Q3 2022 Hyster-Yale Materials Handling Inc Earnings Call
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Welcome to today's high State Yale Q3, 2022 earnings Conference call. My name is Jay and I'll be coordinating your call today, if you'd like to ask a question. During the presentation. You may see you say by pressing star one on your telephone keypad. If you change your mind. Please press star followed by Chi I'm now going to hand over to Christina.
To begin please go ahead.
Thank you good morning, everyone and thanks for joining US today welcome to our 2022 third quarter earnings call I'm, Christina Mcdonough and I'm responsible for Investor Relations at Hyster, Yale Yesterday evening, we published our 2022 third quarter results and filed our 10-Q, both of which are available on our website today's call.
Is being recorded and webcast the webcast will be on our website later this afternoon and available for approximately 12 months.
Our remarks that follow including answers to your questions contain forward looking statements. These statements are subject to several risks and uncertainties that could cause actual results to differ materially from those expressed in the forward looking statements made here today. These risks include among others matters that we have described in our earnings release issued last night and in our 10-Q.
And other filings with the SEC, we disclaim any obligation to update these forward looking statements, which may not be updated until our next quarterly earnings conference call if at all.
Speaking on the call today are al Rankin, Chairman and Chief Executive Officer, Rajiv Prasad, President and Scott <unk>, Our new senior Vice President and Chief Financial Officer, and Treasurer. In addition, Ken Schilling, our former CFO now the special financial adviser to the Chairman is also on the call as many of you already know Ken announced.
In mid August that he would be retiring at the end of 'twenty 'twenty. Two he has been working closely with Scott to ensure a seamless transition of the CFO role when we appreciate him joining us to participate in the Q&A session of his final earnings call with the company.
Formalities out of the way I'll turn the call over to Rajiv.
Thanks, Christie and good morning, everyone you might notice that we've changed the speaker lineup this quarter.
I'll start by giving you the operational perspective and would also provide some color commentary on our markets.
As you'll hear we've made progress and we expect this positive trend to continue in the fourth quarter.
Scott will provide you with a detailed financial result.
And I will close the call with strategic perspective, and take us into Q&A.
Scott will give you the financial pluses and minuses, it's worth noting that our third quarter results were ahead of last year and despite significant currency headwinds.
Additionally, these results.
Seeded our expectations.
Lastly, due to ongoing cost discipline.
Hum effective pricing that led to improved adjusted standard margins dose assets helped to reduce the effect of inflation and supply chain shortages that have constrained production along with others in the industry.
I'll start by providing an update on our production rate and where we stand with ongoing supply chain challenges.
The positive news, we're seeing component shortages moderate and we're experiencing fuel supply chain constraint than in the previous quarter.
However, certain critical components, such as microprocessors hoses, Weldment and stampings thats still difficult to source and our global supply chain remains constrained, particularly dose the port thing materials from China.
As a result, while third quarter 2022 shipments grew over the prior year component availability prevented us from achieving our planned capacity utilization levels in the USA and in Europe .
We are working diligently to increase our production rates quickly.
As the supply issues around critical components are resolved.
Looking ahead, we expect our fourth quarter production and shipment volumes to increase over third quarter levels.
Building on that momentum, we anticipate full year 2023 production and shipment volumes to increase over 2022 levels.
These improvements are largely due to the continued easing of component shortages and resolution global supply chain bottlenecks.
In the third quarter, we continued to experience elevated cost pressures.
This was most acute in EMEA in part due to higher energy costs caused by the ongoing Russia, Ukraine conflict.
In contrast, the rate of cost increases.
The Americas and in J P have slowed significantly.
With economic indicators.
Suggests more moderate 2023 cost inflation trend absent any additional effect from geopolitical event of global supply chain constraints.
As we've shared in the past quarter, we've implemented multiple price increases to combat inflationary pressures over the past 18 months.
We're gaining ground and we expect price increases to fully offset cost inflation in 2022.
Looking ahead, we anticipate the favorable price.
Just the cost ratio to continue benefiting unit margins across 2023 and into 2020 full as the current backlog extends for several more quarters.
Now, let me share my view on global market demand for lift trucks remained strong but appears to be moderating our internal estimates indicate a worldwide market decline in 2022 third quarter, but this both the prior year and the second quarter.
Looking ahead, we expect the lift truck market a decrease in the fourth quarter of 2022 and for the full year 2023, compared with their respective prior year periods.
Despite these declines market should remain above pre pandemic levels, even at the profitability of a global or regional recession rises.
The market decline combined with our focus on order with strong margin resulted in a significant decrease in lift truck bookings in the third quarter from robust prior year level.
Bookings also declined versus 2022 second quarter, we expect lowest booking trend to continue in the fourth quarter and for the full year 2023.
<unk> to debt perspective Priory appeared as a result of slowing economic activity worldwide.
As bookings have declined backlog levels have reduced modestly over the past two quarters. However.
However, our current lead times remain extended.
Incoming order selectivity.
As a resulted in higher average unit prices and margins for both our bookings and our backlog in fact, the average sales price of one.
Booking unit increased by.
In fact, the average price of a backlog units increased by nearly 40% year over year and by over 8% sequentially.
Backlog price improvement support future unit margin expansion as we continue to work through our backlog in the fourth quarter and into 2023. These lower margin units priced in prior years should represent represent a decreasing portion of our overall production as a result average.
Unit margins are expected to improve as we evolve further into our expanded backlog.
It's worth noting is the likelihood of global recession increases our current backlog of higher margin truck extends through 2023 and into 2024.
This backlog would act as a shock absorber against any recession related market downturn, helping to sustain that business.
I'll summarize my comments by saying, we remain laser focused on mitigating the impact from supply shortages and other supply chain issues. Our teams continued to work closely with suppliers to obtain the parts needed for production at the time that they're needed as we increased production and shipment levels. We believe.
The high unit prices and margins within our backlog should support significant operating profit improvement.
Ongoing disciplined around that.
King units with higher margin will support this trend over the longer term.
Combined the mix of anticipated higher shipment levels and the lower booking rates are expected to further reduce our backlog of.
Ultimately, bringing lead times back to more normal levels.
Worth repeating highway that are substantial backlog with higher unit margin would act as a buffer in there with century environment, helping to maintain company profitability level now.
Now I'll turn the call over to Scott to update you on our financial results and provide our financial outlook.
Thanks Rajiv.
I will start with some high level comments about our consolidated financial results and then add perspective on the individual businesses and.
In the third quarter, our consolidated revenues of $840 million increased by 12% or more than $90 million versus the prior year. This growth was due to a 13% revenue increase in the lift truck business, which more than doubled to 6% shipment growth rate over the same time period.
Revenue growth outpaced shipment growth due to higher pricing and increased parts volumes. This was despite $30 million of unfavorable currency headwinds on an absolute basis, our shipments decreased modestly from second quarter levels.
Combined with the lower third quarter bookings, our backlog decreased by 3% sequentially ending the third quarter at 108200 units.
The company reported a consolidated operating loss of $24 9 million for the third quarter compared with an operating loss of $54 $3 million in the third quarter of 2021.
The operating loss for 2021 included $24 8 million of noncash charges taken at new era.
On a net basis, we reported a consolidated loss of $37 million for the third quarter compared with a net loss of $77 million in the prior year.
In addition to the new very charges last year. The net loss in 2021 included a $38 million charge to establish valuation allowances on deferred tax assets.
Now, let's look at the results by business.
First the lift truck business generated an operating loss of $15 $3 million in the third quarter compared with an operating loss of $21 $3 million in the prior year as.
This 29% improvement exceeded our expectations and was driven by price increases of $82 million.
Which more than offset our total material and freight inflation.
Higher unit and parts volumes also helped drive this favorable comparison.
Third quarter operating results improved year over year, despite a $16 million increase in manufacturing costs caused by inefficiencies related to component shortages and $11 million of unfavorable currency impacts.
As Rajiv mentioned, while we continued to make progress on the lower margin products in our backlog units created a temporary drag on our third quarter margin.
Turning to Baldoni, where we reported a 2022 third quarter operating loss of $1 3 million versus breakeven results in 2021.
Price increase benefits and a favorable sales shift toward higher priced higher margin products were more than offset by lower sales volumes.
Reduced customer demand, particularly for legacy components used by our lift truck business was the primary driver of lower volumes.
Higher manufacturing cost due to supply chain inefficiencies and unfavorable currency movements of $1 $4 million also contributed to the decline in <unk> results.
<unk> third quarter 2022, operating loss of $9 million decreased compared to a loss of $32 5 million in the prior year, excluding the prior year charges that I called out earlier, the operating loss increased mainly due to a nonrecurring warranty benefit in the prior year period.
Additionally, product development cost to support new various current 45, and 60 kilowatt engine as well as their future 125 kilowatt engine increased in 2022 as did expenses to expand their sales pipeline through engine demonstration projects.
Looking ahead, we expect to return to overall profitability in the fourth quarter into further build on that progress in 2023. These improvements are supported by what you just heard from Rajeev <unk>.
Increased manufacturing efficiencies as component shortages moderate leading to increased production rates and shipments lower inflation rates and the ongoing benefits from our cost savings and pricing programs, which should continue to provide a favorable price to cost ratio.
Our strategic programs, which al will discuss in a moment should also enhance margins as they continue to mature as a result of these improvements the lift truck business expects to generate a substantial operating profit in 2023.
Moving to <unk>, we anticipate a return to profitability in the fourth quarter due to projected sales volume increases versus the third quarter.
This production gain is due to moderating component shortages and improved manufacturing efficiency.
We expect ongoing benefits from increased pricing and strict cost control as well as benefits from lower material cost inflation.
As a result of bony boltonia should generate increased margins over time and higher operating profit in 2023 as compared to 2022.
Finally, as new Vera focuses on ramping up product demonstrations in bookings, we expect a moderately lower loss in the fourth quarter of 2022 compared to prior year.
We anticipate a 2023 operating loss in line with 2020 two's results as modest sales growth is offset by higher costs.
It's worth noting that the assumptions underpinning our outlook, particularly production rates are highly sensitive to events that could impact global supply chains.
Our actions are focused on the things that are within our control. We will provide you with updates as the fourth quarter in 2023 unfolds moving.
Moving to the balance sheet, we generated cash and reduced our net debt by nearly $30 million in the third quarter 2022 compared to the second quarter.
This improvement was driven by a 9% reduction in working capital largely from decreases in accounts receivable and inventories as part of our ongoing efforts to improve working capital efficiency.
As of September 32022, the company had cash on hand of $69 million and total debt of $545 million.
This compared to cash on hand of $76 million and total debt of $581 million at the end of the second quarter.
Debt outstanding decreased by 6% due to lower borrowings on the company's revolving credit facility cash.
Cash flow before financing was $7 million for the nine months ended September 32022, and this compared to a significant use of cash in the same prior year period.
We ended the third quarter with $191 million of available borrowing capacity compared to $156 million at the end of the second quarter.
Now I'll turn the call over to al to give his strategic perspective al.
As you just heard from Rajiv and Scott.
We're making progress both operationally and financially our third quarter results reflected the improving quality of our backlog and we continue to have solid bookings and a robust backlog.
Looking forward on a consolidated basis, we continue to project a modest operating profit and income before tax in the fourth quarter of 2022.
However, we expect a modest tax loss due to tax expense on profits in areas, where evaluation allowances not provided.
In future periods, we believe that we will be able to recognize tax VAT tax benefits that are currently offset by valuation allowances.
Global taxation challenges aside our ongoing efforts to work through the improving but lower price lower margin backlog layers in the fourth quarter and early 2023 are expected to lead to improving margins and a return to solid operating profit and net income for the full year 2012.
Three.
While we continue to work through this transitional period in our backlog, we're laser focused on improving our cash flows and maintaining adequate liquidity.
To achieve our objectives, we tightly managed capital expenditures operating expenses and production plans working capital continues to be an area of intense focus as inventory levels remained elevated due to production delays created by parts shortages.
We're working diligently to build trucks it reduce on hand inventory, while limiting new purchases to those materials that are in short supply.
As a result of these cash conserving actions the company expect solid cash flow before financing activities for the full year 2022, compared with a significant use of cash.
In 2021.
We expect our disciplined approach to capital allocation to continue including timing delays and some strategic investments we remain focused on executing our core strategy over time, and we will continue to invest for long term profitable growth.
Our strategic initiatives remain consistent and I'd like to provide a few key updates for each business. So.
The lift truck businesses primary strategic focus continues to be.
On introducing its new modular and scalable products as well as projects geared toward electric electrification of all types of trucks and transforming our sales approach by using an industry focused.
Approach to meeting our customer needs.
The lift truck continued business continues to make progress on these high priority projects.
The modular scalable products are currently being introduced into the Americas market following their introduction into Europe .
In addition, early in October we announced that the first hydrogen fuel cell powered container handlers using <unk> fuel cell engines began its pilot phase in the port of Los Angeles.
Lift truck business and <unk> are also working jointly with Hamburger Hoffman and logistic AG to provide two heister electric containing container handling vehicles, including the first ever empty container handler powered by fuel cell technology, and the first taster terminal tractor.
Supplied in Europe , both units will be powered by <unk> fuel cells.
Looking beyond the lift truck business <unk> continues to work on streamlining and strengthening their operations. They are focused on increasing their americas business and expanding their broad global industry sales marketing and product support capabilities.
<unk> continues to focus on ramping up demonstrations and increasing bookings for its 45 and 60 kw engines. They are also working to develop a heavy duty $1 25 kw engine capable of operating in more power demanding applications.
Over the first nine months of 2022, <unk> has announced several projects with various third parties, who are testing our planning to test new Vera engines and heavy duty applications.
In summary, we're focused on managing effectively in this volatile and complex environment. We're controlling the things that we can such as our cost structures and our prices and we are minimizing the negative effects of the items that we can.
We have innovative products and deep customer relationships that provide a strong foundation for our business.
Overall, we are encouraged by our progress to date, but recognize we have more work ahead to get to our target margin goals.
Today temporary challenges such as component shortages are limiting our financial results.
However, we believe we've got the right business structure with the core strategies in place to achieve our long term financial goals.
Before closing I'd like to take a moment to discuss our CFO succession.
Succession as Christie mentioned, Ken Schilling will be retiring at the end of this year and today is his last earnings call.
I'd like to thank him for his many contributions devoted service and really terrific leadership over his 31 year tenure with both heister, Yale and our predecessor parent company Nacco industries, Ken will be missed and we wish him well in retirement.
We are fortunate to identify.
A great new CFO and Scot vendor, yes over two decades of experience in senior financial positions across several manufacturing industries.
Forward to working with Scott to move Heister yield forward in a balanced and disciplined manner.
We will now turn to any questions you may have.
Thank you stuck in today's Q&A session, if you'd like to ask a question. Please press star followed by one on your telephone keypad now H P. J. Your mind. Please press star followed by one staring to ask your question and please ensure your phone is on mute.
Our first question today comes from Chip Moore from Es Haughton. Your line is now open.
Yes. Good morning, Thanks, very much for taking the question.
Just first reiterate Ken.
Ken Congratulations it's been great to work with you and.
And welcome Scott.
Today's call so I wanted to ask about.
It feels like there's light at the end of the tunnel on supply chain, obviously still challenges, but more curious.
If you could expand on your commentary about.
Backlog really potentially serving as I think you called it a shock absorber in any downturn.
Feels like a unique environment, our unique position, maybe you could look back to prior cycles.
Those have there and what's unique about your current positioning.
Well.
Let me comment and then others Ken can add on.
I think the starting point is to recognize that.
The bad side of all of this is bad debt.
Component shortages have led to a much larger backlog than we ever would have liked and frankly uncompetitive Nash in terms of serving our customers in that timeframe that we would like to between the booking of an order and delivery of a shipment.
So now.
As economic times are weakening.
That said that extended backlog is in our view.
Something that will work in our favor and quite a significant way we have some.
A considerable number of our production lines that are.
Fully booked through not only the end of this year, but all the way through 2023 and into the early parts of 2024 that's.
That's not true for absolutely all we have a.
A few lines that have much shorter cycles in that but in the main the high value items are all Indonesia extended backlog areas.
One hand, it makes us less competitive in the marketplace.
You've seen our focus on ensuring that the orders that we do take in this in the context of this long these long lead times and high backlogs.
Margins that we think are favorable and of course, we're putting a substantial number of.
Book trucks into the backlog every month and were not producing a huge amount more than we're putting into the backlog. So even if the markets fall off relatively quickly.
As they sometimes do and the fork lift truck business unusually temporarily as well, it's a fairly short cycle of steep.
A downturn.
We should be well positioned to keep on adding to our backlog.
Hi.
And a very profitable way.
And still have plenty of production all the way through 2023 and enter into 2024. So I guess the bottom line is it a very difficult situation over the last year.
We hope is turning into a protective advantage.
And also confidence in the security of our forecast as we look forward.
Want to add anything.
No.
Thats our answer collectively yes.
Perfect Alan I guess, just fair to say that.
<unk>.
You've never experienced anything like that in your history, just like the past few years I would say I think Ken.
I gave them a chance to give us partnering comment here, you've never experienced anything in 31 years or like that right now never anything like this it really does provide us with a unique.
Opportunity, if we end up in a recession. So normally we might have what can cut might've had five months.
Typically of a <unk> 25.
And about <unk> <unk>.
Some lines might've been five and longer lead time big trucks are typically five months, but we're trying to get our idea of lead time for our most trucks is 12 to 16 weeks. So the answer is Europe quite accurate that this has not happened before.
Got it.
He's definitely benefit from the pain of this of what you've been through.
We're ready for our benefit.
Yeah, Great and you guys deserve it.
<unk>.
Follow up is around your comments around electrification wall-tex trucks, obviously important FERC fuel cell as well.
And hybrid applications.
If you could expand on what Youre seeing there and then also just new Barrett specifically at the port of delay in.
Well, it's an intense focus and I'd ask Rajiv to comment on all of that I think our electrification.
Suffocation plan, which we laid out a few years ago, because we saw this trend coming that was part of why we acquired Nevada is now starting to really trend.
As we expected probably delayed by a few years.
But we see a huge amount of interest from our customers.
<unk>.
One thing a zero emission solution for <unk>.
The products that are typically had internal combustion engine trucks.
It's particularly strong right now for our biggest trucks that serve the port equipment and some heavy industries, but we are increasingly seeing the same interest in a medium sized trucks.
As we've just said we've we are now.
We have our initial products out in the marketplace going through an evaluation phase with some key port customers.
Both in North America, and we will have in Europe .
And then now we are delivering medium sized electric trucks running on lithium ion batteries to customers.
Currently so those are now starting to trend and especially with some of the energy challenges. We are seeing in Europe , we are seeing and densification.
On efforts, both by governments as well as.
And our users.
Other Oems to find solutions for that market, which novartis getting more and more involved in.
I think to Rajiv that the refreshment of some of our products, including the modular scalable electric trucks, while not exactly.
Qualifying as electrification does reflect an.
An enhanced commitment.
Those products will be coming out in.
Relatively near years into the future. He wants any more best sure. So we have launched the internal combustion engine variants of those products in Europe , and we're just about to start shipping the trucks in North America.
But they will.
They will also have electrified versions of those trucks, which have traditionally been internal combustion engine trucks aside from.
We will be introducing the same fifth.
Strategy.
Electric trucks that would exist today, but there will be electric versions of the IC trucks in the future.
Interesting okay.
It may be allowed to talk about at the next Investor day, perhaps some of it absolutely that's going to be a big team absolutely.
I think if we can begin to convey.
<unk>.
I guess a combination of quality.
Really almost too.
I think our word has been transformative.
The impact of these new modular scalable products.
We've really got a focus on communicating that effectively at our investor.
Investor day, because it's very very important to the future of the company and we've.
Made an enormous investment in that and it's worth focusing on noting here and I am sure that Rajiv and others will elaborate on it at the Investor day, but.
A great deal of the pain of developing these new modular scalable trucks occurred in the context of the.
<unk>.
At the heart of the line one to three five ton internal combustion engine trucks.
And now as you move toward as Rajiv indicated using many of those components and the structures of those trucks.
The electric components.
The task becomes significantly easier in the number of new components in these new trucks goes down radically as we're reducing the.
The number of components.
Types of our individual product numbers in our system and are quite a radical way.
Yes, yes for sure Barry.
Interestingly application, but maybe I can sneak a last one I guess sneak one in for Ken.
Given your background on the.
The tax situation in Q4 and pre tax income.
Moving to a loss just to help us there thanks everybody.
Yes, no I think as we work through periods, we have obviously jurisdictions, we're making money in those taxes are dropping to the bottom line and become the provision and theres jurisdictions, where were losing money and we have the requirement to book a tax.
Reserve called evaluation allowance and of course that benefit is still there it's still going to be available on a carry forward basis in the periods when those tax jurisdictions our businesses in those tax jurisdictions returned to profitability. So it's just a matter of timing and how the books recognize it.
Let me say, an addition, and Kevin check me, if I get into the strong debt.
The <unk>.
Segment reporting.
It doesn't really do a good job of revealing the legal reporting which governs the tax provisions.
That we have and so it's a difficult and complicated area.
With a lot of a tactic, but a lot of expenses associated with the U S and in fact.
And therefore, we have to generate substantial profit in the U S in order to take the benefit of.
Those tax reserves.
And I would just add that.
You don't have to look it in much detail at our financial.
Reports to understand that the big.
The biggest driver by a significant margin of profitability for our company has always been the Americas, and Thats, where we will get a big impact in half.
For a period of time, we hope and expect outsized.
After tax income.
In due course as we start to use it did I misstate anything Ken No and I think Ali you just stated exactly the case why from a segment perspective, we stop at operating profit the confusion and complexity of dividing up taxes between the segments really that misleads, the reader and I think thats, what we what we need to follow.
In the lift truck segment in particular, we have.
The geographic locations that are very profitable and others that we're working through those oil price drops and as we worked through the low priced stocks and get to the trucks with higher prices and higher margins will restore the profitability in those jurisdictions, we sell from.
Got it thanks again.
Thank you.
Our next question today comes from Steve.
R&D from that at all.
And company your line is now open.
Good morning, everyone I appreciate all the color on the call sorry, if I repeat something I missed a little bit with some phone difficulties.
What I think about cash on the balance sheet, obviously, youre carrying significant inventory she'd like to see them draw down, particularly as sales pick up but in the near term.
Given demand is as it is would you expect to end up having to utilize some more capacity of the revolver.
Let me, let me start just with a couple of comments.
Okay.
More demand really isn't quite the right way to think about it as we said earlier, we're working through our backlog the market demand is really going to affect our production way in the future.
So what we're doing and in fact is using up inventory that came in when we didn't have a full understanding of the magnitude of the component shortages that were going to reduce our production levels. We've now reduced.
Our production levels to levels that we think.
The suppliers can sustain.
And so what we're doing is using up the backlog that is on the balance sheet.
And are using up the inventory that is on the balance sheet.
And making sure that we don't have any more inventory coming in then those few parts that we need in order to build the trucks that we have so the whole dynamics of cash generation are really contained in that little construct that I. Just gave you know some other things.
Happen as well of course as we begin to work through.
We bring our inventories level debt levels down and order in a more normal basis, we'll have more payables offsets that actually.
In effect adds to our cash position because we've already paid for parts that we have on our balance sheet. Today. So those are the things that I would focus on in answer to your question.
Okay. Okay.
Okay, that's fair.
When I think about.
The backlog, which is appear to remain extremely sticky.
How are you thinking about it from a geographic perspective, knowing that Europe , clearly is going into a slowdown a lot sooner.
Yeah, So our backlogs.
Both locations.
On a percentage basis is higher in North America than in Europe , but Europe has quite extended backlogs. In fact, they are now new orders being slotted in kind of well into the second half of 2023.
For the primary lines.
Those are the big truck lines, and our counterbalanced production line.
So.
We feel good about the backlog and in both of those geographies.
And we feel fine with the backlog, we have in Europe to get us through.
Downturn that we're already seeing in Europe .
And remember too is that.
Especially in the case of these new modular scalable.
<unk> that we started producing earlier in Europe than in the U S.
As we ramp up production.
Those are global products slip and we can ship them around the world to wherever their needs their needed. So.
Which can keep the European business operating potentially at a higher level.
In terms of performance then.
The actual market and Europe might drive however.
The overriding factor is the backlog structure that.
Rajiv.
Top line.
Okay, great. Thank you.
When I think about.
Obviously, we see some seasonality this quarter, but I'm just thinking about given the massive almost a year of backlog or cell I would assume that.
For my modeling perspective, and I know you don't guide that far out, but I would expect to see a lot less seasonality just in trying to get the timing of deliveries or is that really on the customer side.
Now the timing.
Seasonality is much more driven by vacation schedules.
Manufacturing plants, and therefore lack of absorption during the mid summer period, what Rajiv July August depending on the plant.
In North America is late June early July and in Europe as July and August so during those periods at plants typically shutdown for a two week period.
We still plan to do that in.
In 2023, so we will see that seasonality.
Okay should I, how should I think about sort of the Thanksgiving to.
December holidays type scheduling.
Again, we have a break over the Christmas holidays for Thanksgiving.
Typically a two day.
So okay.
Okay.
Thanks, so much folks generally a strong quarter, but the.
December internally is always weaker because of the.
The Christmas New year's holiday periods, and I think that would be a great way to put it it is yes.
Fair enough. Thank you.
Our next question comes from Brett <unk> from Gabelli <unk> Company. Please go ahead.
Hi, guys. Good morning, Thanks for taking my question.
Good morning, good morning.
Provide a lot of great color on the benefits that the modular and scalable programs unlocking for Heister Yale curious as it's been in place in Europe , and now rolling out into the Americas also what Youre hearing in terms of customer response.
The benefits Youre hearing on that end.
If I may.
Rajiv already has a smile on his face you can't see it but let me let me ask him to answer your question.
No that's.
Firstly I've spent a lot of time driving this truck myself and there are quite a big improvement over our current product, which was already very good so and that's the feedback we're getting from customers.
That they appreciate the.
The economics the visibility on the new trucks, the controllability of the truck the productivity that can get out of it.
It.
It definitely has a very positive impact on the fatigue factor that sets an over a shift which then leads to issues latent shifts. So we're seeing all those improvements, but there's one thing we are seeing it recently.
Our recognized in.
In Europe <unk>.
The U K with a Nokia award for the economics of the truck.
So it's nice to get that recognition externally as well and uptime and reliability quality, yes, I mean, it's still early days, but we're seeing very positive trends in for a new product introduction that has a lot of new content.
We are seeing in our quality levels, which are very consistent with <unk>.
Very in a mature and very high quality products that we ship today so.
That's been a pleasant surprise, because we are expecting a bit of a blip as we launched the new product.
Terrific and then just one quick clarification item great to see.
Progress on working capital and the reduction in debt in the quarter.
Short term debt of $1 $41 million.
At September and that's primarily.
The foreign lines of credit alright, any specific.
Maturity dates are.
The conditions around that.
The balance sheet.
These are long term revolvers.
In the short term portion that you are talking about the line on the short term portion of that.
Right.
Those are mostly one year.
Arrangements that rollover and we haven't had any issues with rolling over our debts and mostly offshore as you've noted.
Primary domestic <unk>.
Facilities, our revolver as.
It's going to be shown in current when it's going to be paid down in the next 12 months and when it is going to be held for more than 12 months and it's shown as long term.
And I think you see it on the balance sheet in a single line. When you look at the the AAV. The term lumpy that's predominantly going to be long term and you are talking about the consolidated numbers. So Ken do you want to bring <unk> into this and how that affects our <unk> would have would have some of the debt in that other current line as well.
They are able to access the ERP market and have done a nice job of securing and recently rolling into more longer term arrangements from shorter term arrangements on their own.
Yeah.
Terrific very helpful. Thank you guys.
Our next question comes from William Glenn from Sappho Advisors. Please go ahead.
Good morning, and thanks for taking my question.
My question revolves specifically around new Vera.
And.
Major from what I can say major fuel cell manufacturers are putting strong emphasis now electric <unk>.
And it appears that the electrolyze, it which is the supply side of the green hydrogen equation.
Our experience from our rapid growth in the fuel cell side, which is.
The demand side of the hydrogen equation.
I saw what sparked my question is I saw in I.
E. A projection that there would be 85 times growth, maybe buybacks and the size of the market for electrical items.
Within eight years.
We know that the hydrolyzed technology is very similar to the fuel cell technology. So my question is.
Does new Vera have any aspirations of being <unk>.
Jimmy Electrolyze it business.
No. Our current strategy is all around building the power unit they use it the hydrogen the other side of it we do expect.
The electrolyze it to become a key part of the hydrogen supply chain and we're working with.
In our hydrogen providers, who will use that technology.
That's not the focus of Nevada, Nevada is very much focused on developing engines that can be used in power units both for mobile equipment, but also now increasingly looking at stationary and kind of recharging.
Type systems.
We think.
Yes.
In the broadest sense that this is a time to have.
Neuberger.
Fuel cell.
Technology focused on very specific.
Applications were.
Fuel cells are really required to do the job because battery electrics will not provide the power capability to do it.
And we're focused on segments, where that is true on the one hand, but it's reinforced by the fact that.
We think that these particular segments have the biggest opportunity for significant growth as we go to the future. So from our vantage point it's.
Focus and get the job done in the areas that have the greatest likelihood.
Significant commercialization, the soonest and where the demand will be driven by the nature of the application.
And that's the strategy, we're going to stick with.
Sure.
Thank you that seems like the.
The low risk <unk> strategy.
That's a good one.
Thank you very much.
Thank you.
This concludes today's Q&A session I will now hand, you back over to Christina <unk> for closing remarks.
Thank you, we'll close with just a few final reminder, a replay of our call will be available later this morning.
We will also post a transcript on our Investor Relations website when it becomes available. So you do have any questions. Please reach out to me my phone number is on the earnings release and I Hope you all enjoy the rest of your day I'll turn it back to drew to conclude the call.
The recording will be available until Wednesday November nine.
The phone number to call that on is plus four four.
450658.
The access code for that is nine zero to 151.
That concludes today's conference call you May now disconnect your line.
Okay.
Okay.
Yes.
Okay.