Hyster-Yale, Inc. ($HY)

Good day, and welcome to the Hyster-Yale, Inc. First Quarter 2026 Earnings Conference Call. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Andrea Sejba, Director, Investor Relations and Treasury. Please go ahead.

Good morning and thank you for joining us for Hyster-Yale's First Quarter 2026 Earnings Call. I'm Andrea Sejba, 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 contribute 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 U.S. 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 tape process. We also plan to seek approximately $15 million to $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 we recovered in full, these refunds would represent only a portion of the tariff costs we have incurred. Consistent with our prior communication, 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 life cycle 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, lower tariff and life cycle economics. A key enabler across all 4 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 has 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 3-wheel standard counterbalance truck featuring technology-driven ergonomic and productivity enhancements that are resonating with customers. In direct store delivery, customer evaluation of the Hyster and Yale Route Runner and 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 improved 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.

[Operator Instructions] And the first question will be from Ted Jackson from Northland Securities.

So I'm going to start first question. I want to kind of go into unit mix with regards to the modular equipment and the more -- I mean, this is the strategy you guys have been going for. But could you maybe unpack for me the sort of the mix in the Lift Truck business between older legacy units and the newer more modular product? And then maybe talk a bit about where that trend has come from, kind of where was it, say, as you rolled through last year to where it is now and where you see it's going? And 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? I have one big, huge multi-point question. I have a couple.

For some data that we don't typically publish. We certainly don't talk about volume. So let me just -- firstly, the majority of the trucks that are now modular scalable are the 1- to 3.5-ton trucks, especially the internal combustion engine trucks, although we're in the process of launching our electric version of the 1- to 3.5-ton trucks. Now with a couple of -- the two most important series have been launched already, what we call our 2- to 3-ton DBB and 2- to 3-ton CBB. The start of production for the DBB has already started in Europe and the CBB will start soon. But 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 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 South Africa, for instance, but now fully implemented globally. And the legacy version of that truck is now out of production apart from one model that's going into some of the emerging markets. And the 1- to 3.5-ton truck is the largest part of the market, especially if you take out the small pallet trucks. And for us, typically, it's around 1/3 of our kind of volume, 1/3 of the market, 1/3 of our volume. So 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. So 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 early -- in the fourth quarter in North America. Now in some markets, those are available. So 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. But that's how we are covering the market. So I would say that currently somewhere around 40% of the market we've got covered with some level of scalability.

To 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 and because that really hasn't occurred yet. And so I think that's the other part of your question is where are the shipments today. And 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. So yes, the bookings have been there for since early part of this year. The shipments are basically happening now, now onwards. So it's going to -- dealers will receive those trucks. Customers will get to have demonstrations and try it out in their application and then more orders will come in. So there is that cycle, which seems to take us somewhere around 4 to 6 months to do, although the seed orders are already there.

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. And so it's unrealistic to think that we could get us the share we traditionally get before those products really get out there in the marketplace. And so we feel that the strength of our dealership and our own efforts with the national -- with our national accounts and large accounts as we have these trucks more fully in the pipeline and available for customer application are going to really start to move, especially in the second half.

Yes. And in terms of margin, we feel -- we've designed each of these trucks to hit their target margin requirements. And so we expect that this will have a positive impact on our margin.

So if I recall, so I'm going to kind of just regurgitate just to make sure I understand the whole 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 like some of the Asian stuff is coming in, it's just very, very inexpensive 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 at a solid margin. And the combination of those two things should enable you to take share because you've been having some competitive issues with regards to pricing. You're going to have at worst, an equivalent product, probably a better one with an architecture that allows you to keep your margins and be better competitive -- be more competitive within the marketplace. Is that kind of where we're at?

I would encourage you to think of the market as having 3 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. So 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.

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

Well, the timing is nice because you're hitting it when the market is coming -- going to be coming out of a cycle. And I mean it's a good timing. Shifting to next question. You talked with regards to tariffs and you had a $30 million impact in the quarter. Second quarter is going to be something greater than that. And then it will start to tail off because of mitigation strategies. How do you mitigate the tariffs? Just what are the strategies? How are you going about that? Just pricing.

So there's 2 primary strategies. The first one is pricing, either 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. And then for the others, like the 122 and the IEEPA, which we thought was more temporary, we put a surcharge in place. Now also, we have to be conscious of the market price. So we have a pretty sophisticated pricing program where we determine how much pricing we can put in. And then whatever is remaining, then we have to take action on the cost side, start to go back to our suppliers, work with them to get the components located in regions where the tariff is more manageable and focus on cost reduction. The way I would split it is about 2/3 is going to be pricing, and about 1/3 is going to be cost. So that's how we're managing it, Ed. Now the cost adjustment takes a little longer. That's why we've got -- and so does the pricing because, as you know, we build to order. So we have a backlog. Backlog has been somewhere around 4 to 6 months depending on the truck. And that's why we had a -- we've got the first quarter that was -- 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. And now it's going to start building back up.

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

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

Okay. So you haven't even begun that process yet.

We make a full evaluation of our finance team, and we've kind of -- we're rearranging a few things, and 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.

And our next question will be from Chip Moore from ROTH.

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. Just talk about the conversations you're having. It sounds like you've got a fair degree of confidence that things improve here in the back half. And of course, you've got some new products coming out that align with some of the inflationary pressures out there, but maybe just dive in there.

Yes. Maybe at a high level, Chip, I can give you -- and then we will dig in. But at a high level, if you look at the profile, like we talked -- I just said we had a low point in bookings in the third quarter. Let's say that was $380 million of -- that was very low for us. It was a really tough quarter for us and everyone else. Then we grew -- kind of rose to $540 million in the fourth quarter of 2025. First quarter was around $585 million, 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. And then 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've been waiting. Some of these orders were put in 2022 that we delivered in '23 and some orders that were put in '23 that we delivered in '24. So 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. And -- but utilization is also down a little bit because manufacturing is in North America and in Europe is down because of the -- just the economy for things is down. But we expect that to build back up. The conversations we are having with customers, there is no -- we've seen increasing 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. Dealer inventories are back into -- in normal conditions. So those are all good indicators for what's coming. We're seeing more stock orders coming from our dealers. So for our high flow business, these are ready to kind of stock units, ready to sell units. We're seeing our dealers more confident. And Alta, who is one of our dealers, who's public company, if you look at their reports, they are talking that as well. So it's not just one of our dealers who publishes things kind of earnings is also essentially compatible with the story I'm talking about. So that's -- so we are seeing all of that. As we look at some of our large customers and their plans, we are 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 helpful color, Rajiv. And maybe for my follow-up, talk a bit around automation. I think you highlighted a few things already, but are you gaining share in warehouse and the role there? And then lastly, just an update on the battery strategy.

Yes, sure. So 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. And then we continue to demonstrate our automation solution. As you know, since April, we've been out there selling the -- and really, we're ranking it. It's more a material handling as a service model for our automated trucks. And we've had a couple of really good wins with that. But in MODEX, we introduced the -- an early version of our kind of stacker. So this tow tractor obviously pulls trailers, but this is a version of the truck that lifts products to typically second level and first level, can also pull things off production lines or set things on distribution lines. And 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. And then in the background, there's work going on and automating some of the other warehouse products, especially the Reach Truck and also our counterbalance trucks, which will come in '27 and '28. So we're building up our automation product line, but also, we're seeing success -- early success with key customers that we have targeted initially. In terms of the batteries, we're starting to ship now our own lithium-ion batteries to customers, especially in Europe, and we'll initiate that in North America in the third quarter, right at the beginning of the third quarter. And we have pretty large growth plans for it in the second half of the year, and then it will be a significant part of our business in 2027. And we'll talk more about that at our Investor Day that we are 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. I look forward to that in November, I think, right?

And ladies and gentlemen, this concludes our question-and-answer session. I would like to turn the conference back over to Andrea Sejba 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 1 (855) 669-9658 or 1 (412) 317-0088. Replay beginning at 2:00 p.m. Eastern Time today. You will be prompted to enter a conference number, which will be 9387098. Please record your name and company when joining. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.