Good day, and welcome to the Hyster-Yale Inc. Second Quarter 2025 Earnings Conference Call. [Operator Instructions] Please note, today's event is being recorded. I would now like to turn the conference over to Andrea Sejba, Director of Investor Relations and Treasury. Please go ahead.

Good morning, and thank you for joining us for Hyster-Yale's Second Quarter 2025 Earnings Call. I'm Andrea Sejba, Director of Investor Relations and Treasury. Joining me today are Al Rankin, Executive Chairman; Rajiv Prasad, President and Chief Executive Officer; and Scott Minder, Senior Vice President, Chief Financial Officer and Treasurer. During our call, we'll discuss our second quarter 2025 earnings release issued yesterday. You can find the earnings release and replay of this webcast on the Hyster-Yale website. The replay will remain available for approximately 12 months. Today's conference call contains forward-looking statements, which are subject to risks that could cause actual results to be materially different from those expressed or implied. These risks are described in greater detail in the earnings release and in our reports filed with the SEC. On this call, we discuss our adjusted results. We believe that these are useful as a supplement to our GAAP financial measures in evaluating the company's operating performance. Reconciliations of adjusted operating profit, net income and earnings per share to the most directly comparable GAAP financial measure can be found in the company's earnings release and investor presentation filed with the SEC. With the formalities out of the way, let me turn the call over to Rajiv to begin.

Thanks, Andrea, and good morning, everyone. I'll start by sharing our view on the current economic environment, how it impacts Hyster-Yale and how we plan to address these challenges in our business. Scott will follow with our detailed financial results. The assumptions built into our 2025 forecast and our outlook for the third quarter and full year. I will provide his perspective to wrap up our remarks, and then we'll open up the call for questions. Since our last update in May, economic uncertainty continues to influence our business in significant ways. Fluctuating tariff levels impacting demand and cost structures require us to maintain nimble and responsive. We're keeping a close eye on these changes, assessing how they might affect our business and responding proactively. This keeps us well positioned in the market and ensures that we can consistently deliver on our key promises. Transparency is critical to our efforts. We are maintaining regular dealer communication, adjusting unit prices monthly based on actual product costs, raising prices as tariffs increase, lowering prices when tariff levels decrease to ensure that our unit economics reflect the current environment. This ongoing dialogue strengthens our relationship and shows our commitment to win-win partnerships. In the near term, we are taking clear steps to protect our financial health drawing on what we learned during the pandemic. We're monitoring input costs closely, adjusting sales prices based on input cost changes and diligently controlling our overhead costs. To support our dealer partners and other customers and protecting the order backlog, we chose not to retroactively raise prices on orders placed before recent tariff-related cost escalation. This build trust within our customer base and dealer network while also creating a temporary lag in cost recovery efforts. For the medium to long term, we're building on strategic initiatives that…

Thank you, Rajiv, and good morning. I'll start by covering Q2's results. For Lift Truck, Q2 revenues declined 19% year-over-year, reflecting lower volumes across all product lines. This compares to exceptionally strong prior year results that were driven by record market demand levels. Revenue decline was primarily due to weaker industry booking rates since early 2024, and more recently, tariff-related economic uncertainty and its impact on end customer order patterns. Additionally, our sales mix shifted toward lower revenue Class 3 products. By region, Americas sales volumes decreased, particularly for higher-value Class 4 and 5 internal combustion engine trucks. And in EMEA, product revenues declined year-over-year, primarily due to lower Class 1 electric product sales. Globally, revenues improved 5% sequentially indicating modest positive momentum as we move through the year. In particular, sales of higher-value Class 4 and 5 internal combustion engine trucks grew. Q2 adjusted operating profit was $5 million, marking a significant decrease from prior year. Adjusted Q2 results exclude $15 million in severance and asset impairment costs related to Nuvera's strategic realignment. Lift Trucks adjusted Q2 operating profit declined year-over-year largely due to lower volumes and reduced manufacturing overhead absorption. Q2 product margins were negatively impacted by $10 million worth of tariff-driven material and freight increases. To counter these headwinds, we implemented price increases starting in Q1. Benefits from these measures have a time lag due to our production backlog in various customer-specific programs. Looking at our cost structure, operating expenses decreased year-over-year mainly due to lower employee costs from the early completion of Nuvera's strategic realignment actions and reduced incentive compensation. These benefits were partially offset by continued investments in the information technology systems and customer support programs. Turning to regional earnings performance. Americas operating profit decreased as a result of lower volumes. This was partially offset…

The updates provided by Rajiv and Scott today are particularly important. Tariffs remain a large and important concern and a key focus of our intention. At Hyster-Yale, our long-term vision is to revolutionize the way materials move from port to home. This vision is built on a mission with two core promises; delivering optimal solutions to our customers and providing exceptional customer care. To achieve this, our focus remains on executing key strategic projects that will transform our core Lift Truck business while expanding complementary high-growth opportunities. We believe warehouse Lift Trucks, vehicle automation, energy solutions and attachments will supplement growth in the core counterbalance forklift truck business and propel significant additional growth and revenue opportunities. These complementary growth and profit improvement efforts are designed to strengthen our competitive position, drive long-term revenue growth and operating profit and position Hyster-Yale ahead of materials handling market trends. Over time, we believe these key projects will create a sustainable competitive advantage for Hyster-Yale businesses to benefit both our customers and shareholders. And now I'll turn over the discussion for questions.

[Operator Instructions] And today's first question comes from Ted Jackson at Northland Securities.

So my first question, I wanted to start in on Lift Truck. So you're expecting to see second half revenue production on top of its first half. Typically, with regards to the Americas, your third quarter is down and you get a big rebound in the fourth quarter. Could we expect that same seasonality in North America? And then shifting over to EMEA. You had a good rebound after a weaker first quarter. I mean when we think about EMEA in the second half, should we be thinking about EMEA following kind of typical seasonal trends based off that second quarter? Or was the strength in the second quarter a result of stuff that might have been in the first quarter shifting to the second quarter. So that's my first question out of a couple of questions.

I'll take it and then other can input. So for Americas, we do expect it's difficult to -- the way our customers are operating right now is huge amount of market activity. So RFQs and quoting activities are all very good, really to kind of our expected levels. What's happening is with the tariff volatility, decision-making has slowed down. So we expect that to stabilize as the tariff kind of rules stabilize and that we have more steady pricing because I think that's the big element that's concerning our customers is, they can't predict what the pricing is going to be because of the volatility. So we do expect those to stabilize. We're seeing a little bit more stability on the regions that are important to us, probably the main exception being India, that seems to be pretty volatile. So we think on the basis of that, some of the backlog on quotes and RFQs decisions will be made because our customers are indicating they need the trucks. So that's what we expect to happen in Americas. Obviously, that's conditional to, if there is increased volatility due to tariff or any other kind of economic condition, reasons, then again, they may continue delaying decision-making. But our expectation right now is that we'll see more decisions being made by our customers. In Europe, we had a pretty strong booking in the first quarter. Second quarter booking was down, but shipments were up from the booking that came in on the first quarter. There's still a fair bit of weakness in Europe, again, predominantly driven by kind of expectations on tariffs, you know focus on building up military capability. As you've seen Europe, as a whole, has committed to a higher spending on military. So we do expect there to be some impact on spending patterns due to that. And obviously, seasonally, it's a slower quarter because of the shutdowns in Europe for the holidays. So I think the behavior is going to be pretty similar to what we normally see in Europe with probably third quarter being the weakest quarter from a shipment point of view.

My next question, going into tariffs. So two things. One is, having gone through at this point dozens of quarterly calls with various equipment OEMs, a lot of the OEMs have seen the view with tariffs as being probably better than it was with the last quarterly call, but maybe -- so the aggregate for the year is better, but maybe some shift to more of it being in the second half. So I guess I'm curious with regards to your view on tariffs and their impact on Hyster-Yale, how has that changed relative to the first quarter? And then have there been any changes in how you view the timing of that impact on your business? And then following up on that, I find it interesting and actually smart that with regards to your pricing that you're putting in regular adjustments based around tariffs on a monthly basis, but you held steady with regards to how you price things that were already sold. So when I think about your backlog in your quarters on the kind of a simple math basis, would I be thinking about the bookings of $330 million from having had a price adjustment. And then, let's say, none of that stuff is going out the door in say second half. And that would mean that from a conversational perspective, that the remaining, call it, ability for you or backlog is price at pre-tariff flexibility that makes us due? So those are my questions on tariffs.

I think we've gotten used to the idea of it, right? So I think that we've kind of got over the shock of the numbers and got used to the numbers, still very impactful to our business. And yes, compared to what came out as the initial kind of April tariffs, obviously, they have changed quite a bit from that. And those numbers were just unsustainable, I think. And I think they were, from our perspective, that we use for negotiation purposes. I think we're seeing a settle down now around this 10% to 15% with the exception being for the countries that are important to us, China and India. That's still high, and we are adjusting for those. The issue for the bookings in the second quarter is, we're not only protected what was in our backlog, but also some of the key deals that were in the quote process. So in the second quarter, we'll have a mix of kind of pricing pre-tariff, but it's going to be mostly post- tariff pricing, so I think that's the way that will pan out. We've accounted for the tariffs in our look forward for the rest of the year. We are also planning to make some production where we're going to make trucks adjustments based on some of this. So I think it's still going to be quite a bit of moving pieces to adjust to the tariffs. I think that's probably the best way to reflect your question. I know it's a moving story, it is for us as well and how we are reacting to it.

Well, at least you have a lot of flexibility built into your footprint. I do have two more questions, but I'm going to step out of line, and then I'll reenter then ask and follow-up, if that's okay.

Sure.

And our next question today comes from Brian Sponheimer with Gabelli Funds.

Just curious as to any thoughts or comments on Toyota taking Toyota Industries private. Obviously, a significant competitor to yours. And what that does from a competitive environment and pricing? Anything that you're seeing out there yet or any expectations going forward?

I was in Japan a couple of months ago. This is more a Japan effort. If you look at Toyota certainly has done it. One of our partners, NTT, has done it or is in the process of doing it. We expect others to do it, too. And I think it's so that they can have a little bit more flexibility in the way they really align their internal capabilities. I don't think we expect there to be a market dynamic in the short-to- medium term. I think a lot of the strategies they're following in automotive will be similar to what will happen in Lift Trucks. Good examples are electrification, continuing to put technology -- the transition technology from automotive to Lift Trucks. So I think those are important ones. Supply chains are also converging. So I think there are some of those elements. But at the end of the day, there seems to be a trend in the way Japan wants to structure its companies.

Regarding autonomous Lift Trucks, clearly seems to be a labor productivity benefit. With your profitability, obviously hampered by externalities right now, any concerns as to your own ability to invest to keep up from a technological standpoint?

No. I think we launched our automated solutions at the ProMat show. We demonstrated our horizontal mover that will be going into production very soon. And yes, so there's a huge amount of activity going on all of our technology solutions where we are talking about automation or communication through telemetry or our operator-assist systems.

Brian, this is Scott. I would say if you look at our CapEx, it's north of depreciation and amortization. So that shows that we're continuing to invest in our future, both technology and efficiency.

And our next question today comes from Eric Ballantine with CVC.

Just maybe we could drill down on a couple of things on in the backlog. What is the kind of the mix there and the profitability? I know that you guys did a pretty good job coming out of COVID and making sure that within the backlog, all trucks would be profitable, if you will. And obviously, that was prior to coming in. But maybe you could just give us some color on how we should think about that. I mean is there the chance that some of the backlog trucks are going to be negative like in the past? Maybe just a little more color on that would be great.

I think there's a couple of things that are going on. Firstly, our discipline on pricing has been very good and continues to be good. Obviously, the market is a little bit more aggressive as the overall size of the markets come down. But we still feel good about our margin due to our pricing discipline. The other thing that is helping us and will further improve is the scalability in our product line so that we can match, especially for our 1- to 3.5 ton internal combustion engine trucks. We can better match the application with the solution. And that will also help the margin profile of our backlog. What has been difficult has been the tariff dynamic. And we do see that as a pulse that will go through our profitability because it's really a bit of an overlay because it will take -- I would imagine that in the third and fourth quarter will be back to pricing -- the tariff as things stabilize, we'll put it back into a normal pricing process. So I think that will provide us with stability. But we are very committed to maintaining our pricing discipline.

Eric, average selling prices booked in the quarter were actually up year-over-year, nearly 10%. So I think that reflects the discipline Rajiv was talking about. So it really comes down to the volume. And in this lower volume environment, our challenges are around manufacturing efficiency, but we've announced projects to take a significant cut to our manufacturing overhead costs in the next couple of years. So I think, as Rajiv said, we're committed to pricing discipline and reducing cost to meet our demand in the future.

Okay. And then I just have a couple of more questions. Just on the components that you're sourcing from China and India, I mean, which are the -- you're saying that you're doing in region for region, if you will, but you still have to source some components which are being impacted. What are the major components that are being impacted for you that you can't necessarily get in region for region, which I guess basically mean you can't get it in America?

Yes. I don't think we'll get into specific components, but maybe I can talk about the category of components. So the way we categorize components are highly engineered components, high investment kind of components such as our castings. And then there are the low investment, low engineered components such as our fabrications. So the most difficult for us to move quickly are the highly engineered components. But for majority of those, we have suppliers that can produce those in multiple regions. Obviously, given no tariff environment, we had the vast majority of the volume in low-cost countries such as India and China. One of the new platforms is predominantly in India, but they can be transitioned. Now it takes some time to make that happen. And we're in discussions with those suppliers to transition those to the country -- either the country of assembly or the next best country from a cost point of view based on the tariffs that are already in place. So those discussions with those suppliers are going on as we speak. Then for some of the highly tooled but simpler components, like castings, part of the issue is the capacity -- by far, the biggest capacity for castings in the world is in China right now. In both India, other Southeast Asian countries, Eastern Europe are developing casting capacity, but it's going to take us some time. So those are going to be a little slower to move just to match up with capacity that opens up in other regions. So hopefully, that gives you a sense for what we're going, how we are progressing looking at outsourcing.

Next question is the follow-up from Ted Jackson at Northland Securities.

So I wanted to jump over to Bolzoni. I mean, the quarter, at least relative to my expectations, was better than I expected. You're clearly seeing -- you can see it in the margins the shift in business in Bolzoni where your legacy low-margin products fading away. So I was curious within Bolzoni, what was the mix in the quarter between -- like the new core Bolzoni or old legacy products? And then what was it in the same period of last year, does it ever go to zero or it's just the new higher-margin product? That's my first question.

The legacy will ultimately go to zero, so those are the transmissions, axles. And in fact, our plan was to make that happen sometime during 2026. But again, with the tariffs, that slowed things down a bit because, again, we knew where we wanted to move it. It's one of our joint venture plants in one of the countries that was heavily hit with tariffs. That one is not settled down yet. But our objective is one way or another, we'll move that volume to one of our other facilities. So Bolzoni will essentially, I think by 2027, will be down to close to zero for legacy. Now I just want to remind us, legacy does not include cylinders because cylinders will continue to be a core business for Bolzoni. So we're really talking about transmissions, axles and steer axles -- drive axles and steer axles.

Okay. And then my next question and my last question is when I think back kind of the outlook you've had for 2025, a part of that was a taking of market share within the warehouse market as you've rebranded, you've refocused, you have a bunch of stellar new products within that area. There's been a clear slowdown, if you would, in terms of warehouse openings within North America. And so I guess the question is, has there been a change with regards to your view on the warehouse macro vis-a-vis the beginning of the year? I mean, has it deteriorated? And then how has that impacted your efforts to take market share within that vertical? That's my follow-up question.

So although the market size is smaller and the competition is pretty stiff, we have made some progress in market share this year. I think there are some key customers that are going to make decisions over the next -- in the second half of the year, and that will really map out how much gain we're going to end up making during 2025, but we're pleased with the traction that team is making in the marketplace, especially in North America at the moment.

And our next question is a follow-up from Eric Ballantine from CVC.

Maybe you could give a little color on someone earlier asked about Toyota, but maybe if you could give some color on kind of the competitive landscape out there if you're seeing are all the players being rational, kinwin and so forth out there, and do you see any players that are trying to take advantage of this time on you guys? That would be great.

I think generally, the key thing that's changed in the landscape has been the participation of the Chinese competitors and to some extent, they're driving really a recalibration within our customer base of what is the right truck for them. And I think we were kind of aware that this would happen and part of our launching our scalable platforms and having value trucks was getting ahead of some of that. As far as our traditional competitors are concerned, we do see some pricing action being taken from time to get specific deals, but nothing across the board. I think that they're being pretty disciplined like they have been in the past to adjust the production volume and participate in the market.

One other comment that I'd add to that is the Chinese economy is weak, and they've been encouraged and stimulated by government resources to continue to manufacture and export and to a level which has been that they've been accumulating inventory in other countries around the world. That's a disruptive factor in the short term, for sure. So I think just reinforces Rajiv's comment that the Chinese are being the most disruptive with a lot of government support for doing it right now.

Thank you. And this concludes the question-and-answer session. I'd like to turn the conference back over to the management team for any closing remarks.

This is, in my mind, a period of extraordinary transition. First and foremost are the tariffs. When they do stabilize, and I think they will eventually stabilize, it's hard to say at what level but they will stabilize and the prices will go up to recover the costs because pretty much everybody is being affected one way or another directly or indirectly by the tariffs, both importers and domestic producers. So that will settle down. It's hard to estimate exactly when that will happen, but certainly not before the end of this year, there will continue to be the lagging effects that Scott mentioned in his material. Second is the overall demand situation. And there are 2 aspects to the demand transition that we're in. One is that, in a sense, we're in a cyclical low in the industry. We had the very large booking period, extraordinary volumes bookings that occurred during COVID. And so we have an exacerbated low cyclically in the marketplace. That's beginning to work its way through, but it certainly hasn't recovered at this point. And adding to the transitional impact is the tariff issue that I mentioned before because it's not just a question of the costs and prices. It's also a question of demand in the context of uncertainty before the tariff situation settles down. And finally, there is transitional aspect in terms of the strength of the economy and the general manufacturing sector. There's a lot of discussion, as I'm sure that all the people on this call are well aware, about the Fed's stance on interest rates. And of course, they're thinking about the economy in total, with consumer purchases being, by far, the largest portion. And the manufacturing orders and more broadly are not putting the low order rate in the Lift Truck business, it's a separate matter, they're part of the same sort of problem. So we've got the potential for some cyclical weakness in the economy as well as the tariff transition as well as the demand, the normal cycle in the industry. So all those factors, I think, mean there's a lot of short-term pressure, but the company is really positioned to take advantage of the upturn when that comes along, and it should be, given the number of projects that we've undertaken, a very dramatic upturn in the company's revenues and profitabilities. And when I say revenues, it's really absolute unit volumes because we've had such an inflationary impact due to the tariffs. So all those factors make this a transition period and one I think that's the core thing to think about when you're thinking about Hyster-Yale. It's not a short-term story over the next couple of quarters. This has got to be put in a broader and longer-term context.

Thank you, Al, for your closing comments. And for the participants, we appreciate your questions in the second quarter earnings call. A replay will be available online later today. We'll also post a transcript on the Hyster-Yale website when it becomes available. If you have any questions, please reach out to me. My contact information is available in the press release. I hope you enjoy the rest of your day. And now I'll turn it back to Rocco to conclude the call.

Thank you, ma'am. This does conclude today's conference call. We thank you all for attending today's presentation. You may now disconnect your lines, and have a wonderful rest of the day.