Good day, and welcome to the High Street Yale, Inc., third quarter 2026 conference call. All participants will be in listen-only mode. Switching to assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your telephone keypad, and to withdraw your question, please press star then two. Please note that today's event is being recorded. I'd 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 Hyster Yale's third quarter 2026 earnings call. Joining me today are Al Rankin, Executive Chairman, Rajiv Prasad, President and Chief Executive Officer, and Matt Cornell, our new Chief Financial Officer. We're pleased to welcome Matt to today's call. We will discuss our third quarter 2026 earnings release, which was issued yesterday. The release and a replay of this webcast will be available on the Hyster Yale website. Today's call contains forward-looking statements. These statements are subject to risks and uncertainties that 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 discuss adjusted results, which we believe are useful supplements to GAAP financial measures. Reconciliations of adjusted results to the most directly comparable GAAP measures are available in our earnings release and investor presentation. Before turning the call over to Rajiv, I will briefly cover third quarter highlights. Third quarter 2026 results improved sequentially. Stronger bookings began to translate into higher shipments and structural cost savings supported operating performance. Revenue increased 2% sequentially to 827 million as higher shipments volumes more than offset lower part sales. Operating results improved by 10 million driven by higher shipment volumes and lower employee-related expenses. These improvements more than offset 20 million of lower tariff-related recoveries compared with the second quarter. As a result, both operating loss and net loss narrowed compared to the second quarter of 2026. For the quarter, adjusted EBITDA returned to positive at 6 million. operating cash flow increased to $26 million, $10 million above the second quarter, which primarily reflects stronger earnings and improved working capital execution, particularly in accounts payable. Bookings were $550 million, up 45% from prior year. This was the fourth consecutive quarter of elevated bookings. Thank you, Andrea, and good morning, everyone.

Third quarter performance showed further signs of the company's recovery. Most importantly, we're beginning to see stronger bookings convert to production and shipments. At the same time, our pricing, sourcing, and cost actions are helping us manage challenging cost environment. I'll first discuss demand and fourth quarter outlook, then I'll explain the structural actions we're taking to improve our competitive position Cost structure and cash generation. Industry conditions have continued to improve from 2025, although demand varies by region and customer application. Deferred fleet replacement needs are converting into new equipment purchases. Customer acceptance of our value and standard product offerings continue to grow. As noted, third quarter bookings remain well above the cyclical low, Backlog held steady as production approximated shipment during the quarter. Together, they give us a solid base of demand as we increase production. Our product investments are a key reason for this momentum. They're broadening the portion of the market we can address. As customer demand shifted, recently introduced lighter incentives Intensity Lower Priced Products helped offset lower sales of higher values standard and premium counterbalance trucks. These expanded product offerings are not simply substitute for our previous models. They extend our reach into applications and price points where we historically had less coverage. They also help us with new customers and create opportunities to increase manufacturing scale over time. Looking ahead, we expect our value and standard offerings to continue supporting volume growth, profitability, and market share gains. This includes the 1 to 3.5 ton, the 4 to 9 ton, and the big truck product lines. Our objective is to match product capability and total cost of ownership more precisely to each application. We're also using modular and scalable product solutions which reduce complexity across engineering, sourcing and manufacturing. Building on this momentum, we expect fourth quarter bookings to exceed both the fourth quarter of 2025 and the third quarter of 2026. This is supported by improving industry conditions, anticipated market share gains and broader customer acceptance of our expanded product portfolio. However, inflation, tariffs, geopolitical uncertainty, and increased competition remain important variables. Strong booking activity is expected to translate into meaningfully higher production and shipment volumes in the fourth quarter. Higher shipments are expected to drive sequential revenue growth. Increased production should also improve manufacturing absorption and operating efficiency. This is the key operating lever in our fourth quarter outlook. More volume moving through our plants is expected to improve the utilization of our people and facilities and better absorb fixed manufacturing costs. Converting bookings into shipment is our priority. That is not automatic. During the third quarter, customer delivery schedules and production transitions slowed expected conversion. These transitions were associated with tariff mitigation and sourcing initiatives. They could continue to affect shipment timing. Our teams are focused on sequencing production, managing component availability, and coordinating deliveries. We're also closely managing delivery dates and product mix. This will help us convert the backlog efficiently, on schedule, and without compromising customer service. Based on these factors, we expect gross profit and gross margin to improve, sequentially primarily due to higher production and shipment volumes, improved manufacturing efficiencies, and the benefits of pricing, sourcing, and cost reduction actions. These benefits are expected to be partially offset by elevated tariff-related costs, inflation, and competitive pricing, particularly in South America and Europe. Operating results for the fourth quarter are expected to include anticipated implementation costs associated with the new programs I will discuss shortly. Excluding these costs, The same drivers expected to improve gross profit are expected to support stronger operating performance. As a result, adjusted net income is expected to be above the third quarter and return to positive levels. Alongside the expected fourth quarter earnings improvement, we remain focused on cash generation and working capital discipline. Our inventory and working capital progress provides a strong foundation as production and shipment increase. Priority is to have the right inventory to convert backlog into revenue while managing working capital. Looking to 2027, we expect demand and production levels to remain healthy. This is supported by gradually strengthening market conditions and our growth initiatives. It should drive volume and revenue growth However, we expect operating profit improvements to be more gradual than the recovery in demand and production. The reasons are continued cost pressure, a competitive pricing environment, and the time required for strategic growth initiatives to mature. Our previously announced 2024 U.S. manufacturing footprint optimization projects remain on track to deliver increased operational benefit These benefits are expected to help offset ongoing cost increases and support underlying product margins. They're not expected to translate fully into incremental margin expansion. Our 2025 restructuring program is progressing as planned, and we expect to realize the full benefit of $40 million to $45 million of savings by year-end 2026. Together with the completed Nuvera realignment, which delivered $15 million of savings in 2025, these programs have lowered our structural break-even point. This progress gives us a stronger base. It has also allowed us to identify additional opportunities to strengthen our business and improve our operation. These opportunities are driven by the market. The types and volumes of lift trucks customers demand have changed significantly. Customers want a broader mix of value, standard, and premium solutions with competitive lead times and strong route to market coverage. Regulatory requirements, tariffs, inflation, and shifting regional demand adds to these changes. To compete, we need a cost structure that performs across the cycle with a more selective use of capital and resources. We are continuing to adapt to the market and build a more focused and flexible operating model. In the fourth quarter of 2026, we launched a major set of projects to strengthen our cost structure, capital efficiency, and long-term competitiveness. Our modular scalable products have created new product opportunities and production efficiencies. Together with our previously announced restructuring plans, they provide the foundation for these projects. The project should improve operations and better align our business with evolving market and regulatory requirements, including changes in the types and volumes of lift truck customers' demand. The projects are focused on five key areas. First, we are reshaping the product portfolio and route to market. Second, we are reducing manufacturing complexity and cost, including plant consolidation. Third, we are consolidating supporting facilities and activities. Fourth, we are simplifying the organizational structure. And fifth, we are reducing capital intensity. These five areas work together. A more focused portfolio reduces complexity across engineering, sourcing, and manufacturing. A simpler organization and footprint improves execution. Lower capital intensity helps convert more of our earnings improvements into cash. We are targeting at least $100 million of annual cost reduction at maturity, which is anticipated in 2029. These savings come from direct cost reduction and from mitigating future expense associated with higher volumes and inflation. This is important because it allows us to grow volumes while keeping our cost structure under control. The target is measured against 2026 results and is in addition to the benefits from our earlier program. These savings will build over time rather than arrive all at once. We expect The pace will depend on the timing of implementation, so we are sequencing the projects to capture benefits as quickly and as responsibly as we can. Achieving these savings requires investment upfront. Implementation costs are currently estimated at no less than $50 million over the duration of the programs. These costs may include severance, impairment charges, contract terminations, and other exit-related costs. Some costs will come ahead of savings, while others will be recognized as incurred. We continue to pursue opportunities to mitigate these costs. The first set of action to sharpen our focus on strengthening our core lift truck business, improving execution, and directing resources to the areas where we see the greatest opportunity to create long-term strategic and some financial value are the following difficult but necessary decisions. We are pausing the electric terminal tractor program globally and discontinuing our effort to establish big truck production in Greenville, North Carolina, in the United States. We'll continue to serve the U.S. market through our existing big truck manufacturing operations. Effective immediately, we're also discontinuing the development and production of hydrogen-related solutions. including the hybrid electric charging platform and associated fuel cell technology and engines. At the same time, we will continue to invest in and accelerate our lithium-ion battery and charger solutions, where we believe we can deliver greater value to our customers, dealers, and business. We'll implement the remaining projects in stages through 2029. Some are underway. Others remain subject to final planning, legal and regulatory requirements, consultation obligations, and customary approvals. As a result, the scope, timing, and financial effect of individual actions may change. We'll update you as material plans, savings, and implementation costs are finalized. Beyond cost saving and cost mitigations, These programs are designed to strengthen cash generation. To preserve cash amid a slower than anticipated recovery. We expect 2026 capital expenditures of 50 to 60 million. We plan to limit 2027 capital expenditure to 40 to 50 million. Over time, a simpler portfolio and many more. We are concentrating resources on product platforms, market segments, and commercial capabilities with the strongest strategic and financial potential. This includes modular, scalable lift truck solutions for lighter intensity and standard applications, together with broader self-coverage across the addressable market. The cost programs support that strategy by reducing complexity and creating a more efficient operating model. Alongside disciplined capital allocation and working capital management, these actions should support strong financial performance and business growth. Our objective is not simply to operate at a lower cost. It is to emerge as a stronger, more focused company, better positioned to pursue the opportunities with the greatest long-term impact. Our long-term priorities remain consistent. We are focused on converting bookings momentum into shipment so that stronger demand translates into revenue growth. As production increases, improved manufacturing efficiency should help us earn more from that growth. Our modular product platforms and broader market coverage expand the opportunities we can serve, while simpler operations and our cost reduction initiatives should strengthen profitability. We will support this progress by managing tariff exposure and maintaining discipline in working capital and capital allocation. That discipline is important to improve cash generation while preserving flexibility to support future growth. Together, these efforts support our objectives of 7% operating profit over the business cycle. With that, I'll pass the call over to Al for closing remarks before we open the lines for questions.

Thank you, Rajiv. Having covered High Street Yale's earnings release details, I will step back and put the quarter in context. The third quarter showed meaningful sequential progress. We entered the fourth quarter with elevated bookings and a healthy backlog, and customers are responding well to our broader product portfolio. The recovery is advancing. At the same time, the pace of improvement remains affected by shipment timing, product mix, tariffs, and a competitive pricing environment. We are managing those factors carefully with a clear focus on turning market momentum into results. A cyclical recovery is not sufficient. The market has changed and our operating model is changing with it. Customers are asking for different products at different price points with different availability and flexibility. The actions we announced today respond directly to those shifts. They have clear focus on the products, markets, and capabilities with the greatest potential. They are also designed to build a simpler, more efficient, and more resilient business, one that can perform more effectively at all points in the cycle. We recognize that some of these decisions are hard to make since they affect our employees and other stakeholders. We will carry them out with discipline while meeting our obligations to our employees, customers, and suppliers. Our objective is to strengthen High Street Yale for the long term in order to serve our customers well and create lasting value for our shareholders. Implementation costs, which we are working to minimize, will affect reported results as the work progresses. We will provide additional information as material plans are finalized. Our long-term vision of transforming the way the world moves materials from port to home remains. We intend to do that through our two promises to our customers. The first is to provide optimal customer solutions. The second is to provide exceptional customer care. The actions we are taking should strengthen our ability to keep both promises consistently. For our shareholders, the objective is clear. We expect Hyster Yale to emerge from these actions stronger, more cost-efficient, and more focused on our core business. Hooking momentum and broader market coverage should reinforce this. Overall, we expect stronger profitable growth. Manufacturing and organizational improvements should help us earn more from that growth. Disciplined cash management and focused capital allocation should help turn those earnings into greater returns on capital employed. Together, we believe these drivers will support improved financial results in 2027 and 2028 and, over time, our objective of 7% operating profit over the business cycle as well as sustainable long-term shareholder value. That concludes our prepared remarks. We'll now open the line for questions.

Thank you. We'll now begin the question and answer session. To ask a question, you may press star then one on your telephone keypad. If you're using a speakerphone, we ask that you please pick up your handset before pressing the keys. To withdraw your question, please press star then two. Today's first question comes from Chip Moore at Roth Capital Partners.

Please go ahead. Hello, Mr. Moore, your line is open.

Sorry, can you hear me now?

We can hear you now, yes, sir.

Awesome. Unmute. Sorry about that. Thanks, everybody. Thanks for taking the question. I wanted to ask on the demand environment, particularly around some of these deferrals of fleet replacement, can you expand on sort of the pent-up demand you're seeing out there and some of the implications on trajectory next year?

Yeah, Chip, Ms. Rajiv. So, you know, as I think we discussed last time, we see continued growth with certain customers of their fleet age as they've retained trucks longer than you would normally expect them to retain, mainly because I think our customers were unsure of the utilization and also, you know, kind of trying to manage their internal budgets. We're seeing the We're coming to the end of that. We've had good bookings in the third quarter. As you know, our third quarter is normally weaker in bookings because of July and August when there's a slowdown in the industries that we serve. But it came back pretty well in September, and then October has been also good. So I think we still feel good about the market and the market potential. Going into the rest of this year and looking ahead into next year, our pipelines look pretty strong.

Thanks, Rajiv. And you also talked a little bit about just sort of managing the The timing of deliveries and some of the puts and takes there. Maybe talk about that a little bit more, about what you're watching closely.

Yeah, I think there's been a little bit more dynamics on that, that customers have asked for us, especially through that third quarter, to delay some deliveries as they've made some changes to their own infrastructure. and, you know, we've had that, we continue to see some of that. So that's been one factor. The other factor has been, as we said in our discussion, that, you know, we are sourcing trucks from different locations and we're in a transitioning production. You know, what the modular scalable product allows us to do is build this product in multiple locations and based on some tariff changes, we've changed the location of where they're built and therefore some of the product require increased logistics, particularly across the ocean. And so again, timing of that's been a little difficult, especially when there's quite a bit of... Thank you very much. We're coming to the end of that because it's really driven by the Christmas season. And so we should see that ease off, but we've seen more difficult, you know, kind of availability on some of these lines.

That's great.

Very helpful.

Yeah. Thanks, Rajiv. And, you know, maybe if I could sneak one more in, you know, Simplifying the portfolio makes a lot of sense and never easy actions, but those savings are substantial. Maybe flipping the other way, I think you called out investing or accelerating on the lithium and charging side. Just talk about that opportunity a little bit.

Thank you. We continue to see growth of electric trucks pretty much globally as a share of the market. and many more, especially I would say the counterbalance trucks and we're starting to see also the big trucks, Electrify. In the early stages of these, we didn't have our own battery and charger solutions and what we've seen is customers struggle with the integration of these systems. So when you have a truck, which has quite a lot of software these days, then you have the battery with the battery management system, and many more. We've seen an increasing case of that, and towards the end of last year, we decided that we needed to solve these issues for our customers, and the best way for us to do that is bring it to a central point. Of course, we do all the electronics and software on our trucks. Now we're developing batteries systems, especially all the control systems around it ourselves. and again we have partners for the charging system. And so the plan is to be able to offer integrated solutions moving forward with a single point of service and management of the infrastructure. And we think customers are very happy about that. Our dealers are feeling good about that as they've struggled to maintain these type of systems in the field. So we think it's a very positive move, and we expect this to be a good growth part of the business over the next few years.

Thanks very much.

Thank you.

And as a reminder, to ask a question, please press star then 1. Our next question comes from Ted Jackson at Northland Securities. Please go ahead.

Thanks very much. Good morning, everybody, or afternoon. Good afternoon, Ted. Morning. So I got a whole bunch of questions. I'd like to jump back in on the production shifts. You know, the revenue number for the quarter, I mean, you know, obviously progress was shown, but it was a little light relative to expectations, a lot of it coming from North America. You know, you've commented that you had some headwinds with regards to, you know, delivery schedules from your customers, and then some headwinds with regards to for shifting some production to different locations to bring tariffs down. Can you kind of talk about, you know, maybe size, the impact of each of those, and then on the latter with regards to the shifting, if you would, of production at different sites and those kind of issues. Do you see that headwind continuing into the fourth quarter and kind of limiting the ability to grow, or do you feel like you've got that under control at this point? That's my first.

Ted, maybe if I could take the first one and kind of look at so the revenue was a little under our expectations and it was mostly in North America and there are three factors there. The first factor is shipped in trucks and as I said there were issues about getting freight passage for some trucks. We found it difficult to time that and many more. We feel good that that issue is mostly resolved. I would say that was about a third of the issues. The other third was, maybe a little bit more than third, was customers asking for deliveries to be really kind of delayed from the third quarter into the fourth quarter. Those trucks are ready, and they'll be installed as soon as the... And they're already installed. Some of those are already being installed. And then the last, just under a third, would be Some production that's held up because of some component availability. One particular area we had concerns in the quarter was around our electronic suppliers. There was a shortage of certain chips and boards. We're working to get through that. We feel that we've eliminated most of those issues, at least for the fourth quarter. There's still work going on moving forward, but and others. So that's the way I would quantify it.

Okay, that was great. My next thing would be just going over to Bolzoni, and I know it's not the biggest topic for these types of calls, but can you give a little more color in terms of the revenue there was kind of where Bolzoni seems to always roll in, but the margin was just way off and just kind of what was it that pushed the margins and Bolzoni down and is that kind of just a blip with regards to the third quarter is that something that we should take into account as we think you know going forward?

No I think I think that was a blip I think it was just a mix of you know there's a if you look at Bolzoni has two types of businesses they have what you would call the OEM business so these are and of course Hyster Yale is a OEM for the for Bolzoni where we buy things like cylinders, transmissions and axles from Bolzoni and more straightforward systems that go on the mass like carriages and forks. And those are lower margin business. And then you have the attachment business. So these are the attachments that allow you to handle and many more. Thank you very much.

and then my last one kind of with coherence to just kind of model and financials and I do have one more just to kind of that's a little more fun but you know on the SG&A decline which was also you know somewhat substantial you know I mean I believe you guys mentioned that a lot of it was compensation is that just like a stock comp issue or is that part of your you know efficiency efforts and restructuring so that we could you know see that kind of as a lower structure a lower and many more. Thank you.

We'll take some additional, as we've said, because of the suspension of the fuel cell development, our electrical terminal tractor, and our plan to move big truck manufacturing into North America, and there'll be some more action related to those, which we've also announced. So those are the ones that we've taken so far, and there'll be others in the future.

So a lot of that reduction was actually structural.

Yeah.

Great. And then one that's probably a little more fun for you guys, but just kind of, you know, thinking about, you know, the lift truck business and the mix between, you know, the light and the heavy, you know, because the new modular trucks and the area that's getting it into you and you're getting, you know, the market that's getting into you, getting you into and the growth that it's driving, you know maybe you could talk and give us some kind of sense in terms of you know kind of the mix between light and heavy at a unit level the um the and kind of like how that's changed you know kind of some way to like give us some color on the growth you're seeing with those modular smaller trucks because I mean you know you've spent you know many many years positioning the company for this and how it's coming through so maybe just a discussion on on the success you're having there, you know, maybe in kind of with some kind of, you know, numbers behind it, how you see it trending out in the gold form. Thanks.

Yeah. Ted, we think, you know, kind of if we concentrate on applications, you know, what the application actually requires, we feel the center of the market is around us, you know, what we call our standard configuration. and then we're starting to see as we've analyzed the market more that the quantity of low intensity application is very high. And then the premium applications are very specialized. So I'll give you some examples of each. So if you think about Any of the big box stores, let's say Lowe's, Home Depot, Sam's, they really need a low-intensity product because the average hours our trucks do in a Lowe's store is around 700 hours a year. And we know that because we have telemetry on all those trucks. A medium application is I would say light manufacturing. So if you think about one of the automotive tier one suppliers, someone like Lear or Magna, they run a couple of shift operations, but the actual material handling intensity isn't as high as, let's say, the automotive guys. And so they need a more standard type of product. Those guys typically do around 1,400-1,500 hours a year with the lift trucks. And then you've got high-intensity. And a good example of that is paper manufacturing with, let's say, international paper. Those guys could be doing 3,000 to 4,000 hours a year with those trucks. Those trucks only shut down the refuel because those guys are running... and many more. is next in revenue and then the low intensity. Elsewhere in the world, if I take Southeast Asia, that's a very low intensity market because the productivity needs are very different apart from very specialized customers. Standard would be next and premium is a very small part of the market. So hopefully that gives you a sense of Both by geography and application, how these are really targeted. In terms of our own growth, we're seeing high growth in both the low intensity and the standard product line while maintaining our customers for the premium truck.

Okay. All right. Thanks, Rajiv.

Thank you. And that does conclude our question and answer session. I'd like to turn the conference back over to the management team for any final remarks.

Well, thank you for your questions today. We'll now conclude our session. A replay of today's call will be available on the Heister-Yale website, and the transcript will be posted as well. If you have any follow-up questions, please contact me directly. My contact information is included in the earnings release. Thank you, and have a great day.

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