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Day, and welcome to the Hyster-Yale, Inc. first quarter 2026 earnings conference call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by 0. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then 1 on your touch-tone phone. To withdraw your question, please press star then 2. Please note, this event is being recorded. I would now like to turn the conference over to Andrea Saba, Director, Investor Relations and Treasury. Please go ahead.

Good morning. Thank you for joining us for Hyster-Yale's first quarter 2026 earnings call. I'm Andrea Saba, Director of Investor Relations and Treasury. Joining me today are Al Rankin, Executive Chairman, and Rajiv Prasad, President and Chief Executive Officer. Yesterday, we filed our first quarter 2026 earnings release, which provides a detailed overview of our financial results and performance. Today's discussion is intended to supplement that release by offering additional insights and context. The earnings release, along with a replay of this webcast, is available on the Hyster-Yale website, where the replay will remain accessible for approximately 12 months. Before we begin, I would like to remind you that today's call includes forward-looking statements that are subject to risks and uncertainties, which could cause actual results to differ materially from those expressed or implied. These risks are described in our earnings release and SEC filings.

We will also reference adjusted financial measures, which we believe provide useful supplemental information to GAAP results. Reconciliations to the most directly comparable GAAP measures are included in our earnings release and investor presentation. I will start with a brief overview of our first quarter performance and outlook, then turn the call over to Rajiv to discuss the operations with a strategic update for the business. During the first quarter, bookings improved sequentially, increasing 7% from the fourth quarter as we moved from the cyclical low reached in the third quarter of 2025. Backlog increased modestly, although shipments have not yet reflected this improvement. From a cash perspective, operating cash flow followed typical seasonal patterns with $33 million of cash used in operations, representing a slight improvement compared to the same period of last year.

Inventory management continued to improve with meaningful year-over-year reductions from better alignment of production with demand. Finished goods inventory declined compared to last year, improving efficiency and positioning us for higher production later in 2026. Revenue declined to $795 million, driven primarily by the normalization of excess backlog and a shift towards lighter-duty, lower-priced trucks. This shift reflects a broader and more persistent change in purchasing behavior. Customers increasingly select the right truck for their specific application, prioritizing standard configurations, near-term affordability, and fit-for-purpose solutions. In response, we have introduced new core counterbalance models built on our modular and scalable platform to address growing demand for standard and value offerings. While these actions strengthen our competitive position, the transition reduced shipments of higher-priced traditional models and contributed to the year-over-year revenue decline in the quarter. Tariffs also remained a significant headwind, affecting profitability.

In the first quarter, we reported an adjusted operating loss of $26 million, which included approximately $30 million of gross tariff costs. While pricing and cost actions provided partial offsets, tariffs and the shift to lighter-duty, lower-priced trucks more than impacted results. Looking ahead, we expect 2026 to improve compared to 2025, with profitability in the second half of the year. We anticipate the second quarter to represent the low point for both operating profit and net income.

Tariff costs are expected to increase in the second quarter before mitigation actions take effect. At the same time, stronger bookings, backlog growth, and ongoing cost reductions are expected to drive meaningful improvement in the second half of the year. Based on this progression, we expect to deliver a modest consolidated operating profit for the full year, despite a loss in the first half. With that overview, I will now turn the call over to Rajiv.

Thank you, Andrea, and good morning, everyone. With that context on our first quarter performance and near-term outlook, I would like to step back and focus on how we are positioning the business and the progress we are making on our transformation as we navigate this phase of the cycle. I'll begin with tariffs. Given recent legal and policy developments, tariffs have already had a significant impact on our cost structure. Since Liberation Day in 2025. We have incurred approximately $130 million of direct tariff related costs, excluding indirect effects such as supplier price increases and higher steel costs. With a predominantly built to order manufacturing model, there is an inherent lag between tariff implementation and corresponding price realization. As a result, cost recovery occurs over the orders and delivery cycle, not immediately.

In February 2026, the US Supreme Court invalidated tariffs imposed under the IEEPA tariff regime. While that decision created a pathway to pursue refunds, it did not reduce the overall tariff burden on our business. Subsequent action by the administration introduced new higher tariffs, including a 10% global tariff under Section 122 and expanded tariffs under Section 232 that now apply to the full import value of certain steel derivative products and including finished forklifts and components. Based on current conditions, we expect our effective tariff rate in 2026 to increase by approximately 6% compared with 2025. With respect to refunds, we have applied for approximately $40 million related to previously paid IEEPA tariffs through the U.S. Customs and Border Protection CAPE process. We also plan to seek approximately $15 million-$20 million in reimbursements from suppliers.

These potential refunds were not included in our first quarter results or reflected in our outlook. The timing and ultimate amount of any recovery remains uncertain. Even if recovered in full, these refunds would represent only a portion of the tariff costs we have incurred. Consistent with our prior communications, we expect any refunds ultimately received would be used to mitigate ongoing and future tariff impacts. Turning to the broader operating environment, the lift truck market continues to favor lighter duty, lower priced equipment. This shift has been both more pronounced and longer lasting than in prior cycles. Rather than viewing this solely as a near-term headwind, we see it as a clear signal of how the market is evolving. Our transformation is intentionally designed to strengthen our position in these value-oriented segments while preserving the ability to scale margins and earnings as volume recover.

Against that backdrop, our focus remains on executing our transformation initiatives to lower our cost base, improve flexibility, and reduce earnings volatility across the cycle. These are not short-term responses to current conditions, but structural changes intended to improve performance as market conditions normalize. Our transformation is centered on 4 priorities. First, product evolution. As customer preferences continue to shift towards standard and value configurations, we have begun introducing these offerings within our core 1 to 3.5 ton counterbalance product line, where demand for lighter duty application is increasing. These products are built on our modular scalable platforms, enabling common architecture, shared components, and flexible manufacturing. This improves cost efficiency, supports competitive price points, and allows us to respond more quickly as demand continues to evolve. While this transition has reduced shipments of higher priced traditional models in the near term, our new products are gaining traction.

We expect to continue moving in this direction with additional product introductions planned as we align our portfolio to customer needs and support future volume growth. Second, operational and cost structure transformation. Operating costs declined year-over-year in the first quarter, reflecting restructuring actions initiated in 2025, including Nuvera strategic realignment and broader workforce reductions. We began to see early benefits in the quarter, with meaningful margin improvements expected as volumes recover. In parallel, our longer-term manufacturing footprint optimization continues with the largest financial benefits expected in later periods. Third, end-to-end digital enablement. We continue to better align product development, manufacturing, and commercial execution through more integrated systems and processes. This is improving decision making, execution speed, and lifecycle management across the organization. Fourth, commercial and go-to-market execution.

We remain focused on discipline, pricing, dealer execution, and improving aftermarket attachments and service penetration over time to strengthen mix, cover tariff, and lifecycle economics. A key enabler across all four priorities is our integrated individual product line management model, which brings together product engineering, operations, and commercial teams with clear accountability. This model is designed to sharpen decision-making and translate strategy into measurable financial outcomes as market conditions normalize. With that foundation in place, I want to outline how these efforts are translating into early customer traction and acceptance of our strategy. One example comes from a new conquest opportunity with a large warehouse club customer that had concerns about pedestrian safety during after-hour stocking. We demonstrated our proximity detection and related safety technologies, highlighting their effectiveness in blind corners and high-traffic environments.

Following those discussions, the customer engaged directly with our innovation team and elected to move forward with an initial purchase for a greenfield site as a test deployment. Beyond safety, we're also seeing acceptance of our new product platforms designed to improve productivity and address labor constraints. In warehouse trucks, we introduced a new three-wheel standup counterbalance truck featuring technology-driven ergonomics and productivity enhancements that are resonating with customers. In direct store delivery, customer evaluation of the Hyster and Yale Route Runner, a nested pallet truck with a detachable motorized sled, demonstrated operational efficiency gains, including delivery efficiency, reduced labor reliance, and improved route times. We view this as a differentiated solution addressing an underserved market. Commercially launched in April, the Route Runner has already secured orders from several large beverage distributors.

Taken together, these examples reinforce the direction of our strategy, delivering high-value, differentiated solutions that address real customer needs and support growth opportunities, reduce cyclicality, and improve operating margins over time. With that perspective, I will turn the call over to Al for closing remarks.

Thank you, Rajiv. As you have heard today, the industry remains in a difficult phase of the cycle. Demand has been constrained by macroeconomic uncertainty, including the impact associated with the Iran conflict, the changing mix of trucks which customers want and need, tariffs which continue to be a material headwind, and customers who have remained cautious as they work through receipt of equipment ordered in prior time periods. At the same time, we are beginning to see early signs of improved demand led by enhanced customer engagement and increased focus on fleet replacement. Against that backdrop, the actions our Hyster-Yale team has taken and continues to take to transform Hyster-Yale have the capability of repositioning Hyster-Yale's profit structure and growth prospects.

Over the past year, we have focused on strengthening the fundamentals of the business by expanding our product lines, lowering our structural cost base, improving operational flexibility, sharpening our focus on cash generation, and investing in marketing the products and capabilities that matter most to our customers. These actions are not short-term responses to a difficult environment. They are deliberate structural changes designed to improve how the company performs as volumes recover and market conditions improve. Importantly, they are consistent with the transformation Rajiv described. We are optimistic that 2026 represents a turning point. We expect bookings to improve, backlog to rebuild a bit, and cost reduction actions to take hold, and we expect all of this to strengthen financial performance significantly in the second half. We remain disciplined in our execution activities and prudent in our capital allocation.

Hyster-Yale has navigated many cycles over its history, and that experience gives us the confidence of experience, not complacency. The actions underway today are designed to transform Hyster-Yale to build a higher growth, higher margin, and less cyclical business. As a result, we believe the company will then be well-positioned for significant shareholder returns over time. That concludes our prepared remarks, and we'll now open the call for questions.

The first question will be from Ted Jackson from Northland Securities. Please go ahead.

Thank you. Good morning. Excuse me.

Hi, Ted.

I'm gonna start, first question. I wanna kind of go into, you know, unit mix with regards to the, you know, the modular equipment and the, you know, the more I mean, this is the strategy you guys have been going for. Could you maybe unpack for me the, sort of the mix in the lift truck business between older legacy units and, you know, the newer, you know, more, you know, modular product.

You know, maybe talk a bit about, you know, where that trend has come from. You know, kind of where was it, say, you know, as you rolled through last year to where it is now and where you see it's going? Then kind of behind that, maybe some discussion with regards to on a like-for-like basis, what would be the difference in terms of price point and maybe a discussion on the difference, if there is any, in margin.

Um-

Kind of one big, huge multipoint question, and I have a couple more.

Yeah.

They won't be quite as big.

You're asking for some data that we don't typically publish. We certainly don't talk about volume. Firstly, the majority of the trucks that are now modular scalable are the 1 to 3.5-ton trucks, and especially the internal combustion engine trucks, although we're in the process of launching our electric version of the 1 to 3.5 trucks. Now, the two most important series have been launched already, what we call our 2 to 3-ton DBB and the 2 to 3-ton CBB. The start of production for the DBB has already started in Europe, and the CBB will start soon. The internal combustion engine trucks in that range are fully Now the only thing we're shipping are the modular scalable trucks.

That shipment has started this year, especially into our, you know, kind of, EMEA, the territories with emission control, so that's North America and Western and Eastern Europe. Now we've been shipping those trucks for quite a while into Asia Pacific and Middle East and Africa and, you know, South Africa, for instance, but now fully implemented globally. The legacy version of that truck is now out of production, apart from 1 model that's going into some of the emerging markets. The 1 to 3.5 ton truck is the largest part of the market, especially if you take out the small pallet trucks. For us, typically it's around 1/3 of our volume, 1/3 of the market, 1/3 of our volume.

That kind of gives an idea of now, for some of the other product lines, what we're introducing are not trucks on the same platform, but trucks that fill that gap. I'll give you an example. We're going through and introducing for our 4 to 9 ton truck range, a low intensity product, and then later in the year we'll be introducing a more standard version of the truck, probably in the fourth quarter, in North America. Now, in some markets, those are available. That's how we're covering it. Now, ultimately, we'll have a modular scalable version in the 4 to 9 ton, but that's still a few years away. That's in development, just initiated development right now. That's how we're covering the market. I would say that currently somewhere around 40% of the market we've got covered with some level of scalability.

Hey, Rajiv, you might wanna just discuss a little bit the lag between the introduction of the models and the full uptake, both with our national accounts and with our dealers.

Sure

because that really hasn't occurred yet.

Yeah

I think that's the other part of your question is, where are the shipments today? I think the bottom line is, we're getting ready to really ship lots of these, but they're in the market, and they're just getting started as far as looking backwards are concerned. I think that's correct, Rajiv.

That's right. Yeah, the bookings have been there for, you know, since early part of this year. The shipments are basically happening now onwards. You know, dealers will receive those trucks, customers will get to, you know, have demonstrations and try it out in their application, more orders will come in. There is that cycle, which seems to take us somewhere around 4 to 6 months to do, although the feed orders are already there.

Yeah, that's a really important point to me because we have really good dealers, especially in North America and parts of core Europe, and we have a sound structure in other parts of the world. When they get the product, they will sell it. It's unrealistic to think that we could, you know, get the share we traditionally get before those products really get out there in the marketplace. We feel that the strength of our dealership and our own efforts with our national accounts and large accounts as we have these trucks more fully in the pipeline and available for customer application are gonna really start to move, especially in the second half.

Yeah. In terms of margin, we feel we've designed each of these trucks to hit their target margin requirements. We expect that this will have a positive impact on our margin.

If I recall, I'm gonna kind of just regurgitate just to make sure I understand, you know, the whole, you know, thing with the modular trucks is that the goal with a key part of the strategy behind this is to be able to produce trucks that you can be more competitive with because, you know, like some of the, you know, the Asian stuff is coming in, and it's just very inexpensive, so that you can be price competitive with them and be able to produce them at a comparable margin that you've had in the past, so, you know, at a solid margin.

The combination of those two things should enable you to take share because, you know, you've been having some competitive issues with regards to pricing. You're gonna have, you know, at worst, an equivalent product, probably a better one, with an architecture that allows you to keep your margins and then be more competitive within the marketplace. Is that kind of where we're going with it?

I would encourage you to think of the market as having three segments in it, if you will, to oversimplify it. A value, a standard, and a premium. We've historically had great strength in the premium. We continue to do that. We've had some entries in the standard, and now we are introducing a full line of standard and value trucks, which are growing segments in the marketplace because customers are looking, because of high prices in general, for more cost-effective solutions. It's not so much a matter of being directly competitive with our old trucks with the competition, as it is a matter of filling gaps in the product line that have become much more important than they were.

I think the customer's application always really required them to have, you know, I think we've given these examples before. For instance, in retail, these trucks do, you know, 500 to 750 hours a year. You don't need a, you know, a very sophisticated truck for that application, and our low-intensity truck is more than capable of handling those applications. In light manufacturing, you have more of a standard truck, and that's a pretty big market. In the past, we sold our premium truck into that market, had lower margins because the customers didn't really need all the capability. That's what gets rectified. We weren't really participating in any significant way in the value part of the market. That's how that gets fixed. Now we can participate across the board and have good margins at each of those segments.

Well, the timing's nice 'cause you're hitting it when the market's coming, gonna be coming out of a cycle.

Yeah.

You know, I mean, it's good timing. Shifting to next question. You know, you talked with regards to tariffs and, you know, had a $30 million impact in the quarter. Second quarter's gonna be something greater than that, then it'll start to tail off because of mitigation strategies. How do you mitigate the tariffs?

Pricing.

What are the strategies? How are you going about that?

Just pricing.

Okay.

There's two, the two primary strategies. The first one is pricing. Either, you know, embedded in our core price some of the tariffs which have been there for a long time, such as the 301, and now even some of the 232 is in the core price. Then for the others, like the 122 and the IEEPA, which we thought was more temporary, we put a surcharge in place. Now also, you know, we have to be conscious of the market price. We have a pretty sophisticated pricing program where we determine, you know, how much pricing we can put in.

Whatever is remaining, we have to take action on the cost side and start to go back to our suppliers, work with them to get the components located in regions where the tariff's more manageable and focus on cost reduction. The way I would split it is about 2/3 going to be pricing and about 1/3 is going to be cost. That's how we're managing it, Ted.

The cost readjustment takes a little longer. Does the pricing because we build to order, so we have a backlog. Backlog's been somewhere around 4-6 months, depending on the truck. That's why, you know, we had a, you know, we've got the first quarter that was, you know, from a revenue point of view, there was a reduction because we had a low point in our bookings in the third quarter of 2025, and that flowed through. Now it's gonna start building back up.

Okay, that was great. My last question is pretty simple. It's just maybe an update on where you are in the CFO search.

We're talking to our board about the, you know, the type of person we're going to look for, and then we'll launch it in immediately after our board meeting in a couple of weeks.

Okay. You haven't even begun that process yet? Okay, that's fair. Okay, thank you very much.

We've been through a full evaluation of our finance team, we're rearranging a few things, that's given us a better idea of the type of capability we need in our new CFO.

Well, don't rearrange Andrea too much because I like working with her.

Thank you.

Thank you. Our next question will be from Chip Moore from Roth. Please go ahead.

Hey, good morning. Thanks for taking the question.

Good morning.

like working with you too, Andrea.

Thank you. You too.

Thanks. Maybe for me, maybe you could just expand a bit on some of the dynamics you're seeing around this pent-up demand out there with aging fleets and need to replace. You know, just talk about the conversations you're having. It sounds like, you know, you've got a fair degree of confidence that things improve here in the back half. Of course, you've got some new products coming out that align with, you know, some of the inflationary pressures out there. But maybe just dive in there.

Yeah. Maybe at the high level, Chip, we will dig in. At a high level, if you look at the profile like we've talked, I just said we had a low point in bookings in the third quarter. Let's say that was $380 million, right? That was very low for us. It was a really tough quarter for us and everyone else. Then we grew, you know, kind of rose to $540 in the fourth quarter of 2025. First quarter was around $585, something like that, close to that. I'm just talking units, not parts, not other sales, not our technology stuff, just units, because that is the driver for our business. All the other stuff comes from that.

Then, you know, we expect that to continue going up. And that's been in conversation with our customers. So a few dynamics are going on. I think as we've talked over the last couple of years, we did a lot of deliveries in 2023 and 2024 to our customers who'd been waiting, you know, some of these orders were put in 2022 that we delivered in 2023, and some orders that were put in 2023 that we delivered in 2024. That's kind of stabilized. Now, as we talk to customers, their average age of the fleet is a little higher than we would like or they would like.

But utilization is also down a little bit, you know, because, you know, manufacturing is in North America and in Europe is down because of the, you know, just the economy for things is down. But we expect that to build back up. The conversations we're having with customers, We've seen increasing, you know, RFQs going out to the field. Quoting activities are going up. Engagement with our customers are going up, which are leading indicators. We're seeing the same thing from our dealers. Our dealer inventories are back into normal conditions. Those are all good indicators for what's coming. We're seeing more stock orders come in from our dealers. For our high flow business, these are ready to, you know, kind of stock units, ready-to-sell units.

We're seeing our dealers more confident. Alta, who is one of our dealers, who's public company, if you look at their report, you know, they're talking that as well. It's not just one of our dealers who publishes things, you know, kind of earnings, who's also essentially compatible with the story I'm talking about. We're seeing all of that. As we look at some of our large customers and their plans, we're seeing that they have plans for third and fourth quarter that are significant. That's what gives us the confidence to say that we do expect both shipments and bookings to continue rising into the second half of the year.

Very, very helpful color, Rajiv. You know, maybe for my follow-up, talk a bit around automation. I think you highlighted a few things already, but, you know, are you gaining share in warehouse and the role there? Lastly, just an update on the battery strategy. Thanks.

Yeah, sure. Actually we are doing well in the warehouse, especially with our reach truck, and we've just launched the new product that I talked about, the three-wheel stand, which is getting excellent feedback from especially our large customers. We continue to demonstrate our automation solution. As you know, since April, we've been out there selling the. Really we're renting it. It's more a material handling as a service model for our automated trucks. We've had 2 of really good wins with that. In MODEX, we introduced an early version of our, you know, stacker. This is, you know, tow tractor obviously pulls trailers, but this is a version of the trucks and lifts products to typically 2nd level and 1st level.

Can also pull things off production lines or set things on distribution lines. We had very, very positive response to that at MODEX. We'll start demoing that with what we call friendly, our core customer base, in the third quarter, and then release it for sale in the fourth quarter. In the background, there's work going on in automating some of the other warehouse products, especially the reach truck and also our counterbalance trucks, which will come in 2027 and 2028. We're building up our automation product line, but also, we're seeing success, early success with key customers that we've targeted initially. In terms of the batteries, we're starting to ship now our own lithium-ion batteries to customers, especially in Europe.

We'll initiate that in North America in the third quarter, right at the beginning of the third quarter. We have pretty large growth plans for it in the second half of the year. It'll be a significant part of our business in 2027. We'll talk more about that at our investor day that we're planning for the fourth quarter. Get into a lot more detail and probably bring along some of the things we're doing on the energy side and the technology side as well.

Great. Yeah, look forward to that in November, I think, right? Yeah, thanks very much.

Ladies and gentlemen, this concludes our question and answer session. I would like to turn the conference back over to Andrea Saba for any closing remarks.

Thank you, Chad. 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.

To access the digital replay of this conference, you may dial one eight five five six six nine nine six five eight or one four one two