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Operator: Good morning, ladies and gentlemen, and welcome to the Hyster-Yale Inc. First Quarter 2025 Earnings Call. [Operator Instructions] This call is being recorded on Wednesday, May 7, 2025. I would now like to turn the conference call over to Andrea Sejba. Please go ahead.

Andrea Sejba: Good morning and thank you for joining us for Hyster-Yale’s first quarter 2025 earnings call. I’m Andrea Sejba, Director of Investor Relations and Treasury. Joining me today are Al Rankin, Executive Chairman; Rajiv Prasad, President and Chief Executive Officer; and Scott Minder, Senior Vice President, Chief Financial Officer and Treasurer. During our call, we will be discussing our first quarter 2025 earnings release issued yesterday. You can find the earnings release and a replay of this webcast on Hyster-Yale website. The replay will remain available for approximately 12 months. Today’s conference call contains forward-looking statements, which are subject to risks that could cause actual results to be materially different from those expressed or implied.

These risks are described in greater detail in the earnings release and in our reports filed with the SEC. On this call, we will discuss our adjusted results. We believe that these are useful in evaluating the company’s operating performance. Reconciliations of adjusted operating profit, net income and earnings per share to the most directly comparable GAAP financial measures can be found in the company’s earnings release and investor presentation filed with the SEC. With the formalities out of the way, let me turn the call over to Rajiv to begin.

Rajiv Prasad: Thanks, Andrea, and good morning, everyone. I’ll start by sharing our outline on the current economic environment, how it impacts Hyster-Yale and how we plan to address these challenges in our business. Scott will follow with our detailed financial results, the assumptions built into our 2025 forecast and our outlook for the second quarter and full year. Al will provide his perspective to wrap up our remarks, and then we’ll open up the call for your questions. Since we last spoke in February, the global economic landscape has changed significantly, becoming more uncertain as a result of tariff policies. This shift required us to quickly reassess our sourcing, selling and production strategies, adapting for what we know today and preparing for what may come in the future.

Despite the challenges posed by the current economic environment, our commitment to delivering optimal solutions remains unwavering. We are confident in our ability to drive substantial long-term growth and profitability while adapting to the complexities of the global economy. While we have confidence in our actions, it’s important to acknowledge the significant uncertainty created by shifting tariff levels and the corresponding effects on market demand and our cost structures. This macro level uncertainty requires us to be agile, remain responsive to market changes and work to preserve our financial outlook. In the near term, we’re taking action to maintain a solid financial position. We’re applying lessons learned from pandemic era supply chain inflation by proactively monitoring our input costs, taking action to reduce them where possible and quickly adjusting sales prices to offset any remaining cost increases.

In quarter 1, 2025, we adjusted our prices to address component inflation since our last broad pricing action in 2022 and to include known tariff-related cost increases. Over the medium term, we are leveraging our strategic initiatives to further strengthen our business in all economic environments. Generally, our strategy is to produce and sell products in the same region to avoid excess shipping costs and enhanced delivery time for assembled to order products. Today, our U.S. domestic operations account for approximately 65% of sales. This localized production helps reduce costs and mitigate finished vehicle tariffs. However, our global component sourcing strategy increases tariff exposure in today’s environment. We will strive to minimize supply from high tariff countries, but some materials are only available from these geographies.

While we continue to push for new economically viable sources, our increasing lineup of modularly designed vehicles enables us to produce the same models across multiple facilities of both our suppliers and our own assembly operations. This allows us to maximize output across our global manufacturing network, while minimizing input costs. It improves overall operational efficiency and increases our ability to manage shifting market conditions. Our long-term strategic focus on driving profitable growth through innovation and operating efficiency is clear. Our approach is rooted in thorough analysis and deliberation, ensuring that every decision supports the long-term health and success of our company. This enables our business to adapt intelligently to evolving market dynamics and deliver value to stakeholders across the business cycle.

While the current landscape remains volatile, will continue to actively evaluate and implement a broad range of short- and long-term mitigation strategies. These strategies, some of which require significant time and expense to implement may require greater clarity and stability in the global trade environment before taking actions. We’ll provide updates in the coming quarters as new plans emerge. We’re a resilient company having emerged stronger and more agile from the pandemic with a clear direction and long-term dedication to achieving our goals. We are confident in our ability to manage through current uncertainties and make progress on our objectives. Turning to our view on global demand. Despite the volatile global environment, the Lift Truck booking market showed encouraging signs of recovery in the Americas and particularly in EMEA.

The market is expected to further stabilize throughout 2025. That improving view could change due to potential tariff effects, which we believe caused customer order hesitation in April. To support the first quarter bookings growth, our production rates are expected to increase in the second quarter. We expect to maintain our strong $1.9 billion backlog as we continue to keep production aligned with adjusting bookings. This will be balanced while adjusting pricing to counter inflation and mitigate tariffs. Next, I’ll provide an overview of the strategic business realignment related to Nuvera that we announced on April 30. This initiative is designed to enhance near-term profitability and create an integrated energy solutions program at our Billerica, Massachusetts facility as part of our Lift Truck business.

This realignment includes 3 key areas: first, the development, manufacturing and commercialization of lithium-ion battery modules chargers, battery management systems and energy management services. These products are critical for the Lift Truck business as next-generation lithium-ion batteries are expected to increasingly replace lead acid batteries in electric forklift trucks. Second, the development and commercialization of a mobile modular and scalable hybrid electric charging platform, this platform will deliver off-grid power solutions to meet diverse customer needs and will feature a variant called HydroCharge that utilizes Nuvera’s proprietary fuel cell technology. Third, a more focused and streamlined fuel cell development program.

We’re finalizing a high-powered 125-kilowatt fuel cell for use in port equipment and larger HydroCharge applications. This strategic shift reflects our conclusion that the current fuel cell business will not achieve profitability within an acceptable time frame. Largely due to lack of market demand and a changed political environment, the business realignment is expected to deliver direct annualized cost savings of $15 million to $20 million starting in the second half of 2025. Additionally, we also anticipate an additional $10 million to $15 million of Nuvera costs to be absorbed by the Lift Truck business, largely into open positions to accelerate programs on key growth initiatives. As a result of these actions, we expect to incur $15 million to $18 million in severance and impairment costs during the second quarter with the potential for additional charges as we progress.

This strategy leverages Nuvera’s technical expertise to further transform our core Lift Truck business by accelerating growth and profitability of our battery and charger programs, launching our mobile charging platform for off-grid power solution and completion of our port equipment electric power solutions. We anticipate battery program sales to accelerate in 2025 and continue to expand in subsequent years. Initial HydroCharge sales are expected to in the second half of 2025, while battery and fuel cell powered port equipment is already undergoing customer testing. This strategic realignment complements Hyster-Yale’s broader transformation initiatives aimed at reimagining material handling solutions from port to home. It adds to ongoing programs in modular product development, manufacturing optimization and expanded customer solutions.

Through these initiatives, we aim to achieve significant revenue and profitability growth in Lift Truck and Bolzoni businesses, enhancing cash generation and capital returns across the business cycle. I’ll now hand over to Scott to discuss our results, forecast and outlook. Scott?

Scott Minder: Thanks, Rajiv, and good morning. As you just heard, we’re cautiously optimistic about our 2025 outlook and have great confidence in the actions we’re taking to making long-term structural improvements to the company. As you recall, in 2024, we generated the strongest results in company history. At the same time, underlying market demand softened in industry booking rates, along with our backlog declined substantially across the year. We proactively reduced production rates to maintain our backlog at a lower level, more aligned with our targeted lead times. That as a backdrop I’ll cover our first quarter results, which were in line with expectations for this transitional period. In Q1, Lift Truck revenues declined by 14% year-over-year, primarily due to lower sales volumes in the Americas and in EMEA.

This decrease reflects reduced market demand in the latter part of 2024, resulting in lower Q1 2025 production and fewer deliveries. Looking at the Lift Truck business by region. In the Americas, the downturn was largely driven by reduced sales of higher-value Class 4 and 5 internal combustion engine trucks. While in EMEA, the revenue decline was due to lower Class 1 product sales. On a positive note, JAPIC revenues increased year-over-year due to increased volumes and a favorable product mix shift toward big trucks. Sequentially, revenues declined for similar reasons. Lower second half 2024 bookings led to reduced production levels in the first quarter. Lift Truck adjusted operating profit declined significantly compared to prior year, primarily due to lower volumes and the resulting loss of manufacturing absorption.

Product margins remain solid and above our targets. This was largely due to pricing actions taken to offset material and freight inflation and benefits from our long-term investments in product design and new technologies. Looking at regional profitability. Americas reduced Class 4 and 5 truck volumes, particularly in the 1 to 3.5 ton category, created lower manufacturing absorption. In addition, the business saw increased material and freight costs in the quarter. Warranty expenses associated with newly launched products improved from Q4 2024 levels, but remained above rates for well-established prior models. EMEA’s first quarter operating loss was driven by significantly lower manufacturing absorption rates caused by reduced production volumes across regional facilities.

As Rajiv mentioned, EMEA’s first quarter bookings improved. The segment remains committed to delivering stronger results in coming quarters by adapting to fluctuating market dynamics. Across the business, operating costs rose modestly year-over-year as we continue to focus on advancing our IT systems and bolstering our customer support infrastructure. These investments are pivotal for enhancing operational efficiency, expediting new product introductions and expanding our market share. Overall, while the Lift Truck segment faced significant volume related hurdles in Q1, ongoing technology and infrastructure investments coupled with efforts to optimize production should strengthen the company’s resilience across the business cycle. These measures will play a critical role in navigating future challenges and building a robust foundation for long-term growth.

Turning to Bolzoni, revenues declined primarily due to the planned phase-out of lower margin legacy products. Gross profit margins improved versus prior year due to better pricing and lower material costs. Bolzoni’s Q1 operating expenses were below prior year levels due to strong cost management efforts. Adjusted operating profits declined compared to prior year, largely as a result of lower volumes. Sequentially, Bolzoni’s adjusted operating profit increased due to improved product margins and cost management. Nuvera’s operating loss increased both year-over-year and sequentially, largely driven by higher research and development expenses. Additionally, lower U.S. Department of Defense funding in Q1 2025 negatively impacted the prior period comparisons.

A portion of these elevated costs were offset by savings realized from headcount reduction initiatives implemented in 2024. Next, I will cover the company’s tax position. Q1 2025 income tax expense of $8 million was significantly below the prior year’s $25 million due to lower pretax earnings. Q1’s effective tax rate increased because of the ongoing capitalization of research and development costs for U.S. tax purposes, combined with ramifications from the company’s U.S. valuation allowance position. Now, I will turn to cash and liquidity. Our company remains focused on continued strengthening of its balance sheet and maintaining financial discipline. Leverage, as measured by net debt to EBITDA was 1.6x at the end of Q1. Proactive liquidity management as our financial results reflect slowing market demand demonstrates improved financial resilience and challenging market conditions.

During the first quarter, operating cash outflows totaled $36 million. This compares to inflows of $22 million in the prior year, with the difference driven by lower net income and unfavorable working capital changes. We’re committed to improving working capital efficiency, particularly through inventory management. In January 2025, we implemented a six-week firm production schedule designed to optimize inventory control. As a result, Q1 inventory levels decreased by nearly $70 million compared to prior year, demonstrating better alignment between production requirements and on-hand materials. Despite this improvement, working capital as a percent of sales rose to 22% due to lower revenues. Now, I will cover our outlook for Q2 and full year 2025.

First, due to the high level of macroeconomic volatility, I want to clearly lay out our key forecast assumptions. First, we include all tariffs in effect on April 9th in our baseline. Second, we assume no reinstatement of April 9th tariffs currently paused for 90 days. Third, our current Section 301 tariff exemption related to lift truck parts will not be extended beyond May 31, 2025. Next, we forecast no additional tariffs globally in 2025. Our demand projections are grounded in bookings, backlog and market trends. We assume no demand decline due to a U.S. or global economic recession. And finally, we model a successful implementation of the company’s proactive pricing, supply chain and cost optimization initiatives discussed in our materials.

With that out of the way, let’s talk about the market details and what we see in the quarters ahead. In Q1, we recorded bookings of $590 million, reflecting year-over-year growth in a nearly 50% sequential increase. This improvement was largely due to elevated demand for higher-priced Class 4 and Class 5 products, including our modular and scalable lift trucks. Our book to bill ratio stood at 100%, reflecting early signs of a potential market demand turnaround. A continued 2025 bookings market recovery will position us for accelerated growth in 2026. We remain mindful of global trade policies and how those could negatively impact our current projections. As a result of increased bookings and moderated production levels, our $1.9 billion backlog remains solid.

Looking forward, production rates are projected to increase somewhat in Q2 with full year revenues expected to slightly exceed annualized Q1 levels. We will remain flexible, ready to adjust production rates should market conditions or booking levels shift later in the year. To preserve product margins, we have implemented disciplined pricing strategies and expanded our portfolio with innovative models. While competitive pressures may lead to a modest margin decline, price actions taken in Q1 will help to counter inflation and tariff related costs. To further build resilience into our business, we are taking several actions to strengthen our competitive position and deliver more consistent financial results across the business cycle. First, our manufacturing footprint optimization project initiated in 2024 to streamline our production footprint is progressing as planned.

Second, the Nuvera business realignment program outlined by Rajiv is expected to accelerate profitable growth and significantly reduce expenses. We are also expanding sales capacity, upgrading IT systems and leveraging lower cost shared services to offset rising operating expenses. These efforts will significantly improve our long-term financial trends, producing benefits in the second half of 2025 and increasing over time. While improved Q1 bookings support increased Q2 production and revenues, lift truck second quarter operating profit is expected to decline moderately versus Q1. This is largely due to the timing of tariff-related cost increases and the actions taken to mitigate their impact. For the full year 2025, operating profit is expected to be below 2024’s exceptionally strong results.

Now, let’s turn to Bolzoni’s outlook. For the second quarter, we anticipate a modest sequential revenue improvement with stronger attachment sales offsetting lower legacy component sales. Operating profit is also projected to increase moderately due to a favorable product mix and disciplined cost control. Looking at full year 2025, revenues are forecasted to decline year-over-year, primarily due to lower legacy product sales and weaker demand across Bolzoni’s customer base. While we expect the improved product mix to provide benefits, it is unlikely to fully offset lower volumes. As a result, Bolzoni’s 2025 operating profit is projected to fall below 2024 levels, partly mitigated by strong cost control. I will conclude our outlook with the consolidated view.

Consistent with our prior guidance, we expect full year 2025 revenues, production levels and profits to fall below our strong 2024 results. Although full year 2025 revenue is projected to decline year-over-year, we are encouraged by the sequential improvement expected in Q2. However, we anticipate consolidated operating profit to decline moderately versus Q1, largely due to the timing of tariff related cost increases and the actions taken to mitigate their impact. Tariff levels and global trade uncertainty remain key factors that could impact our results. We are closely monitoring these external dynamics and preparing actions for a variety of potential outcomes. Our financial discipline established over several years is delivering stronger and more consistent results across economic cycles.

This approach remains central to our operations, enabling our 7% operating profit margin target throughout the business cycle. During periods of backlog-driven strength, such as those experienced in early 2024, we aim to exceed the 7% target. However, in cyclically lower lift truck market demand phases, we expect profitability to remain intact, but be below the 7% level. This ability to sustain profits amid fluctuating demand marks a significant performance improvement compared to prior cycles. Turning to cash flow, we continue to emphasize strong operating cash generation and accretive capital deployment. For 2025, we anticipate cash flows from operations to be only moderately below 2024 levels despite the projected net income decline. This relative stability is supported by ongoing efforts to enhance working capital efficiency.

To align production and working capital processes with anticipated market conditions, we are executing key inventory reduction initiatives. These efforts are pivotal to driving substantial progress in 2025 and ensuring operational cash flow aligns with our long-term cash conversion objectives. Regarding capital expenditures, we forecast 2025 spending in the range of $40 million to $65 million, below our prior range of $40 million to $80 million. This reduction reflects a disciplined approach to investment prioritization given increased global economic uncertainty. We will closely monitor market conditions, and we will adjust our capital investment levels and timing based on evolving visibility. As we continue to generate cash, our disciplined capital allocation framework remains unchanged, reducing leverage, investing strategically to support profitable growth and delivering sustainable value and returns for our shareholders remain our key priorities.

We expect 2025 to be a more challenging year, particularly when compared to 2024’s exceptional performance. We are confident in our ability to adapt and strengthen our foundation for future growth. Our focus remains on creating higher highs and higher lows across the business cycle, maximizing operational results during market upswings and sustaining profitability and cash generation during softer periods. Now, I will turn the call over to Al for his comments.

Al Rankin: The updates provided by Rajiv and Scott today are particularly important. Tariffs remain a large and important concern, and the restructuring of our Billerica facility around energy solutions and away from fuel cells is key in today’s market environment. Our Hyster-Yale vision, however, remains the same, to revolutionize the way materials move from port to home. This vision is built on a mission with two core promises, delivering optimal solutions to our customers and providing exceptional customer care. To achieve this, our focus remains on executing key strategic projects that will transform our core counterbalance truck business while expanding into related high growth and profit areas such as warehouse, lift trucks, vehicle automation, energy solutions and attachments.

These complementary growth and profit improvement efforts are designed to strengthen our competitive position, drive long-term revenue growth and operating profit and position Hyster-Yale ahead of materials handling market trends. Over time, we believe these key projects will create sustainable competitive advantage for Hyster-Yale businesses to the benefit both of our customers and our shareholders. And now let’s turn to questions.

Operator:

Andrea Sejba: Well, thank you for participation and listening to our earnings call today. A replay of our call will be available online later today. We will post a transcript on the Hyster-Yale website when it becomes available. If you have any questions, please reach out to me. My information is on the press release and I hope you enjoy the rest of your day.

Operator: Ladies and gentlemen, this does conclude your conference call for today. We thank you very much for your participation and ask that you please disconnect. Have a great day.