TEREX CORP (TEX)

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

BUSINESS DESCRIPTION

Terex is a global industrial equipment manufacturer of materials processing machinery, waste and recycling solutions, customized vehicle solutions, mobile elevating work platforms (MEWPs), equipment for the electric utility industry, commercial and custom fire and ambulance vehicles, and recreational vehicles. We design, build, and support products used in maintenance, manufacturing, energy, waste and recycling, minerals and materials management, construction, the entertainment industry, emergency response, and the recreational vehicles market. We provide lifecycle support to our customers through our global parts and services organization, and offer complementary digital solutions, designed to help our customers maximize their return on their investment. Certain Terex products and solutions enable customers to reduce their impact on the environment including electric and hybrid offerings that deliver quiet and emission-free performance, products that support renewable energy, and products that aid in the recovery of useful materials from various types of waste. Our products are manufactured in North America, Europe, and Asia Pacific and sold worldwide. We engage with customers through all stages of the product life cycle, from initial specification to parts and service support. We report our business in the following segments: (i) Environmental Solutions (“ES”), (ii) Materials Processing (“MP”), (iii) Specialty Vehicles (“SV”) and (iv) Aerials.

Overview

During the second quarter of 2026, the Company remained focused on executing its operating plan, integrating the legacy Terex and REV organizations, and deploying the Terex Operating System (“TOS”) across the enterprise to improve operational execution, reduce fixed costs, and drive productivity improvements. The REV Transaction, which closed in the first quarter of 2026, significantly expanded our portfolio of specialty equipment businesses and strengthened our position in resilient, high-demand markets with attractive long-term growth potential. Our integration work is progressing as planned, and we continue to focus on realizing synergies, improving operational consistency, and leveraging the combined scale of the Company. See Note D - “Acquisitions” in our Notes to Condensed Consolidated Financial Statements for additional information regarding the REV Transaction.

Terex delivered strong second quarter results, with revenue growth in all segments and higher Adjusted operating profit and Adjusted EBITDA as compared with the same period from the prior year. Net sales for the three months ended June 30, 2026 were $2,238 million including sales generated from SV of $650 million, compared to $1,487 million in the same period in the prior year. Adjusted EBITDA for the three months ended June 30, 2026 was $269 million including adjusted EBITDA generated by SV of $94 million, compared to $182 million in the same period in 2025. Additional information regarding segment specific results is provided in the “Results of Operations” section below. The Company’s free cash flow for the three months ended June 30, 2026 was $101 million compared to $78 million in the same period in 2025, reflecting better working capital management for the three months ended June 30, 2026. Backlog as of June 30, 2026 was $6.9 billion, providing solid forward visibility.

In the second quarter of 2026, our largest market remained North America. Over the past two years, we deliberately shifted our end market exposure to more U.S.-based, resilient and predictable sectors. Our North American sales represented approximately 83% of our total sales during the second quarter of 2026, as compared to the corresponding period in the prior year, where our North America sales represented 73% of total sales. We continue to execute our capital allocation strategy by driving more operational cash through better net working capital management and by returning value to shareholders through dividends and opportunistic share repurchases. Our net working capital as a percentage of trailing three month annualized net sales was 15.2% as of June 30, 2026 compared to 22.8% from the same period in the prior year. We continue to maintain ample liquidity with approximately $1,097 million available as of June 30, 2026. See “Liquidity and Capital Resources” for a detailed description of liquidity and working capital levels, including the primary factors affecting such levels, as well as a reconciliation of net cash provided by operating activities to free cash flow.

Our key end markets remain resilient with reliable replacement and aftermarket demand. In waste and recycling, long-term demand is supported by fleet replacement, innovation and demographic trends, although certain customers in the short term continue to manage capital spending and digest recently delivered fleet. We expect utility market demand to remain supported by long-term investment in the U.S. electrical grid, including transmission expansion and future data-center-related growth. Demand for fire and emergency vehicles remains stable, tied to municipal budgets and replacement demand. In Aerials and MP, infrastructure activity remains robust, supported by government funding and a growing pipeline of mega projects that we expect to provide a tailwind through at least 2030.

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We continue to see opportunities to improve operating performance across the portfolio through the on-going integration process, deploying TOS, investing in technology that enables productivity improvement and leveraging our broader portfolio and scale to better serve customers.

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RESULTS OF OPERATIONS

Three Months Ended June 30, 2026 Compared with Three Months Ended June 30, 2025

Consolidated

Net Sales

Net sales for the three months ended June 30, 2026 increased $751 million when compared to the same period in 2025, including sales generated from SV of $650 million. Excluding the impact of SV, and $36 million of sales in the prior year period from the Company’s tower and rough terrain cranes businesses which were sold on October 31, 2025, the increase in Net sales was primarily due to higher shipments in Aerials, MP and ES in North America and positive effects of foreign exchange rate changes.

Gross Profit

Gross profit for the three months ended June 30, 2026 increased $136 million when compared to the same period in 2025, primarily driven by the gross profit contribution of $139 million from SV. Excluding the impact of SV, the decrease in gross profit of $3 million was primarily due to higher tariff costs within Aerials and unfavorable product mix in ES, partially offset by favorable mix and higher volume absorption in MP, and approximately $8 million of IEEPA tariff refunds received, net of a one-time unfavorable customs-related accrual.

Selling, general, and administrative expense

Selling, general and administrative expenses for the three months ended June 30, 2026 increased $47 million when compared to the same period in 2025, driven by the SG&A contribution of $37 million from SV. Excluding the impact of SV, the increase in selling, general, and administrative expense of $10 million was primarily due to the REV Transaction, including additional compensation expense and severance and retention costs, as well as negative effects of foreign exchange rate changes. These increases were partially offset by lower costs within MP due to the absence of the Company’s tower and rough terrain crane businesses, which were sold on October 31, 2025 and are included in the prior‑year period results.

Amortization of purchased intangibles

Amortization of purchased intangibles for the three months ended June 30, 2026 increased $31 million when compared to the same period in 2025, primarily due to the additional amortization expense from purchased intangibles resulting from the REV Transaction.

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Operating profit

Operating profit for the three months ended June 30, 2026 increased $58 million when compared to the same period in 2025, primarily driven by the operating profit contribution of $73 million from SV. Excluding the impact of SV, operating profit decreased by $15 million, primarily due to higher tariff costs within Aerials, unfavorable product mix within ES, and costs related to the REV Transaction, partially offset by favorable mix and higher volume absorption in MP.

Interest expense, net of interest income

Interest expense, net of interest income, for the three months ended June 30, 2026 and 2025 was $45 million and $42 million, respectively. The increase in expense is primarily due to interest accrued on customer deposits and higher revolver borrowings, partially offset by lower term loan interest rates and higher interest income.

Provision for income taxes

Income tax expense for the three months ended June 30, 2026, was $29 million on pretax income of $139 million, resulting in an effective tax rate of 20.6%, as compared to income tax expense of $17 million on pretax income of $89 million, resulting in an effective tax rate of 18.5%, for the three months ended June 30, 2025. The higher effective tax rate for the three months ended June 30, 2026 when compared with the three months ended June 30, 2025 is primarily due to higher tax related to geographic distribution of income.

Net income

Net income for the three months ended June 30, 2026 was $110 million compared to Net income of $72 million in the same period in 2025. The increase in Net income of $38 million was primarily due to the factors detailed above.

Adjusted operating profit

Adjusted operating profit for the three months ended June 30, 2026 increased $81 million when compared to the same period in 2025, primarily due to the Adjusted operating profit generated by SV of $88 million. Excluding the impact of SV, Adjusted operating profit decreased by $7 million, driven by higher tariff costs within Aerials and unfavorable mix within ES, partially offset by favorable mix and higher volume absorption in MP.

Adjusted EBITDA

Adjusted EBITDA for the three months ended June 30, 2026 increased $87 million when compared to the same period in 2025, primarily due to Adjusted EBITDA generated by SV of $94 million. Excluding the impact of SV, Adjusted EBITDA decreased by $7 million, driven by higher tariff costs within Aerials in the current year period and unfavorable mix within ES, partially offset by favorable mix and higher volume absorption in MP.

Environmental Solutions

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ITEM 7.    MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

BUSINESS DESCRIPTION

Terex is a global industrial equipment manufacturer of materials processing machinery, waste and recycling solutions, mobile elevating work platforms (MEWPs), and equipment for the electric utility industry. We design, build, and support products used in maintenance, manufacturing, energy, waste and recycling, minerals and materials management, construction, and the entertainment industry. We provide lifecycle support to our customers through our global parts and services organization, and offer complementary digital solutions, designed to help our customers maximize their return on their investment. Certain Terex products and solutions enable customers to reduce their impact on the environment including electric and hybrid offerings that deliver quiet and emission-free performance, products that support renewable energy, and products that aid in the recovery of useful materials from various types of waste. Our products are manufactured in North America, Europe, and Asia Pacific and sold worldwide. We engage with customers through all stages of the product life cycle, from initial specification to parts and service support. We report our business in the following segments: (i) ES, (ii) MP, and (iii) Aerials.

Further information about our reportable segments appears below and in Note B – “Business Segment Information” in the Notes to Consolidated Financial Statements.

Non-GAAP Measures

In this document, we refer to various GAAP (U.S. generally accepted accounting principles) and non-GAAP financial measures. These non-GAAP measures may not be comparable to similarly titled measures being disclosed by other companies. Management believes that presenting these non-GAAP financial measures provide investors with additional analytical tools which are useful in evaluating our operating results and the ongoing performance of our underlying businesses because they (i) provide meaningful supplemental information regarding financial performance by excluding impact of one-time items and other items affecting comparability between periods, (ii) permit investors to view performance using the same tools that management uses to budget, make operating and strategic decisions, and evaluate our core operating performance across periods, and (iii) otherwise provide supplemental information that may be useful to investors in evaluating our financial results. We do not, nor do we suggest that investors consider, such non-GAAP financial measures in isolation from, or as a substitute for, financial information prepared in accordance with GAAP.

Non-GAAP measures also include translation effect of foreign currency exchange rate changes on net sales, gross profit, selling, general & administrative (“SG&A”) expenses and operating profit.

As changes in foreign currency exchange rates have a non-operating impact on our financial results, we believe excluding effects of these changes assists in assessment of our business results between periods. We calculate the translation effect of foreign currency exchange rate changes by translating current period results using rates that the comparable prior periods were translated at to isolate the foreign exchange component of fluctuation from the operational component.

We calculate a non-GAAP measure of free cash flow. We define free cash flow as Net cash provided by (used in) operating activities less Capital expenditures, net of proceeds from sale of capital assets. We believe this measure of free cash flow provides management and investors further useful information on cash generation or use in our primary operations.

We discuss forward-looking information related to expected earnings before interest, taxes, depreciation and amortization (“EBITDA”) and earnings per share (“EPS”) excluding the impact of potential future acquisitions, divestitures, restructuring, tariffs, trade policies and other unusual items. Our 2026 outlook for EBITDA and EPS is a non-GAAP financial measure because it excludes unusual items. We are not able to reconcile these forward-looking non-GAAP financial measures to our most directly comparable forward-looking GAAP financial measures without unreasonable efforts because we are unable to predict with a reasonable degree of certainty the exact timing and impact of such items. The unavailable information could have a significant impact on our full year 2026 GAAP financial results. This forward-looking information provides guidance to investors about our EBITDA and EPS expectations excluding these unusual items that we do not believe are reflective of our ongoing operations.

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Working capital is calculated using the Consolidated Balance Sheet amounts for Receivables (net of allowance) plus Inventories, less Trade accounts payable, Customer advances and Short-term unearned revenue. We view excessive working capital as an inefficient use of resources, and seek to minimize the level of investment without adversely impacting ongoing operations of the business. Trailing three months annualized net sales is calculated using net sales for the most recent quarter end multiplied by four. The ratio calculated by dividing working capital by trailing three months annualized net sales is a non-GAAP measure we believe measures our resource use efficiency.

Non-GAAP measures also include Net Operating Profit After Tax (“NOPAT”) as adjusted, operating profit as adjusted, effective tax rate as adjusted and stockholders’ equity as adjusted, which are used in the calculation of our after tax return on invested capital (“ROIC”) (collectively the “Non-GAAP Measures”), which are discussed in detail below.

Overview

Safety remains a top priority for Terex, not only for our team members but also our customers. In 2025, our teams delivered our strongest safety performance to date while maintaining reliable delivery of equipment and services.

We remain focused on executing our strategic priorities by investing to expand our presence in resilient and profitable end markets. As part of our ongoing portfolio evaluation to reduce business cyclicality, we completed the divestiture of our tower and rough terrain cranes businesses. We continue to deploy the Terex Operating System (“TOS”) to further enhance the efficiency of our operational footprint, reduce fixed costs, and drive sustained improvements in operational execution. In addition, we completed the integration of ESG and are ahead of our commitment to deliver $25 million of synergies.

Overall, 2025 financial performance demonstrated continued focus on our customers and our operational performance while navigating through a very dynamic environment, including tariffs. Net sales grew by 5.7% to $5.4 billion as the full year contribution from the ESG acquisition more than offset declines in Aerials and MP driven by channel adjustment. ESG continued to execute very well from higher throughput and profitability. We achieved operating profit of $475 million and free cash flow of $325 million, which translates to 147% of free cash flow conversion. Working capital reductions remain a key priority of our capital allocation strategy to deliver value to shareholders while investing for longer-term organic growth.

Our ES segment sales increased 12.7% year over year on a proforma basis to $1.7 billion driven by improved throughput and delivery of refuse collection vehicles and utilities trucks. ES delivered strong operating margins of 13.8%, driven by improved operational execution, positive customer and product mix and synergies.

MP executed well in 2025 despite a challenging macro environment. Full year sales of $1.7 billion were 11.6% lower than 2024 due to macro uncertainty, high interest rates which remain a headwind for rent to own conversions and weak European demand. On the aggregates side, we saw machines on rent longer than usual, impacting dealers' replenishment of new units. Despite the headwinds, MP delivered an operating margin of 13.9% from tight cost control and gain on the sale of its tower and rough terrain cranes businesses. MP ended 2025 with $71 million more backlog than the prior year providing positive momentum heading into 2026.

Aerials 2025 sales declined by 14.5% year over year driven by less demand from independent rental customers who are more exposed to smaller interest rate sensitive projects. We are encouraged to see year over year 7% growth in the fourth quarter driven by replacement demand from mega projects. Aerials full year operating profit of 5.0% is 620 basis point lower than prior year driven by deliberate production cuts in Q1, unfavorable customer mix and tariffs.

In 2025, our largest market remained North America, which represented approximately 72% of our global sales. As compared to the prior year, sales were up in North America driven by the ESG acquisition and down in all other major geographies.

We continued to execute our capital allocation strategy in 2025 by driving more operational cash through tighter net working capital management and redeploying it to repurchase our shares opportunistically. Our net working capital as a percentage of trailing three- month annualized sales improved from 24.0% in December 2024 to 20.8% in December 2025. We continue to invest in our businesses with $118 million deployed for capital expenditures to support business growth. We also returned $98 million to shareholders through share repurchases and dividends in 2025. We ended the year with $1.6 billion of liquidity with no near-term debt maturities, repriced our term loan lowering interest rate by 25 basis points and maintained our corporate ratings.

Our key end markets remain resilient with reliable replacement and aftermarket demand, strengthened by the opportunity to differentiate through quality, technology and life-cycle support. Waste & recycling market is expected to be fueled by population and economic growth, disciplined fleet replacement vehicle innovation that lowers operating costs, and digital solutions. We anticipate Utilities market growth to be sustained by increasing demand for the U.S. electrical grid with majority of data center related growth still to come. Within Infrastructure, we believe there is plenty of runway with previously allocated government spending, with a need for more investments ahead.

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We completed the REV Transaction on February 2, 2026 and our 2026 outlook includes REV for the period following the closing of the transaction. We expect 2026 sales of between $7.5 billion and $8.1 billion, EBITDA between $930 million to $1 billion and earnings per share between $4.50 to $5.00 based on the higher share count resulting from the completion of the transaction. We are operating in a complex environment with many macroeconomic variables and geo-political uncertainties and results could change negatively or positively. The outlook we are providing does not account for any potential future acquisitions or divestitures that have not been previously disclosed.

ROIC

ROIC and other Non-GAAP Measures (as calculated below) assist in showing how effectively we utilize capital invested in our operations. ROIC is determined by dividing the sum of NOPAT for each of the previous four quarters by the average of Debt less Cash and cash equivalents plus Stockholders’ equity for the previous five quarters. NOPAT for each quarter is calculated by multiplying Operating profit by one minus the full year 2025 effective tax rate as adjusted. Debt is calculated using amounts for Current portion of long-term debt plus Long-term debt, less current portion. We calculate ROIC using the last four quarters’ NOPAT as this represents the most recent 12-month period at any given point of determination. In order for the denominator of the ROIC ratio to properly match the operational period reflected in the numerator, we include the average of five quart

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