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" ROTH Capital Partners, LLC, Research Division

" Northland Capital Markets, Research Division

" Imperial Capital.

" Prudentials

" CVC Credit Partners, LLC

Good day, everyone, and welcome to the Hyster-Yale Inc. Third Quarter 2025 Earnings Call. [Operator Instructions]. Please note that today's event is being recorded. I'd now like to turn the floor over to Andrea Sejba. Ma'am, please go ahead.

Good morning, and thank you for joining us for Hyster-Yale's Third 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. We'll be discussing our Q3 2025 earnings release issued yesterday. You can find the release and a replay of this webcast on the Hyster-Yale website. The replay will remain available for approximately 12 months. Today's call contains forward-looking statements subject to risks that could cause actual results to differ from those expressed or implied. These risks are outlined in our earnings release and SEC filings. We'll be discussing adjusted results, which we believe are useful to supplement our GAAP financial measures. Reconciliations of adjusted operating profit, net income, and earnings per share to the most directly comparable GAAP measures are available in our earnings release and investor presentation. With that, I'll turn the call over to Rajiv.

Thanks, Andrea, and good morning, everyone. I'll begin with our view of the current economic environment, how we're shaping customer behavior, and how Hyster-Yale is responding. Scott will follow with our financial results and outlook, and I will wrap up before we open the calls for questions. Throughout the first half of 2025, we maintained a cautiously optimistic outlook, predicting an improvement in market demand in the second half of the year. However, since our last update in August, that optimism has faded largely due to the impact of tariffs on the market demand and on our costs. This shift in sentiment is not unique to our industry. It's a broad trend across the capital goods sectors. Customers are navigating volatile interest rates, tariff pressures, and geopolitical developments, all of which are influencing long-term investment decisions. This is reflected in our own experience during the third quarter. These were overall lift truck market demand declined across all regions and most product categories compared to Q2. Many customers are postponing capital expenditures and taking a more conservative approach to balance sheet management, citing uncertainty about the trajectory of interest rates, inflation, and broader economic stability. Despite the broader market contracting, Hyster-Yale's booking activity ticked higher compared to both the prior year and the previous quarter. This dollar value booking increase is partly due to higher prices on our trucks, driven by higher tariff-related material costs. Bookings rose to $380 million in Q3, up from $330 million in quarter 2. Gains were led by the EMEA and APAC regions, while the Americas remained stable. Bookings improved across all product classes, with Class 1 trucks showing solid growth, improving our positioning in the warehouse segment. Notably, in October, we saw a strong bookings rate in the Americas for Class 5 trucks and, to…

Thanks, Rajiv Prasad. Let's take a closer look at our Q3 results, starting with the Lift Truck business. Lift Trucks Q3 revenues were $929 million, reflecting a 4% decline compared to the prior year. This decrease was primarily due to lower truck volumes across all product lines. Lower volumes were a direct result of ongoing economic uncertainty, which has led to a slowdown in customer bookings over the past several quarters. In response to the softer demand and lower backlog, we adjusted our production rates to better align with current market conditions. Looking at the results by region. In the Americas, truck volumes fell with a significant drop in our higher-value Class 4 and 5 trucks in the 1 to 3.5 ton range. Many industrial customers deferred lift truck purchases due to lower equipment utilization rates within their existing fleet. These were largely caused by reduced manufacturing output amid demand uncertainty. Looking at EMEA, revenues increased year-over-year, primarily due to higher truck sales and favorable currency translation. Sequentially, overall lift truck revenues improved, supported by stronger sales of higher-value 4- to 9-ton electric and internal combustion trucks. Q3's operating results fell short of our expectations, primarily due to higher tariff costs, including new tariffs on steel imports during the quarter. Operating profit declined by $27 million year-over-year, mainly driven by lower truck volumes. Some of these negative impacts were offset by our strategic pricing actions and a favorable sales mix shift toward higher-value 4- to 9-ton trucks in the Americas. Additionally, Q3's operating costs decreased compared to the prior year, mainly because of lower employee-related expenses, including reduced incentive compensation and savings from Nuvera's previously announced strategic realignment. Breaking down regional performance, operating profit in the Americas declined primarily due to higher tariff costs and lower truck volumes. These negative…

Thank you, Scott. We are operating in a period of extraordinary transition, facing both significant challenges and new opportunities. Today's environment is particularly shaped by the effects of elevated tariffs, which have raised our operating costs and made supply chain planning and pricing more complex. While these tariffs are short-term obstacles, we expect their impact to gradually stabilize as prices and tariffs come into equilibrium. This transitional phase is further complicated by a cyclical low in industry booking demand following an unprecedented surge in bookings during the COVID-19 pandemic. However, shipment levels have remained significantly higher than factory booking levels, which suggests to us that the time for new factory booking orders is now being reached. As booking demand returns to more typical levels, we will also need to navigate the shift in the competitive environment to increase value and standard applications with discipline and strategic foresight. Broader economic factors also influence our outlook. The manufacturing sector is showing shipment resilience, yet ongoing volatility and fluctuating interest rates continue to affect both investment decisions and customer purchasing behavior. These conditions highlight the need for a flexible and highly responsive forward-looking strategy, which allows us to adjust quickly to protect and build a long-term market position. In response to these near-term pressures, our strategic focus remains on transformation and sustainable growth. As Rajiv and Scott have described, we are both strengthening our core counterbalance business and investing in warehouse lift trucks, technology solutions, energy solutions, and attachments. These initiatives are helping us address current challenges and position our company to capture future opportunities. Our goal is to ensure both competitive advantage and market responsiveness in the next market upturn. We remain committed to providing optimal solutions and exceptional care for our customers. We are confident that the actions we are taking today will deliver lasting benefits to our customers, shareholders, and stakeholders. As we continue navigating this complex environment, we look forward to keeping you up to date on our progress and achievements. This concludes our prepared remarks. We will now open the call for questions.

[Operator Instructions] Our first question today comes from Chip Moore from ROTH.

I just wanted to ask about the current environment of demand uncertainty. Obviously, every cycle is unique. But just how would you compare this, I guess, with some of the prior ebbs and flows you've been through over the years? And how long do you think these deferrals could last? It sounds like you're thinking maybe you see some improvement perhaps early next year, but what are your thoughts?

Yes. Maybe I'll get started, and others can make the comments, Chip. So I think the way that we see the market, the market is still pretty active. And what I mean by that is there are still requests for quote processes running. People are reaching out to our salespeople and our dealers. What is slow is decision-making. I think that's really driven by the volatility of the environment people find themselves in, whether they're worried about tariffs because, for instance, we have surcharges and some of our competition do, or our competition has adjusted their prices. So those things are difficult for our customers. And then the other piece is they're worried about interest rates and what dynamics that's going to have with that whole environment. There's a cutting environment, but there are other things going on. So I think one last thing I would say, Chip, is that a large number of our customers have still also been digesting trucks that they ordered in the past, which we're towards the end of it, but we've still got probably another quarter of production to go, which were ordered a while back. So if you look at it from a customer's point of view, they've been getting a series of trucks. They haven't been ordering anything because they've been digesting it. And I think that's coming to an end. So we expect slowly the market will start to recover. People will start to make those decisions because there is no avoiding it ultimately. But I think the next 2 to 3 months, maybe a little longer, are going to be that stop-start where processes are being implemented, but decisions are not being made. We've seen that open up a little bit over the last few weeks, but I think that's still got a ways to go. One last element is that our dealers were in a similar situation with their inventory, and those inventories have mostly worked their way down. So we're starting to get orders from our dealers now as well to restock.

And I guess maybe a follow-up would be, if you do see more degradation, if we get some macro downturn, what actions could you take if needed? And what would really trigger that?

Yes, Chip, I mean, we're pretty much looking at everything right now. All of our cost structures, how we're utilizing our plants, is there a better way to run the plants? We haven't come to conclusions. We will come to conclusions, I would say, in the next few weeks. So we are actually -- I mean, if you look at it from a production point of view, we're going to prepare for something that you're talking about, but still stay vigilant and ready to ramp up if we start to see bookings and backlogs grow. So we are going to take a bit of a conservative posture for the next quarter or two.

Maybe just more long-term, as things do normalize, just strategically around some of the investments you're making, just more of an update on the new modular scalable platform, how that's progressing, any challenges? And then lithium ion, some strategy there. Just maybe speak to that.

Yes. I think for the modular scalable product, if you look at our most important markets, North America and Europe, those products, the full scale has just got to those markets. Now we've had it in APAC, Asia Pacific, for a while, and Latin America for a while. And we've had very, very positive feedback from those markets. Now, as our dealers and some customers start to see this as a full-scale, we're getting similar responses from them. Based on some advice from our dealers, we have updated some of our nomenclature for them to better position the products in this new way. So we feel really good. We're still due to land and distribute significant numbers of these trucks, which will happen over the next 3 months or so. And then we'll start to get a better feel for how the customers are feeling about the more, what we're calling the prime match and the core match, which are, I would call the standard and the prime solutions in the field. And very similar to lithium-ion. We have one customer in North America, where we've put lithium-ion batteries in a large number of their operations. It's been very successful. And then we're launching our integrated lithium-ion solution, which we call the XT/LG or MX/LG. LG is lithium-ion, and the XT/MX is the name of the model. These will be rolled out both in North America and Europe. They're already in the Asia Pacific and are being very successful. So we feel really good about where lithium-ion is going. Early next year, we'll introduce a new set of electric trucks, which will come ready to -- ready with lithium-ion batteries.

Our next question comes from Ted Jackson from Northland Securities.

So the first question would be with regard to the weakness that you're seeing, I know you talked about it from more of a macro level with uncertainty and tariffs, and whatever. What about from a vertical level? So the Americas are the key ones. I mean, I've understood from people I've talked to that, in particular, like, for instance, the auto market has been a little soft because you have a few things and headwinds. One is the redeployment of assets around EVs that weren't necessarily needed. So there was some excess there. And then I'm also curious about what you've had with this aluminum issue and the impact on the auto markets, because there's a bunch of news with regard to Ford trucks and such. So I guess what I'm asking is, is there any kind of vertical for you that stands out in terms of some of the headwinds? And then is it auto? And if it's not, can you talk a little bit about how your auto exposure is and what's going on in there?

I think in terms of material availability, I don't think we have any specific issues. I mean, we obviously have our normal, I would say, back to 2018, 2019 type of things where we get stock out because of some reason or suppliers are late with delivery, but no foundational issue with our materials or components. The other piece, though, is the cost of it. I mean, certainly, we're not so aluminum-intensive, but we are definitely steel and iron-intensive. And those are those have been a significant issue for cost, but also for transition. We were using global steel in North America, and we are transitioning to mostly U.S. steel as much as we can, especially in our Mexico operations. So that's good. I mean, from a customer's point of view, in terms of how they're being impacted, we've certainly seen a slowdown on the manufacturing side. You've touched on auto. We would also put most heavy manufacturing in that environment. I think retail has been fine. I think I would say even light manufacturing and distribution has been fine. Food and beverages have been okay. So I think a majority of it has been the heavy side. And obviously, that's very important to us when we're talking about the paper industry, the metals, and large equipment. So that's been the big customer issue. We're starting to see that ease a little bit. But as I said, it's very new. We haven't seen that spread yet.

So what you're telling me then is so more larger equipment, more industrial. Then moving over to pricing pressure. You're seeing a lot of pricing pressure, you said, with EMEA and APAC. And does that mean you're not seeing as much pricing pressure in the Americas? And if so, why? I mean, is this maybe a sideline that you're actually benefiting from tariffs on that front because it's keeping cheaper Chinese stuff out?

I think pricing pressure is everywhere. And normally, that happens when we are not fully utilizing our capacity. Everybody wants the extra capacity, extra share to drive it. What I was saying is that we didn't have all the right solutions in place, the scalable solutions. They were going through their validation process. We need to meet some very specific requirements, for instance, UL in North America, and we need to meet all the CE requirements in Europe. So that's taken a while, and now we are ready to deliver trucks. So it was more an availability issue, not so much that we didn't see the competitive pressure. Now I would say that certainly if I look at how the Chinese competitors are behaving in EMEA and APAC versus North America, there's definitely some inhibition in the U.S.A. because of the tariffs. Now we're also being -- some of these trucks that we compete with them on do also come from China for us. So it's not as if we have an advantage, but it's at least until recently, we didn't have the availability because of completing our validation processes.

So when I listen to some of the things that same to the pricing pressure and your response to pricing pressure, the biggest response to pricing pressure for you, I mean, it's not that you're getting more aggressive in discounting. It's that you're going to have the new modular products going to allow you to be able to offer a lower-priced product.

Absolutely. So the idea behind this whole scalability was to give the customer the product that works in their application. And if we can do that, they will get the productivity they need at the lowest cost of ownership. So that is the mission behind this whole scalability, and it's going to take a little bit of time to get that through to our network and our customers. But we've been working on that, getting everybody ready. We had some feedback. We've adapted to that feedback. And so I think now it's just a case of getting the products out in the hands of our customers so they can see how good these are and feel that it's the right option for them. But you're absolutely right. We expect our margins to be around our target margins because we're putting the right truck at the right customer, whereas in the past, we would have taken what we had and tried to put it into segments where it didn't work, compromising margin.

My last question is, you referenced in the press release that you're going to be taking actions to increase your closure rates. The quoting activity is fine.

Our participation is fine. What we are starting to do is work closely with customers to understand what their actual fleet position is. Customers focus on what their core value proposition is, and material handling for a number of them isn't. So we're going to do some extra work with them to show them that if they have older vehicles in their range, that could lead to being on the wrong side of the cost of ownership. Working with our partners, create some very specific solutions for them in terms of what's in the truck, but also how we finance it, et cetera. So there are a number of steps with really going customer by customer and looking at what it would take for the customer to get over the hurdle of not wanting to make this decision when there is all this volatility around them.

So, just really more of a sharpening of the pencil, if you would.

And making that whatever we're doing, much more focused on that customer rather than a general hey, look, let's do this, let's reduce price, or let's offer extended warranty, or let's do something else. I mean, if the customer is concerned about something, we want to be able to solve their problem.

Our next question comes from Kirk Ludtke from Imperial Capital.

I just had a follow-up on the automation topic. Amazon's efforts to automate its facilities have been in the press recently. And I was hoping maybe you could expand on the pace of automation. Is it accelerating? And what impact does that have on your mix?

Let's say, the interest in automation is enormous because some of the basic trends that we are seeing, availability of people, and if you do get people, what is their expertise like in driving trucks. The implementation has been slower than we would expect. And part of that is, as you automate, you have to redesign some work, you have to redesign some of the material flow. And so the approach we've taken is we are working with customers in a very partnered approach so that they can experience what automation can do for them. Once they realize that, then they're able to identify how they could reconfigure their operation to better suit. At the moment, we're working with some of the largest companies. I won't go into those. But all the ones that are talking and writing about automation, we are working with at the moment. I think it's one of those things that's going to take some time for people to really understand how best to deploy these technologies, how to implement them, and integrate them into their operations, and then it will take off. So I expect a buildup, but then a fast acceleration after that.

And Kirk, I would add that as that trend takes hold, those trucks, whether they be with our hybrid automation or our full automation, come with higher prices and higher margins generally. So the benefit will accrue to the customer and their total cost of ownership, but will come back to us as well from the sale of the unit and the ongoing revenue of the technology.

So you would consider this automation to be a positive for your business?

Yes, absolutely. I mean, we have automated trucks. We have about 600 or 700 of them running around today. And we're building that up slowly. We have a primary product released now and in the marketplace, and then every 6 to 9 months, we'll be releasing another automated product.

And then a follow-up on the excess equipment that you see out there. And when do you expect that excess equipment to be depleted and orders to pick up in a quarter? Any guess as to timing?

Yes. I think we're working with our network to get their excess inventory in the right place by the end of the year. So we expect our dealers, and they're showing signs of it, as I said, to start ordering from the factory rather than fulfilling from their inventory at their retail. And then customers, similarly, we understand our backlog. We also understand the industry backlog, and the majority of what customers were waiting for has already been delivered. But it takes a little bit of time to cut and some help from the customers to switch stands. They haven't been running RFQs, some of them, especially the heavy side of the business, and really making decisions. And that's where I talked to Ted about that we're putting some special activities in place to help customers get through that process efficiently.

And then lastly, if some of your customers' hesitancy on placing orders, are they waiting for interest rates to come down? Is that part of what is going on here? I'm sure there are a lot of things, but is that a meaningful factor?

I think if I just think about ourselves, we're like them. We're looking at the ISM numbers. We're looking at what is going to happen to interest rates. We're looking at tariffs and the dynamics of tariffs and what this means to us. We're also looking at, in the worst conditions, what capital requirements do we have? And then once you've evaluated all of that, you go all right, what should I do now? The one thing that gets left out because it's not obvious to the customer is that their fleet has aged as well. And the downside of that is that their cost of operation is going to go up. And so we just want them to put that into the mix of their analysis and help them with it. So that's the way we feel we can move them off center because we can absolutely understand why those elements could create a bit of a freeze moment for making capital, at least capital expenditures that you feel that you have some flexibility with.

And then, if I could just sneak one last one in. On the tariff front, I think I heard you say you're not at an advantage. I mean, everyone is sourcing the same components from the same countries. You're not at an advantage, you're not at a disadvantage with your competitors with respect to your competitors?

I think that's generally true, but there are definitely exceptions. I mean, I think if I just take South Korea as an example, so if you are a South Korean manufacturer, you can pretty much import parts from anywhere, mostly tax-free. You can build with Korean steel. And when you bring it in, you'll have to pay the duty on steel. And then on top of that, 15% duty on the truck. And I think the same thing from Japan. So I think those end up being -- whereas we're buying U.S. steel, which is because of the duty, those just I need to look at the price of steel and see what's happened. Then we're paying duty depending on where it comes, if a lot of our components come from globally, so China, India, other Far East and Eastern European countries, and you could be paying significant tariffs on those, especially from China and India. And then you build trucks with those in North America, I think under those conditions, we feel that's a bit of an unfair situation.

Our next question comes from Jack Fitzsimmons from Prudential.

I think you mentioned cancellations in the prepared remarks. So I was just wondering if you saw a pickup in cancellations in 3Q? And if so, you could just quantify that number?

Yes. I mean, I think the majority of our cancellations are behind us. They were particularly difficult during, I would say, the first and second quarters. I think as our backlog has come down, those have really whittled out. So we wouldn't expect many cancellations looking -- there weren't many during this quarter, and we wouldn't expect many moving forward. And these cancellations were from orders that were made in late 2023 or 2024, so there weren't recent cancellations or recent orders.

And then just one more for me. I guess in the release, you mentioned $40 million tariff impact in 3Q. Just a clarification, is that net of price increases and other actions? And if not, kind of how much of that cost were you able to mitigate?

Maybe I can say a few words and then Scott can -- so don't forget, we build trucks in backlog. And as I already said, the market is pretty intense because of us not all fully utilizing our capacity. So we felt that there wasn't an easy way for us to go back. We tried to go back to the marketplace. Customers pretty much said, "Hey, we'll just go back to the market." So on these backlog trucks, we weren't able to get in any extensive way, any pricing on it. So we took the cost, and the majority of that $40 million was the tariff, and it mostly hit our P&L. And I think that still be somewhat the case next quarter because we're still in that situation. And then the things we are booking now are better from incorporating the tariffs in them, either as surcharges or price increases. So, Scott?

Well, I think you covered it pretty well. I would say, yes, the $40 million was the gross tariff cost, and we were able to offset less than half of that with the price in the quarter for the factors that Rajiv laid out.

And our next question comes from Eric Ballanntine from CVC.

Just a follow-up on that question on the backlog and pricing. I know in the past, you've talked about that you want a profitable backlog and so forth. Now it sounds like there's still some unprofitable or lower-profitable new units in the backlog. Of the overall backlog, what kind of percent is related to those unprofitable, lower-profitable units? And so, when do we think that when you start showing the value of the backlog, $1 billion, $1.2 billion, whatever that number is, that's really 100% profitable backlog or pretty close to it?

Yes. I think we'll get there in January, February. And I wouldn't say that these were bad margins when taken. Those were actually very good margins. But then we've had, as you heard, $40 million worth of tariffs, which went around when we took those bookings. So really, the untariffed covered backlog will be out of mostly by early first quarter next year in terms of what we're building. And of course, we are booking those right now.

And then on your comments about the kind of the fourth quarter and the profitability falling off there, I know you've talked about that you didn't want to go back to the days of EBITDA negative and so forth. I mean, obviously, EBITDA is falling off pretty significantly this year. I mean, are we looking at a situation where we could potentially be back into the EBITDA negative sometime next year until the industry flips around? Or are you pretty confident that you're going to stay at least positive?

I think it's really difficult to tell at the moment. You saw us, we're pretty close to breakeven this quarter. I think as we've guided, we're going down, so going a little lower for the next couple of periods. So I think that's the best I can do right now.

And then just on the AI issue, I mean, your comments around you're working with the customers. Is it really the customers or the issue in the sense that you have the product that you can deliver to them that's functional, AI-automated, and so forth? It's really the customers that need to kind of figure out their plans and figure out how they want to operate. Or is there something else that's limiting you guys?

Yes. The way we've designed our automated solution is really more from a material handling point of view. We are not software guys. We use software, but we're really material handling people. And we know to most effectively use -- again, we're using our own solutions in our own plants. So we know what it takes to optimally use it. And we think we have a role to play in that with our customers. We've always felt that with the solutions we put in place. That's part of our value proposition. That's how we can differentiate ourselves and give the customer a solution that is better value for them. So we're getting all of our salespeople, dealers, ready as well as customers to be able to do the same thing. And we have a pilot going on right now with a number of key customers working with our internal automation implementation team to pilot these concepts. And so far, we've had very, very positive feedback from those customers in what we're doing, and it is seen as very differentiated.

With that, we'll be concluding today's question-and-answer session. I'd like to turn the floor back over to Andrea Sejba for closing remarks.

Thank you for your questions. A replay of our call will be available online later today, and the transcript will be posted on the Hyster-Yale website. If you have any follow-up questions, please feel free to reach out to me directly. My contact information is included in the press release. Thank you again for joining us today, and I'll turn the call over to Jamie to provide the replay information.

And we would like you to note that to access the replay of today's event, you may dial (855) 669-9658 or (412) 317-0088 and use the access code of 479-9887. Again, that is 479-9887. Replay will be available approximately 1 hour after the completion of today's event, and we do thank you for attending the presentation.