Hyster-Yale Materials Handling, Inc.

Good 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 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 touch tone phone. To withdraw your question, please press star then two. 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, and 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 the 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 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 IEPA 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, 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 IEPA tariffs through the U.S. Customs and Border Protection CAPE process. We also plan to seek approximately $15 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 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 their 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 four 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 improvement 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 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 three-wheel stand-up 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 viewed this as a differentiated solution addressing an underserved market. Commercially launched in April, the RouteRunner 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 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.