Yeah. Okay, good. Okay, thanks everyone. Excited to have the team from Terex again at our conference. We appreciate the loyal support over the years, John, and John Garrison, Chairman and CEO to my left, Julie Beck, CFO to his left. Thank you both for being here and we'll just do Q&A. Hopefully we can make it interactive with the audience. Before we go to that, I think John had a few slides he's gonna whip through. Over to you, John.
Yeah. Thanks. Thanks, Tim. First of all, on behalf of the entire Terex team, thank you for your interest in Terex. We've got a couple slides that we used during our investors call and as well as our investor day that I'd like to just quickly run through, as Tim said. The forward-looking statements, we will be making forward-looking statements, so please take a look at that. We start every meeting at Terex with our Zero Harm safety and our Terex Way values. You know, the purpose, to improve lives of people around the world. We can't do that if we can't keep our team members safe. Up until the pandemic period of time, you'll see dramatic improvement in our year-over-year safety improvement. We plateaued a little bit and actually went backwards.
That's something we're focused on as a team. I also think it's another good indicator of the level of disruption that we're experiencing in our manufacturing operations. When you have to do consistent rework, do things multiple times, it creates the opportunity for injuries to occur, and that level of disruption has shown, and you can actually see it also in the overall machinery manufacturing average index as a result. We've got work to do there. We're not proud of our progress overall. We're not on the path that we need to be, and part of that is the ability to overcome disruption. Incredibly proud of the team, especially around citizenship, of what they've been able to do in the world over the last couple years that have been very dynamic and very challenging.
In 2022, we implemented our execute, innovate, and grow strategy. I think the team, hats off to the team. They did a great job really being resilient and adaptable in a very dynamic environment and really managing the supply chain, labor constraints, the challenges that we had to produce as much as we could to meet the needs of our customers. Drove improved execution in a very challenging operating environment. Continue to be zealots around managing expense and cost in the business, and I think that was reflective in our SG&A spend, while at the same time investing significantly in the business. Our biggest CapEx investment is our Genie Mexico facility, and we'll talk about that. Also continue to invest.
Part of our growth has come from we've got a very active vitality index, where we continue to invest in our products and services to make sure that they're leading the industry in terms of the solutions that we offer to our customers. We had some firsts, the industry's first all-electric bucket truck. We announced new electric drive systems for our Genie products and continued, and this is an ongoing investment that we continue to make around digital and interfacing with our customers, with our dealers digitally to improve the performance of our business as we go forward. On the growth side, we did have strong organic growth, up four, you know, overall 14%, We also started back in the mergers and acquisitions to grow the business via inorganic activity.
We acquired ProAll, a volumetric mixer up in Canada, a nice add-on for us in that space. We have also made some investments in technology investments. Let me be clear, these are technology investments to enhance our product offering and our capabilities for our products. We also get the upside from an equity standpoint, but that's not why we're making the investments. We're making the investments to grow our technology and to improve our offering to our customers as we go forward. We were successful with several there. Overall, ended up being a strong year with sales up, operating income up substantially, EPS of $4.32, up 41% year-over-year.
You know, Tim, we used to talk about quality of earnings, and one of the things we're proud of now is that there's no as adjusted, as reported. That's GAAP earnings, and that's what we report. Returned another $130 million to shareholder via share repurchase and dividends. The other thing that we're proud of as an industrial company is we think return on invested capital is incredibly important. Over time, we've dramatically improved the return on invested capital deployed in Terex. We think that's an important metric, and we measure ourselves and compensate ourselves based on the improvement that we drive there.
In our investor day, we kinda laid out looking a little bit longer term, what can the next couple of years look like and where do we think there's opportunity for us to grow? In the first, we call it capitalizing on megatrends. Circular economy, basically what is that? It's recycling, it's repurposing materials around the world. We have a line of equipment that helps to do that. Electrification, both in terms of our products, our utilities business, we can do that. The world, and I'll show a slide, continues to invest substantially in infrastructure and the U.S. as a major infrastructure bill, and frankly, it's catching up to where the rest of the world is. We have our Materials Processing segment. It represents 60% of the operating earnings of Terex, and it's incredibly important.
It's consistently delivered over a period of time, and it does a great job of growing into adjacencies, product categories, geographics. We've got a great distribution organization in MP, and we leverage those relationships to expand our offering around the world. What are the dealers carrying gives us ideas and opportunities for future M&A activity. We continue to invest in innovation. For Genie, it really is about optimizing our through margins, optimizing and improving our margins through cycle. That's what the team's been, you know, focused on the last couple years, to continue to drive improvement. We think over time that we can return that business to a 12%-14% level of operating margin, as we go forward with the series of significant initiatives that we have to drive Genie forward.
We made a sizable investment in our utilities business in Watertown, South Dakota, plus service centers. Why? The investment required in the U.S., in North America, really in the globe, but especially in North America, to achieve the electrification objectives, the net zero objectives, is significant. We think there's real opportunity for us to grow and profitably grow there, then looking to grow internationally, in places like China with our offering, places like India as we go forward. Last, but certainly not least, parts and service. We've invested in that, digital capabilities, enhancing that customer experience. We produce capital goods that go to work. For the customer to get a return on their capital when they utilize our solutions, it has to operate.
The parts and service side is critically important to the customer, and it helps us too because it's countercyclical, and we do enjoy reasonable margins on that part of the business as we go forward. As we look out, that's what we think, you know, there's opportunity to grow the Terex portfolio as we go forward. Then what we talk about this concept of megatrends. At the center of that is sustainability around the world and how the world has to fundamentally alter the way in which we operate. Around that sustainability megatrend is things like infrastructure investments. If you look at that's a global number. Sizable infrastructure investments here in the United States that we think's gonna be a tailwind for our business for the next several years. We spoke about electrification.
The simple math is we have to invest in generation, we have to invest in transmission and distribution in order to achieve the electrification goals that have been set out. Digitization. You know, around the world, the onshoring here of chip manufacturing plants into the US market, all things digital, major construction required. For our Genie business, there's a lot of Genie products that work long-term in data centers, in chip manufacturing areas, so we think that's a growth opportunity. Last, but certainly not least, is waste and recycling. As the world begins to realize that we just can't dump everything into landfills as we've done historically, there's opportunity to recycle that. Europe started the push. We've been successful there. The world is changing in terms of regulatory requirements for waste and recycling.
We offer a full line of product solutions that help in that circular economy waste and recycling. We believe we're in a good place with our portfolio, with some tailwinds with these megatrends that position us for some sustained growth as we go forward. These were the financial targets that we laid out in December for, you know, from now through 2027. We think we can grow at a $6+ billion company. As we said, it's about 7.5% CAGR. Won't always be linear, but the starting point and the ending point, and again, let me talk, this is all organic.
We think we can drive the operating margins, consistent performance in that 15%, 15.5%, 16% range in our MP business, but drive the AWP segment up higher. The overall company, we're at 13%-14%. $8-$9.50 in EPS and ROIC north of 25% return on invested capital. On top of this, you know, we think we could add another $1 to $3 or so in terms of inorganic growth, because underlying this, our balance sheet's in great shape. You know, the less than 1x net debt to EBITDA, good cash flow generation. We've generated 21% return on invested capital while investing substantially into the business.
Just a couple things, Tim, that we laid out, you know, about where we are, where we're going. I know we're always focused on the here and now, as we have to be. As we look out into the future, we think there's some good sustained tailwinds for us, and for this business, and we think we're well-positioned to capture that, as we go forward.
Good. That gives us a good amount of stuff to kind of unpack. Maybe we'll start with the just kind of operating segments. You know, I think you've done a much, or done a good job in terms of shining a brighter light on MP. I think, certainly think that's helped the investment story. But maybe, John, start with, I think you mentioned 7.5% CAGR in terms of revenue growth. I think that's what you outlined for-
Yes.
For MP specifically. What are some of the levers you have or underneath that or, you know, that you see driving that kind of growth? Which is, I think, higher than what the business has done historically.
No, actually, it's consistent. We've actually done a little, at times a little higher than that.
Oh, okay.
That is not, that is, I would say, one of the things we like about the MP business is consistent revenue and consistent operating margin growth, and that really continues that consistency as you go forward. MP is really a portfolio of businesses. The biggest segment is our aggregates business.
Mm-hmm.
About 50% of the overall segment is aggregates. We are the world's leader in mobile crushing and screening with our Powerscreen and our Finlay brands, Ecotec brands, EvoQuip. That's a segment of the market that's growing globally. Aggregates are at the core of everything that needs to occur from an infrastructure standpoint.
Mm-hmm.
We have great specialized global distribution, where we're important to the dealer, and the dealer's very important to us. That combination enables us to grow into new markets around the world. We continue to add new product offerings around the world, and there will be opportunity in M&A. We made a small acquisition of a heavy trommel company in Ireland last year. We've substantially been able to grow that business, taking that product offering and putting it through our global distribution. That's the aggregate side of MP. A true global leader, we also do modular systems. Terex Washing Systems. One of the other things we always hear about shortage of computer chips. One of the things there's a shortage of is silicon sand to make the silicon chips.
We have an offering, Terex Washing Systems, where we actually can take recycled material and create sand of the high enough quality that it can be used in chip manufacturing. Another example of a segment within the broader MP, within aggregates, that we think can grow. The other part of that business that's, the team's done a good job is what we call our handling business. That's really our Fuchs business. Again, above market growth there tied to the scrap steel markets, but also we're diversified that business now into other applications, into timber, into port handling, and as a waste handler that we combine with our Ecotec brand to offer a solution to municipal waste handling operations, where we provide a complete solution. Again, seeing real nice growth with that business.
So that's on the Materials Processing side. Our concrete business is a North American business within that segment. It is of the businesses that's perhaps more tied a little bit to the residential construction strike, at least historically. Our Terex Advance business still seeing strength. ProAll, more on the infrastructure side. We've got a nice concrete business that we think is gonna grow. Our lifting business, and that's really three businesses that are global for us. The most exceptional is our Franna business down in Australia. It's a great business. Wonderful market position, wonderful operating margins, wonderful capital return business.
In that, we also have our tower crane business and our RT business, that service Middle East, which has been a strong market for us, in Europe, which has been a bit of a challenge. All together, those segments come together in the MP segment. Those businesses come together in MP segment. Historically, that's the level of growth they've been able to drive. We think, given those underlying mega trends, that we can continue to do that. Then the other thing, Tim, that I think is really important is even in the depths of the, you know, the pandemic, MP delivered 11% operating margins. You know?
Mm.
At the depth, they delivered 11% operating margins. That consistency through time is something we think that we're talking a lot more about. We position it in the front of everything, not after, because we think it's been a great part of the Terex story for a long time, but it was just covered by other less-performing businesses. Now we've kind of taken that away and shined the light on what's been a great business for a consistent period of time, and we think it can consistently grow as we go forward.
Yeah. Yeah, going back to aggregates, like all of MP, is a pretty diverse geographic business. maybe highlight, you know, Asia and the U.S. would seem like a pretty big opportunity for the business.
Yes.
Maybe start there.
Yes. U.S., North America, across our business portfolio for the next couple of years, we think is going to be a very strong market.
Mm-hmm.
Clearly will help MP, we also It's gonna help Genie and Utilities as well. You know, why is that? The, you know, the Infrastructure Act, my predecessor warned me, he says, "John, don't ever talk about an infrastructure bill because I've been doing this for 25 years, and it never happened." The infrastructure bill finally did happen. That's a tremendous amount of stimulus that's gonna be spent. You know, the timing of it is always questioned because you've got government contracts and you've got permitting.
Sure.
That is a tailwind that we're gonna see. The next area-
Have you seen funds?
Starting to.
Yeah.
When you talk, especially to the rental customers, they're starting to see funds flow, especially at the state level on infrastructure, that supports. Yes, you're beginning to see funds flow in that area. The other area is the CHIPS Act, and that, you know, beginning to see some major projects be announced on the reshoring or the onshoring of chip manufacturing back here to the States. Those are multiyear, multibillion-dollar, you know, construction projects.
Mm-hmm.
After they're up and running, our type of equipment is present in the operations of those as we go forward. The U.S. market, we think is, you know, again, we can't be Pollyannish, but there's a lot of positive tailwinds that are setting up for our business globally, but especially here in the U.S.
Europe, from memory, is as big or big, even bigger chunk of the aggregates business for you. What have you.
Comparable
seen there?
Yeah. aggregates has actually held up pretty nicely in Europe. As we called out on our earnings call, if we've seen any weakness, it really has been in Europe. I will say that I'm pleasantly surprised it's remained as strong as it has. We did see some softness in orders in our tower crane business and our RT business and some of the Fuchs business. Some of the Fuchs was really more around timing of large dealer orders. We're seeing some of that come back here in Q1. We have seen some slower softness in Europe. When we look at our backlog position versus history, it still remains quite strong, despite all the challenges that exist right now in Europe.
Yeah. Well, to the point on backlog, I mean, what can you do to kind of test the legitimacy of that backlog? 'Cause that's everyone's fear that...
Yeah.
You know, we wake up.
Yeah.
X% of those disappear.
We've all been in the cycles, we're all just on the line. That's a really good question. For us, it really is the leading indicator. It's not just bookings or orders, it's really what is transpiring in the backlog. Tim, we're hypervigilant on that, what do we look for? The first thing you look for, we actually have our teams have to report out on it, are you seeing pushouts? Are you seeing a dealer that said, "I wanted it in on February 15th," now push that out to May? Are you seeing a rental company say, "Oh, I don't want it now," push that out. That's the first sign potential of things, quote-unquote, softening. We're not seeing any of that. The next sign would be outright backlog cancellations. Again, we're not seeing cancellations in our backlog.
Frankly, right now, if there is anything canceled, we can immediately take it and sell it elsewhere. It'll be pushouts, cancellations, order rates. Again, we have historically high backlogs. Our backlogs need to come down. I mean, our lead times are excessive based on historical norms. I've said this to a couple investors today. We booked $1.8 billion in Q1 of orders last year. Probably not gonna book $1.8 billion in first quarter of this year. The world's not ending.
Yeah.
Our backlog will probably still be up.
Yeah.
Even though we, you know, we had lower bookings for the quarter.
Got it. Parts is, you know, the target has parts becoming a bigger piece for both businesses. I would think that's probably a little easier, but less of a of a stretch on the MP side, is it relative to Aerials? What can you do in terms of? Is that a function of fill rates? Is it a function of capturing, you know, more of your own, I.e., you know, less wheel fitters and just what can drive that?
Yeah. Tim, you're absolutely spot on. If you just look at the two pictures. Obviously, the material processing, you have wear parts, you have physical contact. just the application generates more parts-
Yeah.
You know, a Genie, in that case, a Genie boom lift. You're right. Part of the, you know, growth and margin opportunity in MP is it a higher percentage. We don't publicize it, but a higher % of the overall revenue within the segment does come from the parts and service. One of the initiatives that we've had as a corporation in improving our parts and service business, and the MP team's the one that led it, was what we call Connected Dealer Inventory. That was a program and a system where we actually would go in and manage the dealer channel inventory with our inventory to improve first-time fill for our end customers. We started it as a pilot with some of the more influential dealers. You can imagine that created a little bit of consternation to start.
What the dealers found out is they had more sales, we had more sales, customers more satisfied. We're rolling that technology out across the globe, across the MP, not just in aggregates, but across the MP business. That's one area where we've been able to drive, as you say, improved fill rates, first-time fill for the end customer, overall fill rates, and then we capture a bigger percentage of that parts availability when you're there. You're reducing the leakage, as you say, to the gray markets and to the wheel fitters. That team's done a really nice job there, and that's helped drive some top-line growth and definitely helped drive some margin growth for the MP segment. Similar to the Genie team, doing similar type activity.
We've invested in some information technology that helps us optimize, especially in the parts. We're very dynamic in parts pricing in this inflationary environment.
Mm-hmm.
The technology that we had enable us to do pricing real-time, to scrape markets, understand what other market pricings were, and also helped us to drive material planning. We actually slightly improved some of our fill rates despite the supply chain challenges that we saw. It's been a focus. Team's done a good job, and we think it can continue to provide the growth that we need going forward.
Dealers play different roles across the various pieces of MP. How would you. I know it's probably there's no single answer for this, but how would you characterize the level of inventories across the dealer base for MP and what does that I mean, it's not a big stocking, restocking business, but is that a dynamic that you think. Presumably, they're lower than average.
Yes.
Is that an opportunity where you say they, you know, the emphasis would be on potentially post 2023 to restock or rebuild inventory?
You're absolutely spot on there, Tim. MP, about 75% of the sales go through distribution. Most of that distribution is specialized distribution in and around specific applications like you see in the picture there in aggregates crushing, and screening. Dealer inventories across the product offering across the globe are down. What's unique about our distribution is it's not I don't call it yellow iron stocking dealers. They're just not putting 100 backhoes on the line.
Mm-hmm.
They bring the product in, and it immediately goes out in their, what they call their dealer rental fleets. It really is a RPO rental purchase option type environment. What's happened is very high demand, very high utilization, those are converting quickly to sales, and the dealers don't have any inventory. We do have an inventory stocking tailwind that will help us. If demand begins to fall off a little bit, there's still dealers that need to replenish their dealer fleets.
Mm-hmm.
That, and that's common across the platform and across the globe because we've been in a... Our ability to meet customer demand has been constrained.
Got it. Maybe we can shift the discussion to AWP, and I'm interested to hear about the Mexico startup is happening at a time where, you know, supply chain... I'm sorry, Julie, did you wanna-
No, no.
No, no. We're just whispering back and forth.
Oh, got it. Okay. A lot of complexity, challenges within a supply chain at the same time ramping up a new facility. That could lead to. I mean, presumably, you baked in some degree of cushion into the forecast.
Well, we, you, spot on as usual, Tim.
Yeah.
We did call that out in our earnings call. This is a big year for the Genie team. First of all, the team's done a really good job. In the midst, you know, it's been a 2-year-plus construction, you know, cycle. We moved into a temporary facility with a couple product lines. It's about 1.5 kilometers, 2 kilometers from our permanent site. The permanent site has been on budget, on schedule, and now we're starting to move into the permanent site here early in the second quarter. That's gonna take a while. We've got 10, 11 product line moves that are gonna go on over the course of 2023, but also into 2024 as we ramp up and utilize the full capacity of our Mexico facility. What's the challenge?
First let me say, Genie does this. We're a global manufacturer, we do move product lines from one country, one plant to the next. We have a very defined process. The team has done this. The challenge is doing it in a supply constrained environment. Normally, what we do is the sending plant, you know, works overtime, builds inventory. You get, you know, manufacturing efficiencies. You put it into inventory, you sell out of inventory while the starting up plant, in this case, Monterrey, gets down the learning curve, works out the kinks, gets the supply chain working, and you have disruption there. You have positive in the sending plant. In today's world, we can't build inventory 'cause we have inventory, we sell it.
Mm-hmm.
Now we have to dynamically manage both the sending plant and the receiving plant with a constrained supply chain. That's the challenge for us. You know, the team's up to the challenge, but we did indicate that we're gonna see some manufacturing inefficiencies as a result of these moves. It is the absolute right thing to do. One investor asked me, he says, "Why don't you just wait until the supply chain gets better?" I said, "Well, when exactly is that gonna occur?" It's the right move, and we'll navigate through it. It'll be a challenge, but the team's up to the challenge, and we've tried to anticipate that, Julie, in our outlook.
Yeah, I would just add that, you know, it's important to remember that the reason why we're moving to Monterrey is we have a 200 basis point margin improvement, we think, when that facility is up and fully running. That will happen, you know, later in 2024. It's the right thing to do to go and capture that margin improvement at this point in time.
to get the plant to scale is what? A year or
It's almost two.
Two years.
That's what we thought.
It's two, yeah.
We said to him, we said coming out of, you know, by 2025, we'll have most of the moves complete. We should be through all of this location and the other part, it's not just our plant. We're standing up suppliers in Mexico that will also give us a competitive advantage. You've got that supply chain development activity that's occurring simultaneously with the move as well.
Anything from a logistics standpoint or access or proximity to your customer base? Any other things beyond just labor savings, I imagine are fairly sizable, but are there offsets that go against that go into that equation and not material?
Yeah. I don't think it's. We're manufacturing today in Washington State, you know, it's in northeast corner. For Monterrey, for, you know, a lot of the US customers will be.
Yeah.
You know, as convenient.
Not dramatically different.
Mm-hmm.
You know, we're moving things from Asia, you know, here, you know, so that will shorten those supply lines for us. Yeah, it puts and takes, but.
Yeah.
It's gonna be accretive from a margin standpoint.
The guidance for this year and what, you know, one of your a large customer reported this morning and, you know, where the outlook continues to be really strong and dynamic, the tailwinds are there. But you and another competitor that was here earlier are guiding to, like, single digit revenue growth. Is this just a function of let's potentially leave more upside to the extent supply chains do get better, that maybe we can
Surprise to the upside or? There's certainly an element of price in there, so you're not-
As we think about we have, you know, supply chain is the constraint right now. Our customers would take more equipment from us if we could get the supply chain to support it.
Mm.
You know, we've reflected in our outlook, you know, what we think our supply chain can do. For the last seven quarters or so, you know, we've been running at that $1.1 billion, and our outlook for 2023 is in that $1.1 billion-$1.2 billion range. It's slightly improved, but it's certainly, although supply chain on-time delivery has improved slightly, it certainly isn't what it needs to be to get all of the components and all the parts that are needed to ship a machine. Until we see that, you know, this is the best that we can do at this point in time based upon what our suppliers are telling us and what our experience is and what we're getting from our supply chain.
Tim, all of my conversations with, you know, senior executives of, you know, of our customers is, they need more, and they're gonna need more for. They're looking out, they're gonna because of the replacement cycle specific to the Genie side now, their replacement cycle's been delayed. If you go back, you know, we're producing 25% less than we did in you know, 2017 and 2018.
Yeah.
Their fleets are aging. They haven't been able to. They've had growth, fleets are aging, plus you've got this, you know, these tailwinds and the infrastructure, you know, the CHIPS Act. The market is setting up for a pretty strong buoyant run. The replacement cycle should have started earlier, frankly two years ago, but we've all been constrained, we being the industry, supply industry, constrained to meet that replacement cycle. That is gonna create some form of positive tailwind going forward.
Yeah.
Is anyone in the audience have any questions? We've got one over here.
Regarding your margins, are you able to expand more on your long-term plan? I think you said it was 13%-14%. I see you have 9.5% last year. Your guidance had about 10.5% next year. Where can you clarify where that 300 basis points is coming from?
Yeah. Take it, Julie.
You know, thanks for the question. We have, you know, both of the segments have margin improvement. Our MP business, you know, continues to operate, you know, very strong. We have put in, you know, roughly 100 basis points improvement from that business, as we continue to invest and grow that business and expand the margins in that business. For the AWP, we just talked about the Monterrey facility, and we believe that that's 200 basis points. The team, the Genie team has, you know, hundreds, you know, a couple of hundred at least initiatives that they're working on, whether it's supply chain, redesign, value-added engineering, all sorts of things to improve margins in that business as well.
You know, we're excited about improving the margins and the business improved the margins. In total, Terex has improved to 500-600 basis points in the last, you know, 7 years or so, and we look forward to continuing to expand those margins going forward.
I would also add our utilities, which we report within that AWP segment.
Mm-hmm. Mm-hmm.
Of all of our businesses has been impacted the most by supply chain, their margin performance has not been up to our expectations, especially the investment expectations we made to grow. We'll see margin growth in the utilities, which is in that AWP segment.
Yes.
It's not just Genie, it's utilities as well.
Mm-hmm.
From a customer mix standpoint within AWP, John, has that changed as a function of or as a result of this tight supply environment?
Not dramatically, Tim. We're, you know, if we look at our backlog, if we look at our sales, you know, it ebbs and flows, but our kind of historical mix between, you know, the larger national accounts and the independents is, you know, is kind of within the range.
Yeah.
It ebbs and flows, but nothing dramatically different in either the revenue side or the backlog side.
The dealer-owned fleets have always been a relatively smaller-.
Yes. I mean, for Genie globally, 95% ± of that business is rental.
Yeah.
Direct rental. 5%-10%, depending on the month or quarter, goes through a dealer channel.
Got it. Got it. With utilities, certainly a lot of secular tailwinds...
Yeah
You know, from a demand perspective. I know that was impacted by supply chains. Have you seen, on the chassis side, any improvement in terms of availability or?
We you're right. That business from a. You remember this supply chain disruption, you gotta sequence everything. If you have to have the right chassis, the right body, and then the right assembly unit. If the chassis are out of sync with the bodies and the assembly units, you have pieces, and you don't have complete units. That's been the world we've been living in for the last year or so. On the chassis side, in general, we're the chassis supply has improved, and we're now actually getting some chassis in inventory when we need them, rather than they're arriving late and we're trying to marry up the body in the assembly boom. We have...
I won't mention, there's one supplier that you all read about in the fourth quarter that does supply chassis for smaller units. They're still having trouble. Overall, I would say we have seen improvement in chassis, but it was very bad for the last 18 months.
Yeah.
Very bad.
Yeah. If you try and take that business internationally, I mean, there's no commonality from a customer set, right?
No. No. Nor is there a commonality necessarily from an application. Where there is commonality, Tim, is if you look at the, at the truck there, from the, from the boom down is always gonna be different.
Mm.
The boom
There's where it's commonality. For example, we do assembly of the boom in China and put it on a Chinese truck for the Chinese market. We send kind of the technology piece over there, and we do the assembly in our Changzhou facility. Similar opportunity we think will evolve here in India. The common practice is in the United States and Canada and Mexico, we do what's called live line work. To do work in and around energized lines, you have to have insulated equipment. That's what we produce. Places in Europe don't do that type of practice, the system or the solution they provide is very different than an insulated solution like we provide. It does vary by region, by country.
Got it. Okay. Maybe, Julie, bring you in on free cash flow. That's, that's been a focus going back prior to you joining Terex. The inventory issues are pretty well known, and we'll see how that evolves. Is there anything you can do or your team is doing from a payables or receivables standpoint to help drive, I mean, higher conversion or just...
Yeah, the team is just has done a nice job, you know, both in collections and receivables as well as negotiating terms with our suppliers. Our DSOs and our day payables and those terms are strong. They're good. They've been you know, they've gotten better over time.
Mm-hmm.
We've made progress there, and they were relatively consistent, you know, the last year or so, you know, pretty consistent and strong. The big, you know, lever in working capital, as you mentioned, has been in use of cash, has been in inventory.
Got it. 100% cash conversion this year is a...
No. Well, we talked about 70% or so conversion, you know, is what we're talking about, which is, you know, is improvement and, you know, and we have a big capital year this year, of course, as we invest in our Monterrey facility this year.
I will say, Tim, part of our management incentive compensation throughout the organization is on working capital.
Yeah.
You know, the importance of driving working capital efficiency. Some of the businesses we divested.
Mm.
Part of the reason was the return on invested capital was very poor. Part of that reason was because the working capital as a % of sales was astronomical.
Mm-hmm.
You know? We do focus on the efficiency of working capital.
Got it. Okay. Good. John, with a minute to go, so summing up what we heard, continued optimism in North America, other parts of the globe. I mean, anything changing around the edges or?
No. I know it's, you know, but we're seeing strength, other than Europe that we spoke about. We're seeing strength, you know, around the globe for end markets based on those mega trends that we talked about. The team will continue to be adaptable and resilient and overcome and get, you know, some point in time the supply chain will improve, and we'll be focused more on meeting customer demand not, you know, building backlog.
Mm.
as we move forward. Again, we think there's some good secular trends for our portfolio over the coming period of time. Again, we're not being Pollyannish. We understand there's a macro backdrop out there that causes people to question. The environment we're seeing right now has legs and has strength.
Excellent. Thank you very much, Julie and John. Thank you.
Thank you.
Thank you.
Thank you, Tim. Thank you for your interest in Terex.