Relationships, and that of any company we express a view on this call today. These disclosures are available at ubs.com/disclosures, or you can reach out to me after this session, and I can provide them to you. With that, John Pfeifer, thanks very much for being here. Really appreciate it. John, as we come here to the end of 2025 and reflect back on the year, can you discuss kind of some of the biggest successes and the biggest challenges of this year? And then I'll just, if you have any other opening comments you want to make about the company and where we are.
Yeah, so I mean, I'll get right to your question. 2025, I think for all of us, has been a really interesting year, to say the least. I'll start with the positive. In June, about six months ago of 2025, we went to Wall Street and we kind of outlined what we expect to see from our company going forward over the next three years. And we laid out guidance through 2028. And we said that, hey, our revenue will grow to $13-$14 billion. Our operating margins will increase by 2-400 basis points, 12%-14%. We said that our EPS will nearly double to $18-$22 and talked about the cash flow that we'll generate. And that was, we laid out why that's going to happen. And we talked about the dynamics in the end markets that we serve, of which there are many.
And we primarily talked about the technology that we're bringing to market and how that really helps accelerate change for the customers that use our product. So we serve people in lots of different end markets who are people that do really hard, dangerous work. And without these people in our communities, our communities can't operate. And you see on the slide some of those end markets from construction to firefighting to last-mile delivery to refuse and recycling and on and on and on. And what's important there is that where we are with technology can really help improve the productivity and the feasibility for both the actual person doing the work as well as the fleet owner and the service provider of that work.
So when we look at that, that's what we're doing with technology in those end markets, that's what gives us the confidence in those 2028 numbers. If you look at 2025, back to your original question, I think we would all understand that the thing in 2025 that was probably the toughest to deal with is the tariff and the geopolitical climate. It's caused us to really have to look at our supply chains and our manufacturing footprints and say, okay, how do we do tariff engineering to be able to mitigate as much of this tariff climate as we possibly can? We started in a pretty good position because we're a quintessential American company with American manufacturing footprint. Nearly everything that we sell in the U.S. is made in the U.S.
But we do have global supply chains, and we've had to go to work to make sure that we're doing the work required to mitigate the impact of the geopolitical reality that we're in. And we've made a lot of progress. That's the good thing. And so we feel a lot better now than we felt, say, on April 1st when we all saw what was going on with Liberation Day. So I think that's a little bit of color to your question.
Yeah, terrific. Maybe we can kind of start with the high-level strategy and portfolio. Obviously, we've seen in the recent quarter, a competitor kind of changed their strategy around portfolio. How do you feel about Oshkosh's portfolio at this point? What's your vision for the portfolio over the next few years?
You know, we like to be in businesses that really have end markets that appreciate and value innovation that we can bring forward via technology. So we talk a lot about, and on this slide, you see the airport of the future. We're the biggest in ground support equipment. And we're doing an enormous amount of work to drive autonomous functionality, to drive intelligent products and AI into how the gates of an airport function to make it more consistent and quicker every time. And our big airline customers love that kind of work because they want their assets to be utilized as much as possible. And the job site of the future, we supply an enormous amount of equipment on every job site in America. And making those job sites more productive, it's inherently chaotic on a job site.
Making them more productive through the use of intelligent products, the use of autonomous functionality, and end effectors being able to do work versus people having to do work in difficult areas is a huge step forward for job sites in our end markets. So that's where we're really focused in our portfolio. We like end markets that really value that kind of innovation. And if they are, then we're happy to invest. If they're not, we tend to say that's not an area for us to be.
And so does this make you think about sort of expanding the portfolio from here? Are there a number of areas that you see those opportunities to deliver that value?
Sure. We're always looking at expanding the portfolio, but we're pretty careful about how we do it. You've seen us make some recent moves in Europe, but also in the airport market where we expanded our position in the airport markets. When we expand our position somewhere, it's usually because, or not usually, it's always because we believe it's a really good fit with our technological capability. Our portfolio makes sense because when we take autonomous functionality or intelligent products features or electrification, it makes it we can take that across a variety of different end markets. And when we see the opportunity, like we did in airports, to apply autonomous functionality or apply intelligent products features, it made a lot of sense. The synergies are there long-term to drive real improvement for the customers in that end market.
So that's what we look at when we look at expanding inorganically.
Terrific. How much of a goal is it or should it be to reduce the cyclicality of your business? And do you think about cyclicality at the overall company level or at the individual segment level?
We think that one of the benefits of our portfolio is that we do have a couple of businesses that are cyclical, as you know. And we think that the totality of our portfolio certainly provides a benefit because when you see a market downturn in one of our cyclical businesses, usually it's buoyed by the businesses that are not cyclical. However, we look at cyclicality on an individual business-by-business basis. And when we manage it day to day, month to month, year to year, it's business unit management. And what the expectation is that if we're in a cyclical business, that in a downturn, that business is going to generate strong margins even in a downturn, as well as when the market is healthy and growing. And I think we've been able to prove that we can do that, generate strong margins in a downturn.
And if we can do that, we tend to be very happy with the business. And if we can't do that, then we question whether or not we should be in that marketplace.
And one of the things that I think we get questioned on occasionally is the, I guess you would call it, program concentration. And we've seen it with JLTV, we've seen it with NGDV. You have these programs that can be very big and meaningful to the positive, but they can also create a little bit of just sort of concentration risk. So how do you feel about program concentration? And does that just come with the territory in this type of business, or is there a way you can kind of manage that over time?
I mean, ultimately, when we're developing product, we want it to go through as many channels and to as many customers as possible because that gives you the best resilience, but that's not always possible, right? There's only one Department of Defense. There's only one United States Postal Service, and so sometimes you have to develop a product for a specific customer that becomes a big, huge program unto itself. Now, that also means that you'll see us take what we have developed in that NGDV there, and we'll be able to leverage that in the future for other programs as well, so it becomes a big program, and that's very good because those big programs are very healthy in terms of the value that they create, but they do also parlay us into other things that help to grow our business and our revenue.
Fair enough. I wonder if we could come back to those 2028 targets that you mentioned before. You gave some initial color on why you have the confidence in that. Maybe you can just elaborate on that a little bit more at sort of some of the individual metric levels. What gave you the confidence to get some of those double-digit margins and in that particular timeframe? And I know it's only been six months or so or less. Any sort of indications on sort of reinforcing that or any other new questions that you have in your mind?
Yeah, we're completely confident in what we laid out to 2028, and I can talk. I'll talk about it. In total, what we're doing as a company with innovation for all the end markets that we're in, and we measure it in terms of a vitality index and what impact do the new innovations that we bring to market make? Because that's the intent. Actually make a difference for the person using the equipment as well as the fleet owner driving productivity with the fleet, and when we do that, we're confident that we're driving value and we're driving towards those numbers that we laid out in 2028, so I'll start with our vocational segment. Vocational business is vehicles designed for a specific purpose. So think about fire trucks, airport ground service equipment, refuse and recycling, premium concrete placement vehicles. We have big backlogs in these businesses.
In some cases, three and a half year backlogs in these businesses because of the products that we have and the problems that they help to solve in the end markets that they're suited to solve. So we see real clarity in terms of our ability to get to those 2028 targets that we laid out. And you see us deploy unique technologies in these end markets where, whether if it's a refuse and recycling collection vehicle that's now fully electric that makes no noise, that drives better productivity and usability for the operator, or it's an autonomous cargo loading piece of equipment that helps FedEx be much more productive on the tarmac, that's all part of what's driving demand for these end markets and driving those big backlogs that we have. Then if you go to the access marketplace, well, access is similar in terms of its innovation capability.
We're developing very specific products that are needed to support data centers, which you see in the middle of that program, to ag markets on the right-hand side of that, to normal construction that we've been serving for a long time on the left-hand side of it. The innovations that we're bringing to market continue to solidify our lead in this end market, and when we see the dynamics about what's happening with construction, not only the big stuff we all hear about with regard to data centers and power generation and government infrastructure, that's certainly driving a lot of long-term fleet utilization, but we look at the age of the overall fleet and how much fleet has to be replaced over the next three to five years.
That gives us total confidence in what demand is going to be for this end market for us and what leads to that 2028 target. Then you have our last segment, which is the transport segment, which is the core Oshkosh Defense products and the NGDV for the United States Postal Service. This is a business that's going through margin transformation as we've gotten contract price complete for new contracts for the defense side of it. You can see in the middle picture on the right-hand side here, that's an autonomous family of carriers that allows the Marines to position a Naval Strike Missile specifically autonomously to help them be more nimble in what they have to do to execute their missions. The United States Postal Service, this is in full ramp mode right now, will be at full rate production shortly.
That drives a significant revenue growth for us over the next 10 years, not just to 2028, but over the next 10 years for that platform, which is the largest fleet of vehicles in the world. So that went on a little bit long there, but that's what gives us the confidence that we'll get to those 28 numbers.
That's great. And we can follow up on some of those areas in subsequent questions. I guess shifting gears a little bit to tariffs, you mentioned earlier in our discussion that you've made some good progress in kind of mitigating impacts. What would you say are the biggest remaining uncertainties from the policy side of things as you sit here today, trying to digest and understand all the tariffs? And what do you think could still change from here?
What I'll say is the thing for us that becomes the biggest challenge from a tariff environment. You have IEEPA tariffs, and then you have Section 232 tariffs primarily. And the Section 232 tariffs are difficult for us because there are tariffs on raw materials. And it ends up not only do you have a tariff on raw material, but that pushes up the market price domestically. So steel in the U.S. market is twice the price that it is outside the United States market. So you don't have the luxury of saying, okay, there's a 232 tariff, I'm going to bring all that volume to the U.S. Well, the U.S. is now twice the price of the raw material outside the U.S. So you have very little ability to maneuver.
And that's where you have to say, okay, there is some of this cost that has to be passed on to our customer. And we try to minimize that. But the IEEPA things, we have a lot of tariff engineering that goes on, and the Section 232 tends to be more permanent for us.
So when you sit back and think about some of it has to be passed along to your customer, trying to manage it, how challenging do you think it'll be to be price cost positive in 2026?
We're going to work hard at it. I think that in some of our end markets, we'll be able to be price cost positive. Some of the end markets will make a lot of progress. We'll provide that guidance when we get to January of 2026 for what we expect in 2026.
Fair enough. Okay. Shifting to some of the segment specifics. In terms of vocational, you mentioned before a three-and-a-half-year backlog for certain products. And there's a margin narrative in this backlog. And I'm assuming that three and a half is not for the whole vocational segment, but for certain segment lines within that. Right. So how long can that margin narrative last for the overall segment? And then what's next after that?
When you hear about margin in the backlog, it really comes from two different areas. It comes from, A, catching up from inflationary impacts that have happened since 2021 because we have big backlogs. We're shipping product today in the fire truck market that we took the order on in 2022, and that's when we say, hey, the inflation price increase from 2022 is just being realized in 2025. When we talk about price in the backlog, that's part of it. The other part of it is, as I talked earlier, we continue to deploy more and more technological features on the vehicles that we produce. Customers in most cases want those technological features because it helps them be more productive. In the case of a fire truck, it helps the firefighter be safer. Those also come with better margins.
Customers are willing to pay for those types of advantages, and that pushes up the price point, but gives them a better capability when they put the product into the marketplace. That's also part of what's in the backlog.
Okay. So I guess when we think about the various components of vocational, would you say there's an organic growth cycle somewhere within there other than these, I mean, adding innovations that drive demand is what you're kind of talking about? Or do you think this segment will kind of be ripe for M&A to kind of take it to the next level over the next five years or so?
I think definitely we'll have M&A opportunity in this segment. But if you look at, for example, the airport markets, we're the leader in ground support equipment. It's everything from jet bridges to cargo loading to tugs that move airplanes around the tarmac and other products on the tarmac of an airport. That's in a growth mode. There's a lot of investment that's continuing in airports, not just here in the U.S., but around the world. Expansion, aging fleets that have to be replaced. That investment is all going to continue to drive really healthy growth rates in that part of this vocational segment for a long time. I think when you look at the refuse and recycling collection business, that's a great business for us. It's an opportunity for us to deliver better capabilities to our customers.
But that's probably a business that kind of grows normally around the level of GDP, but it's a very resilient business. It doesn't have big peaks and valleys to it. So there's a combination of both in this segment.
Okay. And you said there will be more M&A. What does the pipeline look like at the moment? And if there's anything standing in the way of deals at the moment, anything, is it tariff uncertainty? Is it just timing of finding the right transaction, all the above?
We have an always-on process. We are always looking at potential targets. We're a very careful acquirer. You've seen us make acquisitions over the past few years in a few specific areas of our business. The always-on process means that there's always a couple of targets that we're looking at very closely. M&A can be a little bit spotty and unpredictable. When we have the opportunity to make the right investment with the right partner, then we go ahead and do it. I think you'll probably see us do something in 2026. We're typically a programmatic acquirer, not a big bang acquirer. We like programmatic acquisitions that help us grow our business in areas where our technology can make a difference as opposed to we're going to do a gigantic multi-billion-dollar deal. We think programmatic is a good way to go.
But we're always looking at acquisitions in different parts of the business that we think are attractive based upon the synergies that we can offer.
Great. And rounding it out with AeroTech, you were talking before a little bit about it. I remember back at CES, we were talking to some of the AeroTech folks about how they were really just getting integrated into the business and a lot of synergies were still ahead. Can you talk about how the synergies are developing there and what we might see from that in 2026?
Yeah, it's pretty exciting what we see in that market. You know, when I think about synergies, of course, you've got synergies that are around supply chain synergies with regard to the cost base. And we've got synergies around how we operate. That's all good stuff. It's all very, very important. But the real meat of the synergies comes from what we can do with the product or the channel to market. And the product synergies here are significant. When I've talked about autonomy being big in the airport markets, we want the gate of an airport. We make most of the jet bridges that we all use to get on airplanes when we go to the airport. We want the jet bridge to be so simple that the gate agent just pushes a button and it's seconds before the jet bridge is at the door of the airplane.
We don't want it to be a stressful experience. It sometimes gets stuck, takes too much time. People are waiting. It takes the airline too long to get people on and off the airplane. Cargo loading is the same. Even the tractors that move baggage around the tarmac will become autonomous in the future. It's a perfect case for us to make autonomous. It helps the airport be more and the airline be more productive. So there's a lot of opportunity to continue to apply our technology in this end market. When we look at airport of the future, we have an AI product that we call IOPS, which essentially takes hundreds of data points real-time at the gate of an airport. And it's learning all the time about what's happening at the gate of that airport. And it knows when certain data points are aligned.
It might look at 15, it might look at 30 data points, and it knows when they're aligned in a certain way that something is going to happen, and it'll be able to alert a gate agent or somebody on the ground, "Look, you need to do this to prevent a 10-minute delay of the aircraft." That is the kind of innovation that we're really investing in to make a big difference in how our customers can operate more efficiently, in this case, at an airport, so that's where I see the real synergies, the real synergies are with what can we do with the product to help customers operate better.
Right. Very exciting. Maybe on the Transport segment, in terms of the ramp-up of the NGDV, I think you said before that you'd be ramped up to full-rate production shortly. I guess what's the confidence that you'll be able to achieve that full-rate production by year-end? And will you be at full-rate production basically for all of 2026, I guess was the question.
I'll start with we're making lots of vehicles right now as we sit here. I will start with the Postal Service absolutely loves these vehicles. It is the most advanced last-mile delivery vehicle ever invented. It's the only purpose-built last-mile delivery vehicle. So it is a fantastic product. It's delivering in nearly every state right now as we sit here. We are continuing to ramp production. Every week we get more units than the week before. I'm still targeting the team to get to full-rate production by the end of the year, but I have to be realistic. It's December 2nd. This can push into 2026. The Post Office knows exactly where we are with regard to the ramp. We will get to full-rate production sooner than later. And this is a program that's going to be in production for at least 10 years as we go forward.
So it's material for the United States Postal Service, helps them transform what they do. But it's a very high-volume, somewhat complex plant with a lot of automation. So there's no specific thing other than the normal production ramp issues that have to be ironed out as you work your way to full-rate production. But we will be in full-rate production in the fairly near term.
And building on that, you've talked about wanting to expand that into the last-mile delivery. How much of a focus is this for this business on a sort of an active day-to-day basis, finding new customers? Are we closer to any new deals there?
We know that we have a lot of opportunity because we talk to a lot of service providers in the industry. Right now, we continue to stay with our engineers because it takes a lot of engineers to develop a vehicle like this. We're totally focused on the NGDV production. But we also know we have a lot of opportunity to expand beyond it. And when we're ready to talk about something specific, we will. But right now, I mean, this alone provides significant growth for the company.
Sounds good. And on defense, can that business be a growth driver?
So the defense business is going through a margin transformation. If you look at the business, it's been through a period where we went through significant inflation from 2021 through about 2024. We had fixed firm price contracts. Those contracts have now been renegotiated where we're now getting price caught up to the realities of that inflation. That changes the margin profile between, say, mid-2025 and the end of 2026, where we'll start to get the full benefit of those contracts and the price changes. We've also got new contracts internationally. The top right side of that picture is a vehicle that we developed based on the JLTV chassis for the Dutch Marines. And that's an example of international opportunity with everything that we all know is happening in the world. And in the right middle, I talked about it earlier, that's a vehicle we developed for the Marines.
It's an autonomous vehicle. Those specialty programs are also helping transform the margin of that business. So when you think of our core Oshkosh defense business, we're working on transforming the margin first. And that's what we have in plan to 2028. It's not a big growth driver, but it's a margin driver. And then beyond that, we'll start talking about growth again.
And so, on that path to getting the margins in that segment to 10%, I believe, is the 2028 target. And clearly, defense is going to be a big piece of it. I mean, how do we think about the balance of the defense contribution versus NGDV? Is it sort of.
So the NGDV will be a little bit more than half the revenue, and the core defense business will be a little bit less than half the revenue as we continue to execute those two sides of the business.
Got it. Okay. Moving on to Access. I think you mentioned before that part of the confidence in the 2028 goals there is really about seeing what the replacement needs are for the fleet. Remind me what you've factored in for kind of cyclical dynamics there. I think it was basically not much of a cycle.
We're in a down cycle right now as we speak. We believe, as we look forward, there's some really good demand drivers in the access equipment world, data centers and power gen and those types of things. But we also have a situation where kind of your mainstream non-residential construction, think about private non-res projects that are still on hold. That part of the market is still a little bit suppressed. We believe that the market will come out of its downturn at some point in 2026. We don't know exactly when. Could be mid-2026, could be late 2026. But as the market starts to recover from that, we are expecting it to expand through 2028.
Okay. And I guess more near term, my sense is you mentioned that we're in a downturn now. The overall level of construction activity still remains, other than the Resi piece, non-residential construction still remains fairly elevated and steady. Do you think, and what we've sensed from the rental channel, it's a lot of the local and mid-sized players in those markets that have been a little bit more pressuring the demand for rental equipment. Do you think that has sort of bottomed out over the course of 2025? This is kind of the sense that we've gotten the utilizations in the market are kind of balanced out a little bit.
The thing that we pay most attention to is what the utilization rate is of equipment that's in the market, the fleet of equipment. And the fleet of equipment that's in the market is the utilization rate of that is relatively healthy. And we look at the used market as well because that can be an indication of the health of the market. And the used equipment market is healthy. There's not an abundance of used equipment on the marketplace. So we start there and then we look at what the construction metrics are. And we know that because of the age of the fleet, where it is in terms of average fleet age that's in the market, that fleet replacement is needed along with fleet growth that's needed to support some of these end markets as they continue to grow.
Right now, I think we have at least a segment of our customer base that's kind of in a wait-and-see mode before they start to put more capital deployment to work. They're in a wait-and-see mode on interest rates. They're in a wait-and-see mode on how does the tariff environment impact certain end markets that they serve equipment to. And we're at a point in time where we think that that's going to start to change as we get into mid to late 2026.
Great. I'll ask one more question here and then I'll turn it over to the audience to see if there's any questions. Obviously, AI remains very, very topical. Just curious your perspective on what does it mean for you as a revenue opportunity and as an operational factor and efficiency driver going forward?
Yeah, it's both. And we're investing in both areas. So I talked a little bit on the product side, which we think about first and foremost. I talked about that IOPS product for the airport markets. I talked about Clear Sky for making job sites more efficient. We're putting a lot of work into those products. They're already deployed. We're learning. We're continuing to improve them. So using AI at the level of where our equipment is used to make it more productive is a big part of our AI plan. But then we have our own manufacturing plants and we have our own supply chains. When we look at our own manufacturing plants, what you have when you walk into any manufacturing plant or even in process that goes way beyond our manufacturing plants, you have silos of data.
And in many cases, those silos of data have been created for decades. You have MES systems and manufacturing execution systems in the plants. You've got ERP, MRP, engineering databases. And what we have to do is we have to take all that data that's in different silos, and we've got to release it and clean it to where AI agents can access it real-time to be able to start to deliver significant insights that allow us to be more productive with every year that goes by. So what you do is you have to start somewhere. So you start with the first dataset and then you start adding datasets to it over time. We work on finding the right AI partners because we can't do all the work ourselves.
We have a lot of good data scientists, but we have to have the right partners depending on what it is that we're trying to do. But it's a challenge of being able to make the data, which is many times its legacy data, accessible in a clean way by AI agents. And we're working very hard on that. We're making a lot of progress, but that's going to unlock significant productivity for us as a company.
Fantastic. I will see if there's any questions in the room for Oshkosh. Okay. If not, John, I'll give you the last word here. Any message you want to leave with the audience?
For us, it's all about driving growth through innovation, which has been part of my talking points as I've been up here on stage. We see a lot of opportunity to continue to drive innovation, to drive significant value for our customers, which is what leads us to the numbers that are on the page. We feel incredibly confident in our ability to continue to execute this.
Terrific. Thanks so much for being here. Thanks, everybody.