportunities as well. So we're looking to expand that. I talked about lifting earlier. John mentioned Fuchs is a 100-year plus business, right? We have a top 3 position in the Fuchs material handler. But again, we also expanded into adjacencies like ProStack, which makes conveyors that we leverage across our verticals. We provide no conveyors that work along with our aggregate processing equipment. We provide conveyors that work alongside our waste and also in bulk in terms of oftentimes in terminals, you see a Fuchs machine loading conveyors to load barges and various types of bulk. And then in our specialty lifting business, right? And I mentioned the Pick & Carry crane in Australia, which we've now just introduced into India, right, the biggest Pick & Carry market in the world, right? So a significant opportunity, not just in India, but there's also an adoption story in that region, right? Because, again, the most efficient way to -- from a Pick & Carry perspective. We also, in Europe, have a leading position in rough terrain cranes, again, leveraging our footprint in India. We will launch an RT crane in the upcoming bauma India is at the end of January and then -- which we will launch our RT crane and then our tower crane business as well, again, a leading position in Europe, strong position in North America, particularly Canada as well, and again, opportunities in markets like India for that as well. So look, you heard me talk earlier about our distribution, right? And I do want to emphasize, we believe our distribution methodology and our distribution networks are one of the most significant assets that we have, right? We really do believe it's a differentiator between us and our competitors. We have deep trusted relationships with a powerful network of distributors across the globe. And what that -- what those specialized dealers give us is the ability to provide solutions to customers that really demonstrate our application expertise. Because when you're applying crushers or you're applying waste, there's a lot of variability in the material. And that knowledge, that specialized knowledge of what's the best solution for the customer is really important. And that's the strength that we really focus on. And again, if you look at some of the stats, about 55% of our business, and there's some examples, whether it's a crushing and screening company, whether it's a material handling company, whether it's a specialty lifting company, they're specialized in their field. However, and I did mention flexibility, we also own multiline -- or also go-to-market via what we call multi-line distributors as well and that's important as well because using multiline distributors, we also see what other products they're selling. And we're always continually thinking and looking for opportunities as to what adjacencies that we could move into that sits our distribution channels. And then we also sell direct. Again, some of our more complex products like our Terex Washing Systems, our Terex recycling systems, don't sit a traditional dealer model. And so we tend to -- we are now focused on developing direct relationships with some of the big global customers, and that's an important dynamic as well. But again, just circling back to what I want a sort of key takeaway in terms of our distribution is the word flexibility, right? So we have maintained a flexible distribution model. And then some other stats, looking at the metrics, the average tenure of our top 130 dealers is 23 years. Again, I talked about again a key differentiator for Terex for MP is those long-term trusted relationships, right? On average, a typical dealer will cover 2 of our brands. We have 53% wallet share on average with our dealers. And why wallet share is important, wallet share, i.e., what percent of their revenues are made up of Terex is mind share. The higher the wallet share, the higher the mind, the higher they get up every day and when they go out talking to customers, they're talking about our products, right? So that's important, right? And then again, we've -- of our top dealers here 100% -- 16% of our top dealers are 100% Terex. So again, I stress and can't overemphasize or do want to overemphasize the importance of our distribution model. We talked about digitization, right? And look, digitization is everywhere today, right? Everybody is talking about digitization, right? We're invested in digitizing our manufacturing sites, our back-office processes, helping increase our speed and throughput and productivity in the factories. We continue to invest in further factory automation, for example, in areas like robotics and some of our fabrication facilities. But also what's really important to us is investing in digitization that really matters to the customer. And this -- in the middle here in this slide, you can see some of the digital tools that we have rolled out over the last couple of years, right, with the ability, remote service, right? To provide remote service. We can see what the technicians are working on through specialty glasses. We have fleet management. We've rolled out configure price quote tools. We've got very strong dealer and customer portals where customers can go online. They can look at their fleet, their fleet management. They can look at their asset performance. Their fuel consumption, the greenhouse gas emissions, that's becoming more and more important as customers and even job sites demand off the contractors that they report data, for example, on their emissions, right? So again, we can provide all that in real time to our customers. We also -- those deep relationships that we have with our distributors. We're very focused, for example, we have e-commerce, all our business units have the ability to transact online spare parts. Many of our dealers have not got that. We're making significant investments to make sure our dealers, those specialty dealers also have those capabilities. And so again, that's critical. So I do want to -- digital drives productivity, it drives efficiency and ultimately, it has to drive uptime for our customers, right? That's the critical thing. Does it really benefit the customer? So you're seeing significant -- there has been significant investment and there's significant ongoing investment in digitization. John talked about execute, innovate and grow. In a moment, I'm going to talk -- just to give you some examples of how we execute, how we innovate and our strategy to grow. Again, the Terex operating system is core to everything we do as a segment. It's core to everything we do in the verticals. So it's a critical part of our strategy, right? And whilst that evolves, it's not a constant, it will evolve as market dynamics develop, as products develop and change, right? The key themes of execute and innovate to grow are really now embedded in our DNA, right? And that remains a constant. It's a focus on really driving growth and delivering superior financial outcomes for Terex and their customers. A good example of execution here is our -- what we call our MP operating system as we apply to our factories, right? -- again, rigorous processes starts from how we do our S&OP, our sales and operation planning, how we do our production control, how we manage our bill of materials in the factories, how we schedule supplier management. So rigorous processes, which we apply. I spoke earlier, we apply these once we have a diverse portfolio, we have a rigorous set of standard processes that we apply across all of the MP business. And that really -- when we applied across each business, along with strong management, we know it drives superior results, right? So if we have this consistent processes, systems, KPIs across the business and functions that drives discipline, drives accountability. And again, that key message that drives consistency of performance. Parts growth, as you can see on the right-hand side here, 6.5% CAGR from 2016 to '22 outlook. We've really focused in key areas like parts availability and not just parts availability out of our warehouses. The most important thing is what does the customer experience. So we know with what we call our CD&E digital tool, our connected dealer inventory. We can now measure our dealers fill rates, our dealers shipped on time at the end user level because ultimately, that's what matters is the ability to measure it at the end user level. So again, we've improved our parts availability. We've improved our average fill rate and ultimately improved our customer satisfaction, right? And we continue to do that. It's a closed zip as parts dealer engagement using digital tools and service. So it's all critical for us to grow and enhance our parts business. And as I said a moment ago, this is critical for a consistent revenue generation. I want to -- if I can dwell on this slide for a moment, right? Because again, I think this is a key part of the MP story, right? When we talk about purposeful innovation, right, and fueling profitable growth. On average, about 25% to 30% of our revenues comes from new products. And we define new products as more than a 30% bill of material change, right? So on average, annually, we drive about 25% to 30% of our sales come from new products. However, that's not necessarily -- while that's an important part of our growth story, on the right-hand side, what's really important part of our growth story is these new categories. John talked about logical adjacencies or adjacencies that we can enter. And I want to give some examples of the adjacencies that we have identified over the course of the last couple of years, right? EvoQuip is -- our EvoQuip business, is a business that makes compact crushing and screening equipment. We look at trends across the globe. There's more and more crushing and screening happens in urban environment. So if you knockdown a 10-story building in Brooklyn. Suddenly you haul on all that material away to some landfill in upstate New York, you can crush and screen the product on site using our EvoQuip highly mobile, compact equipment on-site, delivering quality aggregates, cutting down on truck movements, and really improving the carbon footprint of our customers, right? Also under washing systems. Terex Ecotec started that business back in 2015, growing significantly when we identified the recycling. Also launched MPS modular, again, within our stationary crushing screening business, we identified that our customers wanted flexible electric solutions. So we launched our MPS modular business. And that looking at new categories and adjacencies that continues, right? Terex recycling systems, a great example of a new adjacency that we're just moving into, very, very positive on the future with that. We couple that with our ZenRobotics investment, really strong there. And then we also mentioned about digital solutions, right, on how we have opportunities to continue to develop digital solutions and apply them to our customers and our distributors. So again, I want to really emphasize purposeful innovation, right, that we have and that's really an important part of our story. And then again, if I give you some real-world examples of some of that purposeful innovation, I talked a moment ago about the EvoQuip business, compact machinery that can go in and work in urban environments or for -- and also expanded our addressable market, which is really important when we talk about adoption more and more customers, it's not just the traditional quarries who now use crushing and screening equipment. It's more and more contractors who never before would have used a crusher or a screen. Nicely based on the technology that we have. When I -- taken up a piece of land to build a new Walmart. I may as well crush and screen the material that's on site. And our machines are right at the forefront of that. Talked about the modular, the electrical modular, I also want to highlight in our Finlay business, just launched one of the industry's largest crushers and screen. So we're not all about recycling, these are used in quarries, right? Again, that machine is capable of producing up to 1,000 tonnes an hour -- 1,000 tonnes an hour of aggregate, right? And it's fully mobile, on-site, it can move when you do a blast at the face, it can move out of the way. And then when the material is blasted and comes down, it can track back and crush there and then. But also when you need to move that machine to a different site, it can break down into 3 loads and be transported to another quarry, another location within a matter of hours. And then we talked about our Terex Washing business, recently launched our filter press range, right? And what filter presses do is recycle water. So they take all the dirt and the grip that happens when you wash aggregates and it processes that water and it set aside the grip and a dry cake. So really important in the -- and what we call the growth of the urban quarry, right? The fact that we can recycle the water. And then looking at our environmental business as well. I mentioned earlier, this was a brand-new vertical for us that really we started in 2015 -- start 2015. In that period we've introduced 40 new products, right? And we know you're building one of the industry's most comprehensive product offerings across a full range of whether it's shredding, whether it's screening. So we are really building out our portfolio. And again, I also want to stress that leverage, the idea of leverage, right? Not only are we leveraging our manufacturing sites, we're leveraging our technology. But we're also, in many cases, leveraging our distribution, right? So that's an important theme, again, our specialty distribution channel, right? And then I also want to point out the Ecotec handler, that's actually a Fuchs machine that we brand as an Ecotec and the reason why we did that, we realize a lot of our customers need an efficient solution to feed the waste to the shredder or feed the waste to the trommel screen, right? And the most efficient way to do that is with a handler. So where we have different distribution channels than our Fuchs channel, we utilized a Fuchs -- a Ecotec handler, which comes from Fuchs, right, so a branded Fuchs handler. And again, ideas of conveyors. We also have the conveyor business line that we have, our ProStack business line, we also make branded products that we use across the portfolio. So again, there are some examples of the recent environmental innovation. And again, I want to stress that innovation is segment way. It's in all our verticals, right? But just to highlight some of the others at the recent bauma show, our Fuchs business unit had a fully battery electric model that we launched, net zero commissions -- or zero emissions for our material handling customers and our concrete delivery, for example, in our advanced business recently launched smaller versions of our front discharge and also a mini mix product that also allows us to buy or to mount the concrete mixing technology on electric trucks. Again, excellent in urban environment. And then I mentioned earlier about the launch of the Franna product in India, the largest Pick & Carry market in the world. That's a ground-up low-cost model that we believe will drive accelerated growth, not just in India, but also in that region, right? So again, but these are just a few examples of the next generation of solutions that we've built for our customers. And again, A key theme again is that adjacency, our ability to expand into adjacencies. We talked about electrification. Everybody knows the world is rapidly demanding electric solutions. In many cases, whether it makes sense or not, that's what the customers are demanding, right, but they are demanding electrification. We have, for many years in our Terex crane business, in our modular crushing and screening business and our wheel conveyor business and our washing system, they've always been electric, right, because electric is the most efficient way to operate them. They operate in a fixed site where there is power, right? Typically, a lot of grid power. So that's the most efficient way, and we've had electric offerings for many years in those businesses. However, we have also invested significantly, and really hybrid technology, I talked a moment ago about the battery-driven Fuchs, right? But again, I mean if you look at crushers, the battery technology is not there yet to par a crusher all day long, given the power consumption that it has. But what we've invested in is hybrid, right? So if the site that a crusher is on has mains electricity, our machines have the ability to plug into the mains, right, and that's important. Where it goes to a site because remember, they are mobile assets that doesn't. It has the ability then to power itself with it's onboard engines, et cetera. So hybrid is important, and we've invested significantly in that. And then in terms of our on-highway mobile assets, I mentioned earlier a moment ago about our many mixer in advance utilizing electric trucks that we buy in. But we're really watching that space in terms of -- because the duty cycles for these products today don't necessarily -- there's not a readily made solution at the moment for those products. But again, I do want to stress, 60% of our products today that -- across our offering does have electric options. So look, we talked about the impressive growth we had historically from 2016, that the 9% CAGR, the strong operating profit CAGR. We do believe that if we continue to execute consistently, we continue to expand into adjacencies, we can deliver organic growth 2022 to 2027, and get the segment to be about $2.7 billion or 7.5% CAGR and also believe that we can improve our operating profit performance again from the 15% up to the 16% to 16.5%. So again, look, with growth, we anticipate our strong operational performance to continue and improve our operation margins over that period. But I also want to stress there are also significant inorganic opportunities across the portfolio. I think going forward, look, as John talked about, we have the opportunity to allocate more capital to the MP given many of the verticals we have are fragmented and we really do see strong opportunities in these markets and particularly some of the adjacencies. But I do want to stress, since John mentioned Terex reestablishing inorganic growth opportunities from 2021, really, we've done a number of investments across the MP in the portfolio. '21 we acquired Jiading in China, again, for capacity. We want to be a player in the Chinese market. We're not going to be a player in the Chinese market unless we manufacture. We also acquired fabrication facilities in Northern Ireland, again, focused primarily at this stage on our crushing and screening and environmental given our footprint there. But we also made product expansions, right? This idea getting into the adjacencies, trommels, heavy-duty trommels that are used in large quarries and mines, a logical adjacency for us. It suits our distribution channels. So we acquired that business back in July '21. That's growing very nicely. This summer we acquired ProAll in Canada, again, to expand our adjacency in concrete delivery, right? Where we already had a strong position in North America. And then the ZenRobotics which is really a technology play that makes us more relevant in the environmental space. So look, to finish on the MP bit, right, firstly, I appreciate the opportunity to tell you more of the MP story, right? And again, reiterating that whilst we're 44% of the overall revenues of Terex, we do make up an outsized amount of the operating profit. But look, we really are excited about the next chapter of profitable growth. We do believe we have a strong portfolio of market-leading specialty equipment. We have a consistent and solid track record going back over many years. I showed you data from 2016, but we've -- many years before that, parts of our portfolio strong -- very strongly. We have a really strong -- and I can't reemphasize this enough, our distribution flexibility, our specialty dealers, our ability to go direct, that flexibility is really, really important and really is a strategic advantage to us. And then we continue to invest also in our parts business and organic upside, really adding capacity and MD, et cetera, markets that are really important. And again, just the last bit, right, there are multiple and significant opportunities for further expansion in these segments, again by adding positions and adjacencies, right, and near adjacencies that we can leverage. And that's across our portfolio. So look, again, thanks for your time. I think now, John, we're going to answer a few questions.

Before we go to our first break, Kieran and I are available to answer questions. I'd like to try to keep your questions to the MP segment. We'll have questions on the financial side at the end of the day.

And just as a reminder, for those of you in the room, please wait for a microphone, so everybody on the webcast can hear you. For those who are participating online, there's a Q&A functionality at the bottom of your page where you can enter any questions you'd like us to ask the management team. We're actually going to start with a question from Stephen Weitman from Jefferies. All the MP end markets have been growing nicely. Do some grow faster than others in your plan? Is there a meaningful margin differential amongst products and end markets in MP?

So I'll answer the second part you can answer the first part, Kieran, about the growth. We provide segment margins, overall segment margins for the MP segment. All of the businesses within the MP segment are solidly profitable. Obviously, it's an average, some are more profitable than others, but all of the businesses in the segment are solidly profitable. But there is a variation because it's a segment average. Kieran, do you want to talk about the growth?

Yes. Look, firstly, we expect all the verticals to grow, right? But invariably, there are going to be different growth rates in the verticals. And I mentioned -- you heard me talk there about the environmental one. Like we do believe that, that will grow faster over the course of the next couple of years, not just because the macro trend is towards more environmental. But remember, it's actually our smallest segment, right? So we have real good opportunities there to grow that and do something significant.

David Raso, Evercore ISI. I was curious on the margin growth over the 5 years, about a 19% incremental over the 5 years. I'm just curious, given the, I'd say, relatively modest margin improvement baked in, is that a heavy investment cycle you're looking at? Is it to the question of mix, maybe a little bit where you see the relative growth?

Yes. I'll jump in. I think it's a combination of both, David. So some of the businesses that are growing the faster have the lower margin right now. So there's a mix aspect to that. And this is a business that it's been consistent. We like the starting point of where they are. We have an overall target of 25%, but there are some businesses that have a great starting point. Trust me, we'll continue to push care and hard. But we think of that 20% range, given the combination of mix and investment is a reasonable forecast for the team and we'll pushing them but we think that's a good starting point for that forecast.

And 2 more specific questions. The India Pick & Carry crane market. I mean, Franna is dominant in Australia, the size of the Indian opportunity, can you help us with that? And secondly, on the material handling in the crushing and screening, the opportunity for contractors increasingly getting into that business. Are they going to your specialty dealers or is there a distribution issue you have to address to make sure you tap into that opportunity?

Well, I'll answer the second bit on the contractors, right? And that market expansion for -- [indiscernible], right? They're going to our dealers, right? Because again, the dealers provide knowledge and application, specific knowledge that is really, really important. And like -- and again, I always look at the analogy of any competitors that we've ever had that have tried to sell direct over the years has never worked for them, right. So yes, the dealers are expanded -- or necessary to expand to those contractors, but also -- which is another big factor which is why I believe we have -- we're fairly strong in mobile crushing and screening. A lot of our dealers are on rental fleets, right? And that allows a lot of the contractors to try machines. If they've got a specific job and they ramp them for -- and I'm going to say short term, is not rented by the day, minimum terms are typically a month, but that allows them to try and see what they can do with the crushing screen and how the economic advantages that, that can create. So a big part of our strategy is ensuring that our dealers have rental fleets as well for the product. And the first bit of the question...

India. The size of the market for our type of Pick & Carry cranes. It's obviously a huge market...

There's 2 aspects to the Pick & Carry market, right? To give you some context, the Australian market for Pick & Carry, we believe is about 300 cranes a year, of which we have approximately 90% of the market. However, the market in India, as I mentioned, is approximately 9,000 units a year. However, all those 9,000 units, half of them are effectively a modified like a backhoe loader with a Pick & Carry crane on the front. That's known in the industry, and I'm not joking as the unsafe crane right, they're unsafe crane. They're actually getting banned. A lot of the government jobs now are banning these unsafe cranes. Now for those of you who've been to India, they are everywhere. You drive down the road -- I was in India in November, left the hotel to the factory, 45 minutes, I counted 50-something cranes of the Pick & Carry cranes just along the road. But those 50% of the unsafe crane, that market is shrinking. And customers are now only buying the safe crane, which is effectively the Franna style design. So -- however, but also the price points are very different, right? The India price point versus the Australian price points are very different. The technologies are very different. The crane in Australia goes down -- is our on-highway crane that can travel at highway speeds, 80, 90 kilometers an hour. It's got the transmission, the axles for that, in India they don't, right? They're a very, very basic crane. But if you're asking me the size of the opportunity, it's in the hundreds of millions, probably...

Given the competition in the market, big revenue, but I shouldn't assume the same very high margins at...

That's a great substance Yes, don't assume Franna margins in India, yes. I ask him for that, but I don't think he's going to deliver that one, Dave.

Kieran, with the margin performance that your business has delivered over the past 5 years, as John likes to put it, you've earned the right to grow here. Can you just calibrate us on what the profile of acquisitions look like that you're looking at, what proportion increase your wallet share, if you will, what's the multiple? What's the margin profile compared to the Terex profile today? And I know it's going to be a wide range, but what makes sense within your portfolio?

Yes. So let me answer the first part, and you kind of talk about the areas. So Jerry, we'll talk a little bit at the end in terms of capital deployment. We've got a slide in terms of capital available for deployment. So we'll be disciplined in terms of multiples -- reasonable multiples, they vary by market segment. And it's probably in that 9% -- 9x range, I'm sorry, kind of if you're doing your math, plus or minus is what we're looking at on the acquisition side as you model things, Kieran, do you want to talk about some of the specific areas that you're most focused on?

Yes. Look, I mean a bit of a theme. Hopefully, you've seen the theme through the presentation was we look at logical adjacencies, right? And adjacencies that we can either leverage because the technology is not that far from what we already know or application knowledge or some of our channel knowledge, right? So we look at logical adjacencies. Look, I voiced them -- it's critical that we grow all of our verticals. And again, we have -- I must stress this, we have entered we've our organic strategies that we're implementing now, for example, in our Fuchs business, we will enter this year now into the large port, but we did that organically internally, right? We did design products, right? So we look at our ability and speed as well, which also informs some of our acquisition targets, right, whether we could do it internally, right, whether it's people available, right, whether the right people are available, their geographic position, et cetera. But look, I would be very -- as John pointed out, whilst we're looking at growing all of our verticals, we think there's opportunities in concrete. We think there's opportunities still in crush and screening, although our position is pretty dominant. And then in addition to the environmental segment, I think it's going to -- in my view a lot of our focus will be focused in that area.

Okay. Super. And a follow-up on -- across your end markets, can you just talk about where from a cyclical standpoint, you're most optimistic about there being room for additional upside off of '22 levels when you look at all the end markets that you folks touch in MP?

Probably back to the sort of one of the key macro drivers is this circular economy and the sustainability. And also stressing again that that's really is cross cotton, right? So everyone automatically thinks it's going to favor our environmental vertical because that's what we call it, and it's directly involved in waste. But the whole -- the shift in aggregate production from recycled aggregates really positions Terex in our MP. Given the mobility, given our heritage, that really positions Terex, I believe, very strongly. So look, I'm very bullish on the aggregates and the environmental and even in material handling, I mean a large -- a lot of people think that our material handling is only about scrap. Scrap is important, right? And scrap, as a constituent part of making raw steel is growing anyway across the world because it's the most environmentally friendly way of making steel. But we're working hard on diversifying our Fuchs business as well in the waste handling, in the forestry, in timber and as I said, in the port as well. So look, we think there's multiple opportunities.

Jamie Cook from Credit Suisse. Just on the 7% CAGR, if the macro holds that doesn't seem heroic, given what the business -- how the business is growing historically. What do you guys assume in terms of -- you talked about this segment has been successful introducing new products or market share gains or like the Pick & Carry market in India, I'm wondering if that would all be incremental, like if we were successful there, could that be incremental to the 7% target? And then my second question is, can you just talk to the pricing strategy within this division historically when you're going after price. Is it just there to offset inflation? Or are there opportunities to get price because you're offering clients more value-add solutions?

Do you want to do the -- I can do the price one. This last year, right, we've been very public and very clear that -- and in the inflationary environment, maybe over the last year or 2, that we were very open and honest when people say that we would pass on the price. So any inflation input costs, our strategy was to pass on the price, right? And look, I think broadly speaking, in the mean most of the industry has been relatively disciplined, right, in doing so, right? So again, you get a couple of outliers, right? And some of it's around timing, et cetera. But look, that's been a clear part of our strategy. In terms of -- look, across the business, we analyze lots of things. We analyze market positioning. We analyze competitive. We analyze high effect of our solutions are and that informs -- or what I would call a flexible pricing strategy given the nature of the portfolio.

But built in that assumption, Jamie, and I would say this is kind of company-wide. We don't have a built-in assumption that we're going to -- it's price cost neutrality through the forecast. It's basically our underlying assumption that we're not going to drive significant margin expansion as a result of pricing actions. Kieran on the MP side has been very dynamic in our AWP segment. It's taken us a little bit longer but we've gotten the price/cost. So you think longer term, we think more price/cost neutrality, not necessarily driving margin expansion with the pricing lever. Obviously, we'll pull that if we can, but that's not the underlying assumption. And in terms of the growth rate, and Kieran and the team has done a really great job over the previous and going forward is 7.5% enough, not enough. I think what we looked at, Jamie, is if you looked at the -- we kind of put out the market forecast for the different verticals, and we're trying to say, Kieran historically has driven growth faster than those market verticals. So if it's 4, we think we should be something north of that. And so if you aggregate all those up, we end up being at 7.5%, which is faster than some of the underlying demands is -- and so that's the nature of the forecast by business. And in his world, it is by business, it's by product line, and we wrestle with it. We have vigorous debates on where it should. But as we look out forward, given the things that we have in flight, we think that's an absolutely achievable objective for this team based on what they've historically done and based on the market we're going forward. I'd love to tell you we can do better, but that's what we've laid out for now, and we'll drive hard to get there.

That actually concludes all the time that we have for our question and answer at the moment.

We'll get it at the end. We'll have question -- we have 3 questions we didn't get to. So when we start the Q&A, we'll go with the 3 questions that didn't get addressed. Okay.

Absolutely. We now have a 10-minute break. You guys have till 11:40. Please feel free to get some food, some water, and we'll rejoin in a few minutes.

Thank you. [Break]

Okay. Did everybody get a chance to get some beverages and return to their seats. Well, I go ahead. So welcome back. We're going to -- before I run a video, I want to introduce Simon Meester. Simon is the President of our Genie business. Simon has been with us a little over 4 years. But Simon brings vast knowledge from the original equipment side, but he also had a stint on the supplier side into the OEM world, and that's really helped us over the course of the last couple of years. He truly is a global executive. He hails from Holland or the Netherlands whatever choose, we want to do, but he's lived abroad everywhere. He's lived in the Middle East. He's lived in India. He's lived in China and now he lives in the Pacific Northwest. So please roll the tape, and Simon will follow the tape. [Presentation]

All right. Good morning. Yes, John, I was a little worried when you said the Netherlands that you were going to bring up soccer and immediately make me the least popular person in this room. So -- but anyway, yes, again, welcome, and thank you for your time and your interest in Terex. I'll be talking about the Genie business in our portfolio. And I'm really going to try to emphasize 3 key messages in my presentation today. First of all, I did say in the video, we are very optimistic about our markets and about our outlook. That's message #1. Secondly, we made some significant changes to our cost structure to improve our through cycle margin performance. And then lastly, we build -- we believe, a strong foundation and framework to build continuous margin expansion going forward. So I'll start with our end markets. We serve a very diverse mix of end markets. Probably on your way in this morning or when you drive through the city or when you go through the airport, you see our duty lifts working everywhere. And typically those applications are the applications you would expect, right here on the left hand side, construction, infrastructure, maintenance. However, if we've learned anything from the pandemic in the last couple of years is that our customers continue to find new applications for our products. And if you think about, for example, the online streaming industry that has really taken off in the last 3 years or so, all those movie and TV productions intensely use our Genie lifts as well. But also data centers, warehouses, they're built by our lifts, their operated by our lifts and they are maintained by our lifts. So our markets continue to grow in terms of diversification. Today we sit at roughly $15 billion in addressable market, but it continues to expand and diversify. The second message I have for this slide is as probably most of you know for several decades now, our main go-to-market channel has been rental. And that has been really a win-win for our industry. When you think about it from an end user perspective, they get the right product at the right place at the right time. Our rental customers get a very versatile product that they can rent out in multiple applications, but also yield attractive returns and then Genie gets a very strong go-to-market channel with a large channel that continues to push our products into additional addressable markets. So this is my first message today is that we're very optimistic about our outlook. We see significant upside and it's really a function of 3 variables. First of all, it's straight up fleet growth, John spoke this morning about the mega trends. If you think about infrastructure investment, the Chips Act, you'll hear more later this morning about grid modernization, all those investments will yield to straight up fleet growth for our rental customers. But secondly, and that's what this chart is trying to illustrate is really an amplified replacement cycle. So our industry has been constrained in the last couple of years. And as such, our customers were forced to age their fleets. We're still constrained today. And so it's going to take some time for the industry to come back to more historical trends in terms of where fleet ages sit typically. And that will lead to an amplified replacement demand for the next couple of years. And the third variable is really around adoption. So if you think about China, China has really taken off in terms of demand in the last 5 years has grown exponentially. And now we see markets, large economies like India, Indonesia, Argentina, that also start to adopt our products and move from the more conventional ways of working at safe lead height to the more agile, versatile, safer, more productive way of working at how did our products enable. So all in all, we're very, very optimistic about our outlook. So yes, we've been in the industry for 55 years. We were among the ones that created this industry. It's a very successful story. And as I'm sure most of you know, it literally started out of the back of the garage of our founder in 1966, where he developed the first prototype to lift material up into this global company that we're today, a global business, a multibillion-dollar business. And we're still the #1 and #2 in most aerial markets around the world. And with a true global footprint, we manufacture in the U.S., in Mexico, in Europe, in China. We've been in Asia for 30 years. We've been in China for 20 years, but also with a true global talent pool, we're very talented team members in China, a very large team member pool in India that John talked about this morning, the Europe, Mexico and the U.S. So a true global competitors diversified business today. So what are our competitive strengths? If you would have to summarize them. They really -- we can -- you can bucket them in 3 different categories. First of all, our brand. Being -- having been in this industry for 55 years, we've grown with our customers. Our customers are very familiar with our products. They know what to expect. They also known that the Genie brand is associated with the quality value proposition. That means attractive residual values, which is obviously an important parameter in the rental industry. But secondly, over the last 55 years, we've developed deep and extensive expertise in validating and testing our products. After all, we are in the safety industry, we're applying technology, we're seeking maximum productivity, but never losing the prime objective is to keep people out of harm, and striking the right balance between applying technology and productivity and enable safe work at heights. It's not something that we think is easily replicated in our industry, and that's a competitive strength that we have that know-how. Secondly, as our products, I mentioned in this video, we're among the widest, broadest, deepest portfolio in the industry. And if you think about anything that needs to be lifted from 10 feet to 180 feet, something that needs to work outdoors or indoors needs to work on rostering or smooth concrete slabs, powered electrically or through a hybrid solution, we have all flavors in our portfolio. And the second piece around product is that we do operate at the cutting edge of innovation. We have -- for example, we electrified our first boom lift in the 80s, in almost 40 years ago. And we've also obviously developed deep expertise around optimizing total cost of ownership for our rental customers, which is a big deal in our industry. Today, about 70% of our portfolio is electrified, and we continue to push that forward, as I'll mention later on in my presentation. And the last piece is around our support system. So I mentioned that we have a global footprint, a global reach, which also applies to our parts and service footprint. You'll find parts distribution centers all over the globe. You'll find our service centers all over the globe. And I'm particularly proud of the Genie team that I mentioned that our customers were forced to age their fleets during the pandemic. Our team was able to keep our parts availability over 91% in our first call resolution over 85% during the pandemic. And that shows our strength when it mattered. And then now last but not least in terms of competitive strength, it's our fleet of connected assets. So we introduced a connected solution almost now 5 years ago. And today, there are more than 55,000 connected Genies in the field, providing actionable feedback to our customers, allowing our customers to use that and turn it into value for their customers. But going into the pandemic late 2020, we did realize that we had to dramatically improve our through-cycle margin performance, and that's my second message for today. And as such, in 2021, we took more than $90 million of cost out of our cost structure. And that really became the foundation of the work that we started in 2021 that became the foundation of how we work going forward. And that's how you see, how we basically took the cost out, improve through-cycle margin performance and how we started to transition from how we used to work to how we're working today. And to give you some context on how and where we took the $90 million cost out. First of all, around strategic sourcing. We have -- we are a global business, global footprint, global supply base, which means that we explored opportunities to improve what we buy, where we buy and who we buy it from in order to drive cost out for our business. But secondly, we do have a global manufacturing footprint, so we were able to further optimize the mix of our assembly lines in our product moves, and we're able to move from high cost to low-cost country manufacturing. The third piece was all about the strong bias against fixed costs and fixed expenses. So obviously, if you want to improve your through-cycle margin performance, that's where you look. You look into reducing your fixed costs and your fixed expenses and it started to drive a new way of running our company and how can we run our company more agile and what I call in our video, a lean-mean fighting machine, going forward, which would keep a continuous focus on through-cycle margin performance. And then last but not least, tied to very much to the third point here is that we optimized our SG&A structure and really took a very hard look at all the critical processes in Genie and how we could run our company smarter with a more optimized SG&A base. So that really led us from the legacy way of working to Transformed Genie 2.0. So then we wanted to make sure that 2021 didn't become a onetime-only type of action. So we started to think about, okay, so we were able to take $90 million of cost out. How do we make sure that from a continuous improvement standpoint, that becomes our MO going forward? So we wanted to make sure that we continue to push ourselves every year in terms of strategic cost out. But secondly, we also wanted to make sure that we have clear intrinsic line of sight to continuous margin expansion. And then last but not least, obviously, we also wanted to make sure that we kept pushing our top line, because we have a lot of tailwinds. We want to make sure we keep working the top line as well. And that's what became this particular framework with right at the heart Genie quality by design, as I mentioned in our video, is really a quality mindset around everything we do and very much aligned with the framework that you've seen a couple of times already this morning in terms of Execute, Innovate and Grow. So I'll take you now through each of these 3 buckets and give you more context on how that helps with the 3 points that as we're making so far. So first of all, execute profitably. And it's really a story within a story. I mentioned 2021, I mentioned strategic cost out. So we really kind of created a continuous mindset around strategic cost out and turn that into our standard work, our standard work became our operating system, and that's really our cadence going forward. So every year, we push ourselves to do more with less. And it's really all around process excellence. If you think about it, we're trying to optimize every single process in the business by either creating more value, doing more cost productively or basically just do it faster. And I'll give you one example here. This is an example of our digital manufacturing road map. And if you think about it, today, we apply work constructions to the shop floor to the people that actually build our products on our assembly lines in a digital way. So it's a real-time connection to our shop floor to pass work constructions on. And then if you think about how we've combined it with the back end of the house in terms of quality, our quality management system and the feedback we get from our markets and from our customers and from our distribution centers, what needs to -- what's working, what's not working, and what needs to improve. Now we have a real-time data flow in place between getting feedback on what needs to be improved and applying it straight to the shop floor. So think about how you can run that process much more agile with a lot less resources and much faster and with better outputs for your customers. So the second piece of our framework was all about Innovate. Now obviously, we have a rich history of 55 years of being serial purposeful innovators. And as such, it obviously pushes our top line performance. And as such, we're very excited with the new product development that we've got going on and that we expect to bring to market in the next months and years. Expect to see more from us in terms of electrification, in terms of hybrid solutions and in terms of digital solutions. But the point I wanted to make on this slide is that we also apply Innovate to how can we help ourselves, help customers. And so as an example, as you develop new products, you have an opportunity to also optimize your value streams and as you optimize your value streams, for example, by customizing less, standardizing more and reducing your cycle times, you improve your safety, you lower your costs, you improve your quality, but also you improve your availability for your customers. So at the end of the day, you apply innovation not just to develop new products to add value to your customers to drive the top line, but you also develop new products to optimize yourself to help your customers indirectly. The second piece around Innovate is our announcement of our Acculon partnership. And the Acculon team really brings two key benefits to the table for us. First of all, and I'm sure everyone is acutely aware that the entire capital goods industry is currently looking for clean energy kind of solutions for their portfolios, and they're all looking for ways to test and certify and bring that to market as fast as possible. That's an expertise that Acculon brings to the table for us. So they have deep expertise around testing and validating and prototyping battery management system and battery chemistries. And by having that partnership, we believe we have a faster way to market. The second benefit that they bring to the table is their engineering know-how, especially around battery chemistries, battery integration. And if you think about where mineral availability is going in the next 5 years, what is going to be the most cost productive way of building batteries in the next 5 years, they help us navigate through that very dynamic playing field that's going on right now. So we're very excited about the Acculon partnership, and we believe it will continue to help us to stay in the lead in terms of electrification as we are today. The third piece around Innovate is our new facility in Monterrey. And we're very, very excited about this new facility. It's a very large facility. It's 1 million square feet. And as a matter of fact, the picture you see here, that's almost how it looks like today. We're almost ready. We're actually moving in as we speak. We think we will push our first products out in the late second quarter of 2023. And that's a straight up direct investment that will lead to 200 basis points of improved margins. So that's a very intrinsic investment. And we believe that our footprint is a competitive advantage to us today. And with this investment, we'll continue to expand on that competitive advantage. But the point I wanted to make here is besides a direct link to margin improvement, the reason we have it under Innovate, it's not just a copy paste of our manufacturing footprint, it's actually a facility that is also going to take us to that next level of manufacturing excellence of where we think manufacturing needs to be in the next 5 years. Obviously supported by Genie designs, Genie quality, Genie processes, amplified by a very strong local management team that we're very, very proud of that we were able to recruit that team. But we're really building that facility into a state-of-the-art facility on where manufacturing is going to be in 5 years from now. And the third piece of our framework is all around top line growth. And as I mentioned, we're the #1, #2 in most of the aerial markets. I mentioned the tailwinds that we're seeing in our end markets. So that obviously leads to a lot of tailwinds for our top line. I mentioned our installed capacity in Monterrey. I mentioned our new products. And I also mentioned how we believe that working with our existing channel, we still have a lot of upside in terms of finding new applications for our products. So a lot of upside in terms of top line. And the second piece here is what made Genie great over the last 5 -- 55 years, is that we always kept the customer front and center. We're a very customer-centric organization. We want to make sure that we continue to invest as more technology becomes available, our customers are very -- are evolving quickly and rapidly. And so we want to make sure we keep evolving and developing ourselves as well to make sure that stays front and center. So that leads me to my third and final message around continuous margin expansion. And so I hope you recognize, I spoke about Monterrey. I spoke about the Execute profitably, the continued strategic cost out, and I spoke about Innovate around value stream optimization. All 3 buckets are tied to the framework that we laid out. And I just want to say, this is not another slide that just shows nice buckets with a nice number that leads to 14% OP. I want -- behind each and every item here on this chart, there are dozens of projects that are resourced, that are scoped, that are timed out, that are risk mitigated and that are assigned team members. So we have literally 4,000 team members that know exactly what needs to do, what they need to do over the next 5 years in order to get to where we need to be. So we feel very, very confident that we have the line of sight, and we have the projects in place to get to this level of performance over the next couple of years. So that leads me to my last and final slide. We are a global leader, well positioned for compounded top and bottom line growth, strong tailwinds in our markets. We have taken significant action in 2021 to improve our through-cycle margin performance. We build a continuous improvement framework around it. So we keep pushing ourselves. We continue to invest in our competitive strengths. And being the #1 and #2 in most markets, it means we have scale, which is a competitive advantage. I talked about the footprint and last but not least, about the clear line of sight and the framework we've put in place to continue to push customer value and continuous margin improvement going forward. So we're very excited about our journey. And with that, I think I'm going to pass it over to John.

Thank you, Simon. I think we're going to roll a quick video on Terex Utilities and then I'm going to cover the Utility segment. Can you roll the video? [Presentation]

Okay. So again, our utilities business, full line of equipment, and you heard me say it multiple times in the video, but I think it's important, it's in the insulated side. We like the industry structure. There's very few companies that can provide the insulated equipment that's required and again, insulated equipments required to operate in and around high-tension power lines. The other message here is that it is a big business, and we'll talk about growth and that the need for the net zero and electrification that we think that growth is going to be there as we go forward. The slide says 6% that, we'd actually believe that they could grow more than that as we go forward in this industry based on investment, but that's the current market forecast. But we think there's opportunity for us to go above that as we go forward. In terms of the advantages we have is, again, a leader in technology, manufacturing footprint and then the other opportunity we think we see here is growing outside the United States. And again, this is predominantly a North American-based business. We do have some operations in China, and we think that can grow. But again, when we speak about M&A, we think international growth opportunities could present themselves in this business as we go forward. The other part that's unique about this business is our service platform. And it's parts and service, but the biggest part of this is service. In order to compete in this industry, you need physical infrastructure on the service side. We now have 21 service centers across the country. And when I say compete in some of the product lines, and I'll talk about investor-owned utilities. If you don't have a physical service center in their service territory, you can't compete for that work. So we've been investing in our service territories across the country as well. So electrification, what needs to happen. There's substantial investment that's required from transmission to distribution. Obviously, in generation. We don't play as big a role in generation, we play a role in how the power gets from the generation to the ultimate end use customer. Again, you see the CAGR. In the infrastructure bill, there's about $65 billion that's been allocated to electrical grid and electrical grid improvement. That starts with installation of new wire, also speaks to the upgrades, smart grid, a lot of investments required there. And last, but not least, it's around repair. So I'd encourage you, whenever you have a storm and you lose power in your area, if you do go out once it's safe, and find the service teams that are putting your power back up, thank them and look and see whose equipment it is. We always like to do that. And in terms of making people feel good, there's nothing better than seeing a Terex Utilities truck. And you just had your power restored at your home. And I've had the opportunity to do that, unfortunately, multiple times here in the last couple of years. So Execute, Innovate and Grow. On the Execute side, safety here. The challenge for our utilities team is not just manufacturing safety, but we have 21 service centers and over 60 on-the-road service technicians. And so safety is a big opportunity for improvement for this team, as we go forward. You heard Simon talk about strategic sourcing, utilities was part of our overall strategic sourcing initiative, but of all of our businesses, they've been impacted the most by the supply chain disruption. And so we're -- we need to drive and will drive improvement in that. And when we do that, we'll see the improvement in the factory throughput that we thought we would get when we built the plant. When we do get the materials, we are getting the throughput that we anticipated. On the Innovation side -- I'm sorry, excuse me, let me just go back to the operating system. Similar to the other two businesses, is driving the improvement in the operating system to consistently deliver on the commitments that we make, and there's an opportunity there as we go forward. On the Innovate side, we talked about the all-electric bucket truck. I'll talk about that in a second. That's a big part. Electrification of the electrical equipment is a big opportunity for us as we go forward. And then the digital offering. I'll give you a simple example. In the midst of the pandemic, obviously, utilities were key suppliers, none of our Terex business is shut down, but our customers couldn't get to Watertown to inspect their equipment. And so we had to come up with a digital way, bigger price quote, but then we have customized equipment that how do you inspect and ensure the equipment is what you ordered and then it could be shipped. Historically, our customers would come and do their inspections on site. So literally, we had to create a digital system to enable customers to sign off on their units so it could be shipped without their physical presence. It's an example of how we need to drive digitization through that interface with customers back in, as you heard Simon say, back into our shop operations. And then from a growth standpoint, couple of key markets here. We're #1 or #2 in this market. There's a very large player that's clearly #1 across the whole space. But within the contractor business, we enjoy a strong position, and we think there's opportunity for us to grow in investor-owned utilities and public power. That's not a segment that we historically serviced and now with our manufacturing capability, our engineering capability and sales capability, that's a market that we think we can service as we go forward. Recurring revenue is important to this business on the parts and service side. Again, a large percentage of service. One of the profit driving opportunities for us is to improve the profitability of the service side of this business as we go forward. We currently manufacture or assemble booms in Changzhou in -- outside the Genie facility in China. That was the growing business. With everything that's occurred with the pandemic, it slowed. Over time, they're continuing to adopt live-line technology, live-line work. Where that happens, we have an opportunity to grow. So countries have to adopt the willingness to work on live-lines in order for our insulated equipment to provide the value proposition that they're looking for. So there is significant investment in Watertown. And I don't know, I'll just say that we had 12 or 13 buildings, and I'll be kind to call them buildings. And we knew we couldn't get to where we needed to go unless we made the investment. At the time, it was the largest single investment that Terex has made in the manufacturing facility. So it's there. We got it up and running, launched production during the middle of the pandemic. And it is a world-class physical facility, and we're in the process of making it a world-class manufacturing facility. We also have 21 service locations. We opened 2 new service centers across the country this year. Service centers service not only Terex Utilities, but we service competitive products as well as you saw in the video there, Genie products and other aerial products. So that provides the opportunity for us to expand the service centers as we go forward, as we increase the absorption rate on these service centers, that's going to help to drive profitability in the new centers that we've opened here recently. So purposeful innovation is critical to this business as it is to all of our business. And the first piece that we're incredibly proud of was the work we did to be a first-mover and bring the first all-electric bucket truck to the electrical industry. And I encourage you, one of our great customers, [ Con Edison ] has been kind enough to allow us to utilize their vehicle. It will be parked out front of the NYSE here from 1:00 to 3:00, so please come by and take a look. Why is this important strategically? Well, one, all customers have to drive net zero. The electric companies have big net zero objectives in all aspects of their business, they have to look at how they can use electricity, and this is clearly one example. But strategically, what this demonstrated for us is we made an investment in a company called Viatec. It's electronic PTO, a start-up operation. And they had other customers. We were working with them to incorporate their technology onto our trucks, and they were looking for capital. So we made the capital investment in this business. The important thing for us is it gives us an opportunity to help lead and drive their technology road map, and we gain access to their technology that we can put on our equipment. And we were able to do this in the matter of months. We work with Viatec, we worked with Navistar and our engineers to create the industry's first all-electric bucket truck. And frankly it's, we're at least a year ahead of the competition in this particular space. We'll look to expand this offering across the product portfolio as we go forward. And the next one that I'm incredibly proud of within the segment, as you look there in the middle, and as Simon said, the Genie blue lift, it looks like a Genie blue lift, but it's not. It's an insulated Genie boom lift. We're the only ones in the industry that can do this. How did this happen? One of our great customers came to us and said, "Hey, listen, we really would like to be able to use lifts in and around our substations, but they're not insulated. Do you think you can help solve that problem?" So yes, Genie engineers, Utility engineers work together, working with the customer, come out with the first insulated boom lift in the market. Now we don't know how big that segment could be, but we know we address the customer need. We solve the customer problem and our joint engineering effort enabled us to bring something to market that no one else can do in-house. And then finally, on the digital tools, we talked about that, enhancing that digital experience to the customer, taking it back inside our organization this business, we've got a brand-new physical facility, we have an ancient ERP system. And so in 2023, this business will be integrated into what we call TMS, it's an Oracle-based ERP system that we desperately need. We decided we didn't need to build a new building move and an ERP all at the same time. So it will be an opportunity for the team to excel this year with an ERP implementation. So in terms of the growth in this market. First, it is around the tailwinds of what's needed to invest in the electrical grid infrastructure. And my personal perspective is I think some of the estimates are understated. When I talked to electricity companies, they always talk that they're going to need more going forward. So we think there's strong tailwinds there. We can grow in a market segment, this IOU and public power that we didn't participate in to any extent. We are being successful. We modified our sales approach. We have the engineering approach now, the manufacturing approach. And we're booking units for these customers out into '24 and in a couple of cases into 2025. That tells you the demand and the lead time that's out there in that segment. So obviously, we've got to work on lead times. But frankly, right now, those are competitive lead times in the industry, driving improvement in recurring revenue expansion and driving the profitability of that part of the business up as we move forward is a big opportunity with the 21 service centers and the 60 on-the-road service technicians we have. And then global adoption. You heard both Simon and Kieran talked about global adoption. What we need to see adoption here is countries adopt live-line practices. This is an example in India that potentially could happen. China was moving to live-line. The pandemic has definitely slowed that down, and we'll see if that picks up as we go forward. So when we look to countries that are changing their practices, and then we have the opportunity to deliver our insulated solutions as we go forward. So with that that's our utilities business, again, right at the heart of that sustainability mega trend called electrification, we've made the -- the good news is we made the investments ahead of time. So now we have the physical capacity that we need to drive that business going forward. And again, a real opportunity to drive top line growth and margin expansion within the Utilities business, which is reported within the AWP segment, so AWP segment, Genie and Utilities. And with that, I'm going to turn it over to Julie. Julie is actually, I guess, the newest member of our team, but she's not so new anymore, she's been here almost a year, and she's a great partner as our Chief Financial Officer. So over to you, Julie.

Thank you so much, John. And good afternoon, everyone, and thanks for being here. I'm really excited to talk about all the opportunities we have ahead of us. But to start out the presentation I just want to say that we're reaffirming our guidance, our outlook that we presented to you in October with our Q3 earnings call, so reaffirming that. And we'll give you our 2023 outlook at our February earnings call when we review our 2022 year-end results. But I thought I'd give you a little bit of color regarding what we're expecting and what we're seeing for 2023 right now. We have record backlogs at this point in time, and we have strong customer demand and so because of that, we think of 2023 as a growth year for Terex. Despite all of the cross currents going on, whether that'd be geopolitical uncertainties and volatile interest rates and rising exchange rates and rising interest rates, we believe that this will be a growth year. When we think about supply chain, the supply chain disruption, although we see on-time delivery for our suppliers, improving slightly. It still takes lots of parts to ship a machine. And so it hasn't improved enough to say we still don't have supply chain disruption. So similar to 2022, 2023 will be a function of what our supply chain can provide us. We have the demand, we have the customer demand. And we believe at this point in time that 2023 is going to be a growth year. So now let's talk about our 5-year financial targets. And I want to talk a little bit about being the new CFO, what a privilege it is to be the Terex CFO, and I started that role in January. And I was thinking about, well, what are the things that we want our investors and all of you in the investor community to understand about Terex and what are our key messages. The first thing you've heard all of us talk about is a transformation. And Terex is a very different business than it was in 2015, 2016. And I'm going to show you that in a bit a very different business. We're transformed. We're not done. We're transformed and that transformation positioned us for profitable growth. The second thing I wanted you to know, and I want everybody to understand is the unique opportunity we have to profitably grow in the MP business. That business strong financial performance, the great chart that Kieran showed you earlier showing his 600 basis point margin improvement in growth, there's an opportunity to invest in that business and to continue to grow and improve the margins. And I want you to understand what all the MP business is comprised of and all of those great opportunities. And then we look to our Utilities business. What a fantastic business that is, and we have an opportunity to grow that business, the electrification trends and the net zero sustainability goals that our world has, support growth in that business. And our Genie business, Simon and his team are doing a great job. Simon talked about Genie 2.0. That business is different as well. It's more resilient. It's better prepared for any potential downturn, and we expect to perform better in that business. We already are showing that we're performing business and growing margins in that business as we speak. So I'm really excited about the future of Terex. And I'm really excited that we are going to have accelerated growth. The growth rates that we're showing you are above market growth rates. So we expect to outperform the market in terms of growth. We expect to more than double our earnings per share. Organically, that's just organically, and we'll talk about the cash that we're going to generate, and we'll continue our disciplined capital allocation going forward. So here we talk about our transformed portfolio. So what has been done? We divested the businesses that didn't outearn their cost of capital. They were high usage capital business, low-margin businesses. And so what happens? Our top line actually has declined since 2015, but our operating profit margins have improved by over 400 basis points. In this time, the materials processing business has grown to represent 60% of our operating income, 60%. And we simplified the management structure and simplified the business, and we've been able to take out 340 basis points of SG&A. And our outlook this year says we'll be at 10.6%. And throughout this time, we've more than tripled our earnings per share and our return on invested capital. Our return on invested capital is well above our cost of capital. It's -- so a terrific job by this management team in transforming this business. And as we transform, like I said, we're not done, we'll continue. And we -- and because of all the hard work done, it's positioned us well with a strong balance sheet. We have liquidity to support our future growth. So what have we done? We returned $1.8 billion to our shareholders over this period, $1.6 billion in share repurchases, $200 million in dividends, we've been able to reduce our net debt by 56%, we've reduced our leverage. Our leverage today is -- it's down 2.1x, and our leverage today sits at 1.4x. Other important piece is that we have $600 million of bonds outstanding through 2029 at a fixed interest cost of 5%. So we have access to capital markets as we choose to grow and we choose to invest in M&A and grow the business. So I'm really happy to provide you with these consolidated financial targets. We anticipate by 2027, we'll be a company in excess of $6 billion. That revenue growth outpaces the market. We're going to grow faster than the market. We're going to have operating profit margins of 13% to 14%, again, margin expansion as we grow. And we're going to double our earnings per share from $8.50 to $9.50 in that range, double our earnings per share and increase our return on invested capital to 25%-plus. We think those are fantastic targets, and I want -- and we're excited to do that and deliver that value to our shareholders. Now of course, there's all sorts of cross currents going on over the next 5 years. And it's impossible to predict any impact of a geopolitical uncertainty, if there's a major global event. It's impossible to think about timing of a recession and all of those kinds of things. And I think John said earlier that this won't be linear. But we think that this is reasonable and attainable. And the only thing that can be off is timing from year-to-year. We don't know the exact investments of when all of the infrastructure investment is going to happen. We expect to see that in 2023 and 2024, right? But we think that these are reasonable going forward, and we're excited to deliver this value. So let's look at this by business. So what a great performing business is material processing, and Kieran did a great job of talking to you about how we can grow this business and the passion that he has for the business. And so this business has already improved their operating profit margins by almost 600 points -- basis points. And during the pandemic, they had 11% operating profit margins, fantastic, fantastic. And so here, we have a 7% compound annual growth rate, a 40% increase in revenues, outgrowing the market, along with margin expansion, growing margins again by another 100 basis points and going over 16%. A terrific, terrific opportunity to invest in this business, M&A opportunities in this. And we'll continue to leverage our current operating systems and continue to grow. This consistent performing business is going to grow both in volume and expand its margins over this period. And now we'll look at the AWP business. This business consists of the Genie business and the Utilities business. And so this business is also going to grow, but it has opportunity for margin expansion. We talked about what the Genie team did specifically in taking out $90 million of costs, working on their operating system, working on low-cost country manufacturing, working on value stream mapping, value engineering and taking costs out. If they had taken out $90 million of costs in 2020, we would have improved that operating margin to 5%. And you can see the steady growth in operating profit from 2020 to -- from 2021 to 2022. And we see 500 to 600 basis points improvement in that business. And that's continuing down on the Genie 2.0, as Simon talked to you about, we're talking about strategic sourcing initiatives. Again, all of the value stream. Again, a Monterrey facility and the related supply chain that comes with Mexico. And then we talked about the Utilities business as well. A great opportunity to grow. That business has been impacted the most by supply chain shortages and chassis and bodies, and a great opportunity to grow that along with all of the sustainability and net zero trends that we have. So let's talk about all of this, we will generate significant cash and all of the numbers I presented to you before are all organic. So we haven't invested in M&A at this point in time. But we will generate significant cash throughout this period. And we would like to -- we'll have a target of having 75% to 100% free cash target on net income going forward. We're going to invest in our core business. We're not a capital-intensive business, but we'll spend between 1% and 3% of revenues on capital expenditures, improving our facilities, investing in information technology, investing in our people, those types of investments we want to make. It's also important to us that we maintain a consistent dividend, and we'll continue that as well. And in a moment, I'm going to talk about some of our acquisition criteria. We want to grow through acquisition as well, and we will generate the cash and we have the liquidity and the balance sheet to do so. And we'll also do opportunistic share buyback. We absolutely want to offset dilution, and we want to return capital to our shareholders. And we'll continue to be disciplined. Our target remains at 2.5x net debt-to-EBITDA leverage through the cycle. So our balance sheet does support the fact that we can do growing M&A. And so when you look over here at this chart, here's our 2022 outlook for earnings per share, organic growth to that $8 to $9.50. And on top of that, we believe we have an opportunity to grow inorganically. And so what will we be interested in? We want to buy good businesses and make them better. We want to remain disciplined. We want to make sure that every business we buy is able to be accretive in the second year of ownership after we get all the purchase accounting adjustments behind us. We want to make sure by year 3 that these businesses can outearn their cost of capital. And we want to build on things that are a strategic fit for us and are financially attractive and that could be in our MP business. We talked about acquisitions, and Kieran talked about the things he'd like to do, in our Utilities business and technologies. And so we believe there's -- we have a very active pipeline, and we're excited to grow that way, too. So in conclusion, we are really excited about our growth prospects at Terex. I'm really excited to be here and generate these kind of returns and growth for our shareholders, $6 billion-plus in revenue, outgrowing our marketplace; improved operating margins; doubling our earnings per share; 25% return on invested capital. And so when you think about this, we're going to have over 350 basis points improvement in operating income or operating margins. So on the behalf of all of our Terex team members, I want to thank you for your interest in Terex. Thank you for your support. Thank you for being here and listening to us. And now I'd like to invite up all of my -- I'd like to like Kieran, Simon and John back up to the stage to take your questions.

We got a -- just real quick, we had -- everyone -- go ahead, sorry, go with the announcement. I'm sorry. They want to step -- we had a couple of questions that went over. So we got Tami, Nicole, and there was one in the back and then we'll [indiscernible] I got to fulfill my commitment. I said, we'd call in the next piece. So...

[Operator Instructions] So for those of you who we missed at the end of the last...

Nicole DeBlase from Deutsche Bank. So first question is just on free cash flow conversion. I think if I remember correctly from the 2016 Analyst Day, the target was over 100%. So why are we going to 75% to 100%? And then second question is just if you look at the path of Genie revenues that you guys are thinking about through 2027, what is your replacement cycle analysis say about, are we reaching a peak in replacement demand sometime in the next few years?

I'll take the -- yes, I'll take the first one. And Simon and you can do -- I'll take the first one. So that first assumption back from 2016, we met most of our commitments and we exceeded many. That was one we did not. And that was on me in terms of my estimate of what the capital is required in the business going forward. It was early on. And we -- I underrepresented the capital that was needed, and I think that's represented in the $600 million that we've invested since that time. I think as we go forward, we're going to continue to make the capital investments we need. We've got to work on -- we made great progress on working capital as a percent of sales. We've gone backwards here as a result of the disruption. So we got to get back on the train of driving working capital efficiency and improvement, as we go forward. So I think that's the 2 principle. And then the other side is we have growth in these businesses. As you know, they consume cash in the up cycle and they throw off cash in the down cycle. Hopefully, we're not going to talk about too much of the down cycle. So we're forecasting growth here. So there is growth as you go forward on cash utilization. So Simon, do you want to...

Yes. On the replacement cycle, first of all, thank you for your question. It's really going to be a function of supply chain. I mean, we're still constrained today. Customers have been forced to age their fleet, have the supply chain, at the end of the day, we do strongly believe that free markets will eventually balance things out again, and it will be unconstrained from a supply chain standpoint. But if things go the way we think will go. We think about 2016, '17, '18, all that equipment that entered the rental fleets now needs to be replaced in 2022-2023 on top of that, all what was aged. So we do see more amplified replacement demand in the shorter term of our window, I'd say, the next 2 to 3 years. And -- but that's under the assumption that supply chain will sort itself out sooner than later.

This is Tami Zakaria from JPMorgan. So going back to the MP segment, the 7.5-ish CAGR, can you comment on what expectations are, let's say, in the next couple of years versus the outer years? Is it going to grow at a more moderated pace initially. But then as you invest in the business, it accelerates or is it more or less similar throughout the next 5 years?

Do you want me to take it? Yes, and then Kieran can jump in. As we've said, as we look 2023, we think is going to be a great year, but a year that's constrained by the supply chain. And so as supply chain, as Simon says, free markets open up and we get the consistent supplies that we can build on schedule, and the supply chains constraints should go away and begin to see that growth. Do you want to comment any more on that, Kieran?

No. Look, again, as we've demonstrated before, in 2016 is that 9% CAGR, right? So I still think 7% is still healthy. And still if you look at some of the stats in terms of the growth trends, right, still we believe and some of the verticals above the actual underlying growth trends in the market. So I still think 7.5% is a fairly good target that's reasonable.

Got it. And then the 200 basis points of margin improvement from the Mexico facility over the next 3 years, what would be the cadence of that? Can we expect something in 2023?

Certainly, I think 2023 is a year where we'll be moving all sorts of -- making all sorts of product moves into Monterrey and around through the network, the Genie network. And so really, that the benefit from that will kick in later '24 and into '25 before we see the benefits from that. And remember, that includes we're going to also get benefits from the Mexico supply chain as well. So the AWP margin improvements happens sequentially throughout.

Steve?

Steve Fisher, UBS. Do you see parts and service as being a bigger percentage of your overall revenue mix as you get out to that 2030? Just curious for the overall business and then by each segment, I think you called out within the Utility segment, 25%, but curious how you see that as a changing mix? And then related to that, how do you see the whole move towards electrification as either a headwind or a tailwind to that?

So a couple of questions there. So I'll start and then you'll jump in. So overall parts and service growth, I would say, consistent with the overall top line growth. Obviously, we're making investments to drive that. We think that's important. On the Utilities side, it's 25%, but it's really the only business that we have a large component that's actual service, i.e., rents churning. And so that's a big part of that business, and that's dilutive from a margin standpoint. And that's an area that we're going to drive improvement in as we go forward. So overall growth across both businesses, I think it's relatively similar as I look in terms of the growth. And then the digital aspect and the customer interface aspect continue to drive improvement in that. And over time, we'd like to believe that, that would drive some incremental growth, perhaps above what we have forecasted. But that's a key part in the world we're in today, we've all been Amazon, and then we need to provide that digital interface and it's some of the costs and the investment that we need to make to do that as we go forward. Go ahead Simon.

Yes, I was just going to add on your addressable market question on the parts side. So 70% of our portfolio is already electrified as it is today. It's 60% on the MP side. So having an electrified portfolio is nothing really new to us. But to your point, actually, it's a great point you're making. There are technologies that are slowly becoming obsolete over the next 5 years. We also see new technologies emerging that will bring parts and service and downstream revenue opportunities. So we're not that concerned from an addressable market standpoint.

Yes. And look, from an MP perspective, I know there's a bit of a theme in automotive about replacement and electric doing away from engine and oil and parts, et cetera. But I would -- at least in AMP segment, a lot of our products are very application, they're crushing, they're shredding, they're grinding and then a lot of the parts are actually consumable parts, wear parts, et cetera. So that won't change. As I said, look, similar to Simon, we've had a lot of electric problem or products for many years and their question is crane and our cranes business. So we don't see having a this significant downside to your parts business. I think most of the growth in the parts is going to come in our investments in digital and making it easier for customers to buy parts effectively.

Okay. Sorry. So two questions. One, for the investors that can't get comfortable with thinking out to 2027, is there any way, Julie, you can address how investors should think about through-cycle margins versus margins that would in 2027 be somewhat peak? Because I think that if the margin cyclicality is reduced over time, that's probably additive to your multiple? And then my second question is, if we just do the math for AWP and for MP, the implied mix of earnings in 2027 is like 50-50 versus today, MP is 60%. I mean you guys have been talking a lot about MP and it's less cyclical and the margins are less cyclical and wanting to grow the utilities business. I'm wondering if there's a conscious effort or do you care about mix of where the earnings are coming from and what that implies for the multiple of your stock?

So I guess, from a first perspective, we tied -- we were showing the -- in the Genie presentation, in particular, the opportunity we have to improve margins. And the whole Mexico facility is -- that's margin enhancement that happens regardless of the cycle, we improve those margins. And we've taken out $90 million of cost so that it makes us more nimble, more resilient as we go forward. So our decremental margins will -- if in a downturn, although we're not forecasting a downturn, okay, will be 20% or below. And so we think that we're -- that this business is a very different business from what it was several years ago. And we're pleased with the progress, and we have more work to do, and we'll continue with that. Yes, right now, because of -- when we think about organic and organic Terex and those are the numbers you're quoting on a 50-50 basis, we would be saying that there's more margin enhancement opportunity in the AWP business right now. And so that's the way that I guess the math works at the end. But we're very interested in continuing to grow the MP business and the Utilities businesses as well. So we -- that's -- we showed you organic, and then we talked about the opportunities that we also have from an inorganic perspective.

Jerry Revich, Goldman Sachs. I'm wondering if you can just talk about the AWP targets, given all of the good work that you folks have done in terms of speaking out of SG&A and now the plant consolidation. It just feels like your margin opportunity is higher at the sales level that you folks laid out, just looking at the performance of the business of '13 through '15, before all those changes, you were essentially at that 14% margin rate, give or take. So can you just expand? Are you folks just giving yourselves room to execute given all the price cost dynamics. Can you just expand on that, please?

Take it, Simon, and I will -- I can...

Yes, I mean, a great question. We're very optimistic about our line of sight, as I mentioned in our presentation, the three buckets of actions that we're taking. We do operate in a slightly different environment over the next 5 years than we did in the last 5 years, think about FX alone. So it's a little apples and oranges. But overall, we're very comfortable that we can bring this business back to 14% OP and now we have a clear line of sight to get there.

And sorry, just to make sure I'm on the same page with you. It sounds like you can get there at a lower sales level than what you folks laid out for 2027, correct?

That's correct.

Yes, that's correct. Yes. That's a good way to look at it, Jerry. Absolutely right. And that's the improvement in the overall margin, the resiliency of the margin. And again, sometimes people say, "Hey, peak margins and Genie back at time X, Y or Z, at some of those times, the exchange rate was like EUR 1.42 to the dollar. That also has an impact on us as well.

And our 5 years is based upon like current exchange rates. So we're not counting any margin enhancement or rate that we might get from a change in exchange rate.

And can I just ask a follow-up on that note, any changes in the footprint that's possible from here if the current parity versus euro, et cetera, and environment holds, anything that we should be thinking about for the footprint?

You mean U.S.?

No, global. Global footprint for Genie business.

Yes. Any changes in terms of global footprint? We believe we have put the foundation in place that we can build on for the next 5 years. So we're very pleased with what brick-and-mortar that we currently have, and we feel we have a lot of upside working with that.

Right. And again, the flexibility of the global footprint gives us the opportunity to move things around as things change. And so we like that aspect of the business. We do have some enhanced flexibility. And as Simon said in his presentation, a higher percentage moving to lower-cost areas over time is also going to contribute significantly to that margin expansion.

Tim Thein from Citi. Maybe two for you, Kieran. First, actually just dovetailing off that last point about the footprint. How do you -- as you think about MP specifically on the aggregate side, a lot of potential catalysts for growth in North America. How do you feel about the footprint for your business in terms of -- are you -- is there capacity to support that with a largely Northern European footprint?

Yes. There is. I mean we've made capacity investments, as I said earlier. We -- in Northern Ireland, we invested in a fabrication facility earlier this year, and we plan to extend in 2023, one of our other fabrication facilities. A unique thing about Northern Ireland, right, and this is important to remember for North America, the cost for us to freight a crusher from Ireland to, say, Baltimore, Maryland, is half the price for us to freight that crusher, say, from the Central United States to Baltimore, right, from a freight perspective, right? So freight per se doesn't hamper us, particularly -- the roll-on, the roll-off products, they're complete. And so Northern Ireland actually -- to be honest, it's actually geographically an optimal location to go in east and west, right, based on how you trade the freights routes work. So we did not believe that as said to be any disadvantage to us at all.

Got it. Okay. And then just in light of this, the supply chain environment we're in and given the backlogs that you have, what kind of tests or what kind of -- effectively getting to the soundness of the backlog in terms of what kind of tests can you...

Yes. Look, I mean, we've always been -- particularly in the distribution model, right, and we talked about -- I talked about using digital tools to enhance our business from a customer point of view, like for the -- over the last couple of years, we have a tool called the inventory, right, which is an electronic tool where all our distribution partners report back on a monthly basis, on a real-time basis, the level of inventory that they hold, what's on rent, what's on stock, what they traded and, et cetera. So we watch those trends carefully, right? Because again, a first indicator of a potential slowdown per se would be the inventory building in your channel. So we monitor that, and we're fairly disciplined on that. But we also -- even just in a very practical sense, we look at our customers pushing back, if they've given us orders, are they pushing back saying, "Look, delay that order?" Are we even seeing cancellations? And look, we're not seeing -- at the moment, we're not seeing any signs at all that those dynamics are happening across the business. So we're always very -- I think it's a good practice to be resilient irrespective of where we are in the cycle, and that's something we've been very vigilant on, right? And we really learned that lesson back in '07-'08 to really look at that the downturn end. I mean the rally was there were warning signs before that, that hindsight we should have seen, right? So we're very, very vigilant on looking at our backlog.

Adam?

Just first, what type of investment would you think would be required for that $1 to $3 in EPS that you suggest on the inorganic side? And then does that assume that you guys would feel comfortable going above the 2.5x net debt target through cycle? And then the second one also is more about the business on the Utility side. Can you just size for us again, how big utilities is? And then embedded in the AWP margin improvement, how much margin improvement are you expecting from utilities in that segment?

Utilities businesses, historically, it's been about a $400 million to $450 million business. And that business, we believe, can grow. Historically, it's been a 9% to 10% operating margin business, we're not enjoying that now as a result of the supply chain disruption we're having. And in our plan, that's a low mid-single-digit type margin opportunity that we think they can grow on that business. Now there's a mix implication in the utilities business. As we grow that IOU and public power side, all those require very expensive chassis. And so there's an area of margin dilution. It's still accretive. It's good business. But from a margin standpoint, it does give you some margin compression. When you're purchasing a $0.25 million chassis that you're going to up-fit, so that is an aspect of that business as we go forward. But that's kind of where we are and where we think -- it will contribute to the overall segment improvement in operating margin, it has to.

Yes. So from a chassis perspective, just highlight, that brings in great operating profit and cash. It just comes in at a lower margin. And so we -- and just to clarify, we expect to improve the margins in that business, and we expect them to be in the lower double digits going forward. And from a modeling perspective, when we think about what M&A would be, it would be modeling things in $1 billion to $2 billion of use of capital. And our target is 2.5x through the cycle. And so I just want to continue to say through the cycle and 2.5x to maintain that.

So we have a couple of questions that have come in online from Seth Weber at Wells Fargo. What gives Terex confidence that the U.S. rental channel hasn't learned how to operate their AWP fleet at a structurally higher age?

Yes. Great question. Thank you. Obviously, our customers are very well-run businesses. And obviously, we stay very, very close with them. So as we put our assumptions together on what they are expecting and what they're comfortable with. I'm not suggesting that they're necessarily overly concerned with their fleet age. It's just math at the end of the day. And so these numbers are very aligned with what our customers are telling us in terms of amplified replacement demand going forward, and it's just basically math on where they want to be in terms of their asset turnover.

Great. And then from Jacob Moore at KeyBanc. If you assume we enter a prolonged economic downturn or recession over the next 6 to 12 months, in what ways is Terex insulated and in what businesses do you expect to be affected the worst?

Yes, it's a really good question. Obviously, we're all trying to figure out what the macro situation is going to be. I think the first thing is you have to look at -- we have historically high backlogs. Kieran's backlog is 3x his historical level. Simon's in Utilities, like I said, we're booking things out to 2025. So the first sign for us will be order pushouts and order cancellations. We're still seeing reasonable order intake. We're not going to report mid-cycle, but we're seeing a reasonable order intake. So we think a buffer for us is the fact that the backlog is much stronger, and we have much more forward visibility. Our issue in 2023 is not the recession. Our issue in 2023, as we sit here today, is the supply chain. Given the level of backlog coverage and visibility that we have, it's historically high. Our governor, we don't believe is going to be -- demand is going to be the supply chain. So that's demand there. Kieran mentioned a very important subject on his side of the business. Normally, when we go into some type of downturn, normally dealer inventories are very high, call them bloated. In this case, we're going into this period of time with dealers' inventory is quite, quite low. Simon just talked about on the Utility -- I'm sorry, on the Genie side, the postponement of the replacement cycle and the pent-up demand that's there. And so those are factors that are buffers, cross currency, if you will, that we think, even if there is a recession, we can drive through that as we go forward. Now again, that's how we think today. We'll be back to you in February. And for us, I keep coming back to order pushouts, order cancellations and being vigilant about our backlog. And I can assure you that these two gentlemen are into it all the time, making sure there's -- what we have is as real as we understand it. And so I think that provides the shock absorber for a recession. Second, and then you think, okay, the demand we talked about, and again, it's probably it's a guess, it's an estimate. The infrastructure spend is just starting. So late '23 into '24 is probably when you begin to see these types of things. Customers -- they're going to be planning their business that way. And if they're seeing these contracts coming, if they're seeing that business coming, they're not going to be in a real hurry to cancel things and postpone things and delay things. And so it's an eminent flow, but going in to this potential recession -- with the backlog we have, the age of the fleet, in Simon's case, and very limited dealer inventory, we think that provides some degree of a shock absorber. And right now, I think our bigger concern is not demand, it's supply chain. That's what's going to be the governor for right now for next year.

And we haven't seen any orders or bookings yet related to all of those, the infrastructure and some of that U.S. spending that John highlighted earlier. That's upside as bookings come through for that as well.

David Raso. I'm just curious, the conversation with the Board, when you see the way the stock acts, when people get nervous about the macro in the multiple, I mean just a few months ago, it was down to 7x your earnings guidance, right? So obviously, people would be fearful of the earnings are going to get cut, but you can tell they're taking on a sense of historically not great cash flow. The leverage today is a little bit lower than normal, but historically, it's been pretty high. So the conversation with the Board of 2.5x over a cycle, not just going above it then deleveraging for a particular deal they didn't like, but over the cycle, has there been a serious conversation about, yes, there's growth opportunities, but the stock gets punished so much when there's a fear of leverage going into a downturn to just simply run the company at lower leverage?

So it's a great question, David. And we've actually got a Board meeting coming up. So that will be part of our discussion. So I mean we look at opportunities. And you're right. If you're going to lever up, you've got to be rock solid and what does that opportunity present. And if we're not super confident that it will deliver what we think we're going to be. We're probably not going to do it. And so -- but we do believe that with our cash flow generation and the capabilities we'll bid that we're not over levered at 2.5x through cycle. We think that our processes and improvements -- Kieran's business, Jamie, you talked about okay, it's down to 50%. Most of the world don't recognize it's 60% today. And it's a consistent generation of not only earnings but also cash flow. And so there is a degree of consistency there as we go forward. And then the other thing I'd say is our businesses throws off cash when the market turns down. It consumes cash as we grow. And so if there's a downturn, there's a period of time, as you well know, we throw off a significant amount of cash as we're bringing our inventories down as we go forward. So it's a debate that we have. We still think it's a reasonable target. But I will say, David, for us to go there, we've got to be rock solid in what is that M&A opportunity in target that we have the confidence that we can deliver through that. And I think the other thing that Julie said, the other targets that we look for, we're looking for accretion in the first year. But then she also said, we're looking for -- it covers its return on invested capital in year 3. We still think that's really important and as does the board. And so those are all the things that will go in. We'll do cash flow analysis up down sideways to see are we comfortable. But we still believe that 2.5x through cycle is -- we're significantly below that right now, but 2.5x through cycle is reasonable. And if we decide it's not, we'll change it. But right now, David, we're still comfortable with that 2.5x through cycle. And it's not lost on us how the market has responded to companies that are overlevered in this environment, I'll also put it that way, David.

And low leverage, we have flexibility. Our balance sheet provides us flexibility right now and 1.4x as we sit here today.

Larry De Maria, William Blair. You mentioned $1 billion to $2 billion in capital for M&A, is ultimately the goal to do a sizable deal and have a new reporting segment or can potentially you can build out utilities and have that as its own reporting segment? And then what's the timing you guys are thinking about on M&A? Is it later in the plan? And what does the pipeline look like now?

Great. So, a lot of -- there's like 3 or 4 really good questions in there. Thanks, Larry. So if I don't get them all, bail me out. So in terms of timeline, we're building out a pipeline and the pipeline looks from larger transactions to bolt-on acquisitions and pretty much everything in between. So that that's the pipeline that we've developed. We've executed on some smaller technological investments, some capacity investments and some bolt-on product investments. So we'll continue to look on the bolt-on side. We also look at larger transactions, and that's all about a willing, buying and seller and where is the strategic fit. As we said, we like utility space. I just think that, that's going to continue to grow over time. Kieran, in his aggregates, concrete environmental, Larry, we think there's going to be opportunities there. There's a degree of fragmentation in those spaces that could present themselves opportunities for us, and that's in our pipeline. We're engaged in conversations all the time and active. So one of the things I won't do is predict timing of an M&A transaction. I just won't do that. And so -- but we are active. We do have the balance sheet in cash, but we're going to be disciplined in terms of what we acquire. And I think the other criteria that you heard is we're looking for good businesses that we can make better. We're not overly interested in any type of turnaround story. We want a good business that can be accretive and can drive the return on invested capital by year 3, that's difficult if it's a significant turnaround. So...

Yes, and I think the story is just a lot more options than we did 5 years ago.

Yes.

Yes.

Did I get them all?

Yes. Very helpful color. And then the second part, different here, the $2.5 billion aftermarket parts and service opportunity, do you know what your customer wallet share now is and what it should be? Is that a big part of it just getting more share because you're underperforming there or maybe you're not, I'm not sure.

I think -- you want to go...

Yes, we don't feel we're underperforming. Again, we have the luxury of being very close to our customers and there's a lot of dialogue. Obviously, they want us involved and they ask us to be involved. We're not underperforming there. But obviously, we want to make sure that we think it's actually a competitive advantage, at least in the Genie business today. And we want to make sure it stays that way going forward. So no underperforming in that area.

They've added new product lines, new brands for -- that they can bring to the market. So I think the they've done a good job, and I think we've got a good plan as we go forward to drive that. Kieran, you want to...

Yes. Look, on the aftermarket parts, I mean I do want to stress, we have grown. You've seen the CAGR 6%-plus CAGR in the aftermarket parts. Now one of the things I talked about some of the digital investments that we're making that really tie in our distribution partners with CDI, connected dealer inventories, there is opportunity. We don't deal full wallet share of the business -- of our distributors business, for example, or our customers. But by linking in those digital tools, and that's not the primary motivation, but it does joins us much, much stronger, then for example, CDI now, we're even planning dealer inventory at the point of sale level. We can see their inventory and really -- and then also the fact that we're implementing e-commerce systems at the distribution level, that interconnects everything, right? So we would expect -- hard to put a hard number on it, but we would expect to grow our wallet share of that aftermarket over the course of the next few years.

And on the utility side, it really is -- we've made the investment in our service centers, now we've got to get the profitability of those service centers up.

So we're going to close out with one more question from online. This question comes from Mig Dobre at Baird. U.S. rental industry consolidation is picking up. What longer-term impact do you think this has on your AWP business?

Yes. Thanks for the question. Again, we see, obviously, a lot of developments are -- we deal with very, very advanced customers in our space. We don't necessarily see a material change going forward in the mix of our customers. And so it's not something that is concerning us to be very honest with you going forward.

Okay. I'll just wrap it up real quick. Thank you for your time and interest in Terex. We truly appreciate it. Great questions, as always. And if -- as we go forward, we'll continue to keep you apprise of the progress that we're making on our quarterly earnings call and our follow-up calls, against, you know where we are, what we're doing. And again, the team has delivered performance. We're confident in the targets that we set out that we can achieve those targets as we go forward. Otherwise, we would not have put them out. And so that's what we as a leadership team and a management team are committing to, to deliver for our shareholders as we go forward. And last, but not certainly least, there is lunch here, so please -- I don't want you to go, please don't go away hungry. And before you leave, there is the bucket truck, Jon, is it here?

Yes, it is here.

Good. Okay. So the bucket truck from [ Con Edison ] is out front, so please just take a look at the industry's first all electric bucket truck. Yes. I'm sorry, and Jon won't let me -- he's getting up. We have a Christmas -- or a goody bag for you, so please take that. And finally, given it is the holiday season, I hope everyone has a wonderful holiday season and -- as the year-end and then for the -- all the analysts in the world, you get a couple of days off before the race starts yet again in the first quarter. So thank you all for everything you do and have a wonderful holiday season. Thank you.

Thank you so much. Those of you virtually, you may now disconnect.