Hyster-Yale Materials Handling, Inc.

Good morning, ladies and gentlemen, and welcome to the High Store Yale Inc. Second Quarter 2024 Earnings Conference Call. At this time, all lines are in listen-only mode. Following the presentation, we will conduct a question and answer session. If at any time during this call you require immediate assistance, please press star zero for the operator. This call is being recorded on August 7, 2024. I would now like to turn the conference over to Christina Kometko, Investor Relations.

Good morning, and thank you for joining us for High Street Yale's 2024 second quarter earnings call. I'm Christina Kometko, and I'm responsible for Investor Relations. Yesterday evening, we published our second quarter 2024 results and filed our 10-Q. These documents are available on the High Street Yale website. We're recording this webcast, and a replay will be on our website later this afternoon. The replay will remain available for approximately 12 months. I'd like to remind you that our remarks today, including answers to any questions, will include comments related to expected future results of the company and our therefore forward-looking statements. Our actual results may differ materially from our forward-looking statements due to a wide range of risks and uncertainties, that are described in our earnings release, thank you, and other SEC filings. We may not update these forward-looking statements until our next quarterly earnings conference call. Our presenters today are Al Rankin, Executive Chairman, Rajiv Prasad, President and Chief Executive Officer, and Scott Minder, our Senior Vice President, Chief Financial Officer, and Treasurer. With the formalities out of the way, let me turn the call over to Rajiv to begin.

Thank you, Christy, and good morning, everyone. I'll start by providing the operational perspective and some commentary on our markets. Scott will follow with the detailed financial results and outlook. Al will close the call with his perspective, and then we'll open it up for your questions. Let's start with some second quarter highlights. I'm pleased to say that we again generated exceptionally strong quarterly results and exceeded our expectations. Revenue growth continued and profits were up significantly versus prior year. In fact, our second quarter consolidated operating profit and margins reached higher levels than ever before. Scott will have more detail on this later in the course. Before I discuss our markets and operations, I'd like to share a change in how we think about our bookings and backlog. As you can see in our earnings release, we've decided to provide total dollar values instead of unit counts for these measures. Let me explain why. HSTL is rapidly becoming a solutions-based company. We're increasingly focused on complex, value-adding technology solutions for our customers that include trucks, as well as advanced on-truck technologies. Additionally, per-unit truck sales values differ substantially across the product lines. As a result, aggregate unit bookings data is less meaningful when analyzing our performance. This change to total bookings and backlog dollar values is more in line with industry standards. I'll share an additional explanation around our outlooks of context. This quarter, our release discusses factory and retail bookings. Factory bookings represent orders placed directly with the manufacturer. or on the factory. These are typically for larger quantities and may include custom specifications. Retail bookings are orders placed through dealers with specific end customer purchase orders and are typically for smaller quantities. All retail orders are factory orders, but not all factory orders become retail orders immediately, and some could be canceled. By netting these two measures, we can see if stock and backlog are building, which occurs when factory orders outpace retail orders, or are being drawn down when retail orders outpace factory orders. Now, here's what we see in the market and with our operations. Based on market industry data and our internal estimates, we believe that the global lift truck market was below prior year in Q2 2024. This decline was driven by a significant decrease in the Americas and a more moderate reduction in the MEA. Current market data from the Industrial Truck Association, or ITA, showed a 56% year-over-year decrease in Q2 2024 North America factory bookings. These reduced North America factory booking rates were expected compared to the highly elevated levels reached during the pandemic and subsequent period of supply chain shortages. That said, the decline was steeper and earlier than we anticipated. In effect, these recent low factory booking levels are quickly moving total average bookings back towards a normalized growth trend line. The company expects below-trend North America factory bookings levels to continue into early 2025. After this relatively short period of demand correction, the market is expected to return to more normalized growth rates over time. We are working diligently to ensure those low-level bookings fill open production slots in 2024 and 2025 until normalized bookings levels come back. As we reported in the release, our dollar value factory bookings declined to $380 million in Q2 2024, from $680 million in Q2 2023 and $520 million in Q1 2024. While we increased our America's market share in the first half of the year, this was not enough for factory bookings to offset the steep market decline. The dollar value of our second quarter of 2024 America's factory bookings decreased by 56% year over year and 36% sequentially. We believe four factors contributed to this substantial decline. First, order cancellations by customers who no longer need previously placed orders due to lower than expected activity. Second, shorter lead times. Third, customer and dealer requests to delay shipments of current backlog orders to a time that better suits their needs. And finally, current retail bookings being fulfilled from existing unshipped factory bookings or from current dealer stock levels. Considering the company's strong global backlog, including in the Americas, shipments are expected to continue at sound levels for the remainder of 2024. The Americas few remaining open 2024 production slots are expected to be filled between August and December. This segment is working to extend its backlog by filling open 2025 production slots largely in the second half of the year. We anticipate the Americas market share will continue to increase over the remainder of 2024 and into 2025. These projections are driven by the recently introduced one to three and a half ton modular scalable trucks now reaching their full market potential and additional modular scalable products expected to launch in late 2024 and the first half of 2025. Our EMEA and JPEG order increased more slowly than in the Americas over the past few years, so the market downturn is not as steep for these regions. EMEA and JPEG factory orders were $150 million in Q2 2024, compared to $160 million in both Q2 2023 and Q1 2024. As in the Americas, we expect EMEA's and JPEG's market share to strengthen with the production rate ramp-up of the new 1 to 3.5 ton modular scalable products and the launch of other new products. Production slots in EMEA and JPEG are also largely filled for the balance of 2024, with some lines already in strong backlog position for 2025. We expect our current backlog to act as a shock absorber, keeping global shipments generally in line with our 2024 production expectations. However, certain lines, particularly those for JPEGs and EMEA's lower-value warehouse products, are expected to have low to the first half. Global production levels may moderate in 2025 without market or share improvements above our current expectations. Over the past 18 months, our results have benefited from strong pricing tailwinds and a significant order backlog, which led to product margins above our target levels. Looking forward, we are focused on maintaining competitively priced products at or above target margin levels. We expect to achieve this by introducing new models, decreasing costs, and through ongoing pricing discipline. Before I turn the call over to Scott, I'll point out that despite the market weakness, the lift truck industry is quite resilient and has gone through similar cycles in the past. We plan to push through this latest market downturn by using our backlog and new factory orders while still delivering on our customers' promise to provide optimized product solutions and exceptional customer care. We'll continue to execute on our strategic initiatives and key projects to fulfill these promises. There are many successful projects occurring across all our businesses. We've provided those details in our Fortitude 2024 investor deck. which is currently available on HSTL website. I encourage you to check it out for more information. I'll turn the call over to our CFO, Scott, to provide more detailed financial results and outlook.