Terex Corporation (TEX) - Q1 2026 10-Q Summary
Business Context and Reporting Period
This report covers the quarterly period ended March 31, 2026. The quarter was defined by the completion of the merger with REV Group, Inc. ("REV") on February 2, 2026. This transaction created a new reportable segment, Specialty Vehicles (SV), and significantly expanded Terex's portfolio into emergency vehicles, recreational vehicles, and terminal trucks. The company now reports four segments: Environmental Solutions (ES), Materials Processing (MP), Specialty Vehicles (SV), and Aerials.
Key Financial Metrics
| Metric ($ millions) | Q1 2026 | Q1 2025 |
|---|---|---|
| Net Sales | $1,734 | $1,229 |
| Gross Profit | $206 | $247 |
| Gross Margin | 11.9% | 20.1% |
| Operating Profit (Loss) | $(82) | $69 |
| Net (Loss) Income | $(89) | $21 |
| Diluted EPS | $(0.93) | $0.31 |
| Adjusted EBITDA | $173 | $128 |
| Free Cash Flow | $(57) | $(57) |
| Total Debt | $2,749 | $2,584 |
| Cash & Equivalents | $392 | $298 |
| Total Liquidity | $1,022 | N/A |
Material Changes vs. Prior Period
- Revenue Growth: Net sales increased 41.1% year-over-year, driven primarily by the inclusion of $436 million in sales from the new SV segment. Organic sales growth (excluding SV and divested crane businesses) was 8.1%.
- Profitability Decline: GAAP operating profit swung from a $69 million profit in Q1 2025 to an $82 million loss in Q1 2026. This was primarily due to $112 million in inventory step-up and related amortization from the REV acquisition, $17 million in transaction costs, and increased intangible amortization.
- Non-GAAP Performance: Adjusted EBITDA increased 35.2% to $173 million, reflecting the accretive nature of the REV acquisition ($62 million contribution) and operational improvements in the MP segment, offset by tariff impacts and mix issues in Aerials.
- Balance Sheet Expansion: Total assets grew from $6.1 billion to $10.2 billion, and goodwill increased by $1.45 billion due to the acquisition. Cash decreased by $380 million due to acquisition payments and working capital changes.
Guidance, Outlook, and Risks
Management Commentary: Management views the REV transaction as a strategic milestone that diversifies the portfolio into resilient, low-cyclicality markets. The company expects to realize synergies and improve its net leverage profile over time. Backlog increased sequentially to $7.1 billion, driven by the acquired backlog and strong bookings in MP and Aerials.
Outlook:
- North America: Remains the largest market (~80% of sales), with growth driven by infrastructure and municipal budgets.
- Utilities: Anticipated sustained growth due to U.S. electrical grid demand and data center expansion.
- Waste & Recycling: Expecting a modest reduction in customer CAPEX in H1 2026 as customers digest recent deliveries.
Risks and Contingencies:
- Integration Risk: Challenges in integrating REV operations and realizing anticipated synergies.
- Tariffs: Ongoing exposure to international tariffs, though a recent Supreme Court ruling may allow for refunds of IEEPA tariffs (recoverability uncertain).
- Debt Covenants: The company must maintain a first lien net leverage ratio of not more than 3.00x if revolver utilization exceeds 30%.
- Market Conditions: Sensitivity to economic volatility, interest rates, and supply chain disruptions.
Investor Verification Checklist
- Acquisition Accounting: Verify the finalization of the provisional purchase price ($3.384 billion) and potential adjustments to goodwill and intangible asset valuations during the measurement period.
- Inventory Step-Up: Confirm the impact of the $112 million inventory step-up on future gross margins as acquired inventory is sold.
- Liquidity Position: Monitor the $1.022 billion liquidity position against the $2.75 billion debt load and upcoming interest payments.
- Tariff Refunds: Track the status of IEEPA tariff refund claims with U.S. Customs and Border Protection.
- Segment Mix: Assess the long-term margin profile of the new Specialty Vehicles segment compared to legacy Terex businesses.