Q1 2024 Hyster-Yale Materials Handling Inc Earnings Call
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Operator: Good afternoon, ladies and gentlemen, and welcome to the Hyster-Yale Materials Handling First Quarter 2024 Earnings Conference Call. At this time, all lines are in listen-only mode.
Good afternoon, ladies and gentlemen, and welcome to the Heister Yale materials handling first quarter 'twenty 'twenty four earnings conference call. At this time all lines are in listen only mode. Following the presentation, we will conduct a question and answer session.
Operator: 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 Wednesday, May 8, 2024. I would now like to turn the conference over to Christina Kmetko, Investor Relations. Please go ahead.
Christina Kmetko: Any time during this calls require immediate assistance. Please press star zero for the operator.
Operator: This call is being recorded on Wednesday may eight 2024.
Christina Kmetko: I would now like to turn the conference over to Christina <unk> Investor Relations. Please go ahead.
Christina Kmetko: Good afternoon, and thank you for joining us for Hyster-Yale's 2024 First Quarter Earnings Call. My name is Christina Kmetko, and I'm responsible for investor relations. Yesterday evening, we published our first quarter 2024 results and filed our 10-Q. These documents are available on the Hyster-Yale website. We are recording this webcast, and a replay will be available on our website later this afternoon. The replay will remain available for approximately 12 months.
Christina Kmetko: Good afternoon, and thank you for joining us for <unk> 2024 first quarter earnings call.
Christina Kmetko: Christina tomato and I'm responsible for Investor Relations yesterday evening, we published our first quarter 2024 results.
Christina Kmetko: Our 10-Q. These documents are available on the ICL website. We are 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 result.
Christina Kmetko: 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 are 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 10-Q and other SEC filings. We may not update these forward-looking statements until our next quarterly earnings conference call.
Christina Kmetko: So the company and are 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.
Christina Kmetko: 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.
Christina Kmetko: Our presenters today are al Rankin Executive Chairman, Rajiv Prasad, President and Chief Executive Officer, and Scott <unk>, 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.
Rajiv K. Prasad: Thanks, Christy. And good afternoon, everyone.
Rajiv K. Prasad: Thanks, Christy and good afternoon, everyone I'll start by providing the operational perspective, and some commentary on EM markets.
Rajiv K. Prasad: I'll start by providing the operational perspective and some commentary on our market. Scott will follow with the detailed financial results and the outlook. Then I'll share a few strategic project highlights. Al will close the call with his perspective, and then we'll open it up to your questions.
Scott A. Minder: Scott will follow with a detailed financial results and the outlook.
Rajiv K. Prasad: And then I will share a few strategic project highlights.
Rajiv K. Prasad: We'll close the call with his perspective, and then we'll open the call to your questions.
Rajiv K. Prasad: First, I'll provide some highlights from our excellent Quarter 1 2024 financial results. 2023 was an outstanding year, and we're continuing to build on those successes. For the fourth consecutive quarter, we have reported revenues of more than $1 billion. And this past quarter, we had the highest reported operating profit and profit margins in the company's history, achieving an operating profit margin above 7% for the first time. Our quarterly highlights are all posted.
Scott: First I'll provide some highlights from our excellent quarter. One 2024 financial results 2023 was an outstanding year and we are continuing to build on those successes.
Rajiv K. Prasad: The fourth consecutive quarter, we have reported revenues of more than $1 billion.
Rajiv K. Prasad: This past quarter, we had the highest reported operating profit and profit margins in the company's history.
Rajiv K. Prasad: Keeping an operating profit margin above 7% for the first time.
Rajiv K. Prasad: Our quarterly highlights are all positive.
Rajiv K. Prasad: Consolidated operating profit and net income are up significantly versus the prior year. We've improved operating profit margins and consolidated revenues as well. The global economy remains strong overall in the first quarter. However, political unrest around the world is causing lingering uncertainty.
Rajiv K. Prasad: Holiday to the operating profit and net incomes are up significantly versus the prior year.
Rajiv K. Prasad: We've improved operating profit margins and consolidated revenues as well.
Rajiv K. Prasad: The global economy remains strong overall in the first quarter, however, political unrest around the world is causing lingering uncertainty.
Rajiv K. Prasad: The latest publicly available lift truck market data indicates that Q4 2023 global bookings increased year-over-year with stronger-than-expected year-end volumes in EMEA and JPEG markets. Those higher bookings more than offset America's decline. However, we estimate that Q1 2024 global lift truck bookings, moderated compared to the relatively strong prior year level. In Q1, we continue to work through our extended backlog and continue to focus on booking orders with strong overall margins. This, coupled with the year-over-year market decline, led to a moderate bookings decrease compared to the prior year.
Rajiv K. Prasad: The latest publicly available lift truck market data indicates for Q4 2023 global bookings increased year over year with stronger than expected year end volumes in EMEA and Jacob markets.
Rajiv K. Prasad: Those higher bookings more than offset the Americas decline however, we.
Rajiv K. Prasad: We estimate that Q1 2024 global lift truck bookings.
Rajiv K. Prasad: Moderated compared to relatively strong prior year levels.
Rajiv K. Prasad: In Q1, we continued to work through our extended backlog and.
Rajiv K. Prasad: Continue to focus on booking orders with strong overall margins.
Rajiv K. Prasad: Coupled with year over year market declines led to a moderate bookings decreased compared to prior year.
Rajiv K. Prasad: Bookings increased 10% sequentially, led by a large order for Class 2 and Class 3 warehouse trucks in EMEA. In Q1 2024, average booking prices decreased compared to Q4 2023 and the prior year. This was largely due to a shift toward lower-priced warehouse products, predominantly in EMEA.
Rajiv K. Prasad: Bookings increased 10% sequentially led by a large order for plus two and plus three warehouse trucks in EMEA.
Rajiv K. Prasad: In quarter, one 2024 average booking prices decrease compared to fourth quarter of 2023 and prior year. This was largely due to a shift towards lower priced warehouse products predominantly in EMEA and.
Rajiv K. Prasad: In line with our objectives, backlog levels decreased compared to year-end 2023 levels. Now, let's talk about the outlook for our business. Looking ahead, we expect competitive dynamics to become more prevalent again in our market, particularly on products with shorter lead times. As we reduce backlog levels and improve lead times, we're committed to maintaining our targeted booking margins through new model introductions and cost decreases. We predict an upward swing in quarterly-over-quarter bookings throughout 2024.
Rajiv K. Prasad: In line with our objectives backlog levels decreased compared to the year end 2023 levels now.
Rajiv K. Prasad: Now, let's talk about the outlook for our business.
Rajiv K. Prasad: Looking ahead, we expect competitive dynamics to become more prevalent again in a market.
Rajiv K. Prasad: Particularly on products with shorter lead times.
Rajiv K. Prasad: As we reduced backlog levels and improved lead times, we are committed to maintaining our targeted booking margins through new model introductions and cost decreases we predict an upward swing quarter over quarter bookings throughout 2024.
Rajiv K. Prasad: This is largely due to anticipated market share gains in the Americas and EMEA and improving North American market conditions later in the year. Our shipments are expected to increase in 2024 compared to 2023 due to higher production rates, continued supply chain improvements, and the dissipation of lingering product launch issues. As production and shipment rates increase, we foresee backlog levels and lead times on many product lines reaching target levels by year-end. As expected, our $3.1 billion backlog, which is equal to approximately nine months of production, combined with new unit bookings, is supporting the business through any near-term market weakness. Now I'll turn it over to Scott to provide some detailed financial results analysis.
Rajiv K. Prasad: This is largely due to anticipated market share gains in the Americas, and EMEA and improving North American market conditions later in the year.
Scott: Our shipments are expected to increase in 2024 compared to 2023 due to higher production rates continued supply chain improvements and the dissipation of lingering product launch issues.
Scott: As production and shipment rates increase we foresee backlog levels and lead times on many product lines, reaching target levels by year end.
Scott: As expected our $3 1 billion.
Scott: Backlog, which is equal to approximately nine months of production.
Scott: Combined with new unit bookings is supporting the business through any near term market weaknesses.
Rajiv K. Prasad: Now I will turn it over to Scott to provide some detailed financial results and outlook.
Scott A. Minder: Thanks, Rajiv. I'd like to emphasize that our strong Q1 2024 results build on 2023's exceptional year-over-year improvements. The numbers speak for themselves. Consolidated revenue rose to $1.1 billion, up from just under $1 billion in Q1 2023. As Rajiv mentioned, this is the fourth consecutive quarter with revenues over $1 billion. Consolidated operating profit increased to almost $84 million, compared to $41 million in Q1 2023. Our operating profit margin of 7.9% was up from 4.3% one year ago. Our Q1 2024 earnings per share increased by nearly 90% to $2.93. Let's dive into the results at our lift truck business.
Scott: Thanks, Rajeev I'd like to emphasize that our strong Q1 2024 results build on 2023 exceptional year over year improvements the numbers speak for themselves.
Scott A. Minder: Consolidated revenue rose to $1 1 billion.
Scott A. Minder: Up from just under $1 billion in Q1 2023.
Scott A. Minder: As Rajeev mentioned this is the fourth consecutive quarter with revenues over $1 billion.
Scott A. Minder: <unk> operating profit increased to almost $84 million compared to $41 million in Q1 2023.
Scott A. Minder: Our operating profit margin of seven 9% was up from four 3% one year ago.
Scott A. Minder: Our Q1 2024 earnings per share increased by nearly 90% to $2 93.
Scott A. Minder: Let's dive into the results at our lift truck business.
Scott A. Minder: List truck revenues grew 6% versus the prior year due to higher average sales prices and a favorable sales mix. However, these improvements were partially offset by lower unit and parts volume. Due to previously implemented price increases, average lift truck sales prices increased by 17% year-over-year and 3% sequentially. Our sales mix improved versus the prior year, mainly due to increased sales of Class 4 and 5 internal combustion engine units in the Americas. These higher capacity lift trucks generally have higher selling prices. However, shipment volumes declined 8% versus the prior year, driven by a 21% decline in EMEA as a result of lower production rates. America shipments were lower, mostly due to reduced shipments in Brazil.
Scott A. Minder: Lift truck revenues grew 6% versus the prior year due to higher average sales prices and a favorable sales mix.
Scott A. Minder: These improvements were partially offset by lower unit and parts volumes.
Scott A. Minder: Due to previously implemented price increases average lift truck sales prices increased by 17% year over year and 3% sequentially.
Scott A. Minder: Our sales mix improved versus the prior year, mainly due to increased sales of class four and five internal combustion engine units in the Americas.
Scott A. Minder: These higher capacity lift trucks generally have higher selling prices.
Scott A. Minder: Shipment volumes declined 8% versus prior year, driven by 21% decline in EMEA as a result of lower production rates.
Scott A. Minder: <unk> shipments were lower mostly due to reduced shipments in Brazil.
Scott A. Minder: In 2021-2024, lift truck operating profit of $89 million increased by 87% year over year. Operating margins were 8.9% in the quarter, improving by 390 basis points versus the prior year. This gain was driven by higher new unit margins due to favorable price and material costs. Units sold in Q1 2024 were largely added to our backlog in late 2022 and in 2023. These units had higher prices and margins than trucks sold in Q1 2023, the latter of which entered the backlog before our price increases went into effect.
Scott A. Minder: In Q1 2020 for lift truck operating profit of $89 million increase.
Scott A. Minder: Increased by 87% year over year.
Scott A. Minder: Operating margins were eight 9% in the quarter, improving by 390 basis points versus the prior year.
Scott A. Minder: This gain was driven by higher new unit margins due to favorable price and material costs.
Scott A. Minder: Units sold in Q1 2024 were largely added to our backlog in late 2022 and in 2023.
Scott A. Minder: Units had higher prices and margins and trucks sold in Q1 2023, the latter of which entered the backlog before our price increases went into effect.
Scott A. Minder: Operating expenses increased in the quarter compared to the prior year, mainly due to higher employee-related costs, including incentive compensation. The lift truck team remains focused on growth with disciplined execution. As a result, the business generated a 71% year-over-year incremental margin in the first quarter. Now over to Baldoni.
Scott A. Minder: Operating expenses increased in the quarter compared to prior year, mainly due to higher employee related costs, including for incentive compensation.
Baldoni: Our lift truck team remains focused on growth with disciplined execution.
Baldoni: As a result, the business generated a 71% year over year incremental margin in the first quarter.
Baldoni: Now over to volatility.
Scott A. Minder: Walzoni's gross profit increased while revenues decreased as a result of the plan's phase-out of low-margin legacy component sales. This phase-out will continue throughout 2024. The business maintained a strong price-to-cost ratio on its core attachments. Bolzoni's Q1 2024 operating profit decreased due to higher operating expenses due to moving to Nivera.
Scott A. Minder: <unk> gross profit increased while revenues decreased as a result of the planned phase out of low margin legacy components sales.
Scott A. Minder: This phase out will continue throughout 2024.
Scott A. Minder: The business maintained a strong price to cost ratio on its core attachment products.
Scott A. Minder: <unk> Q1, 2020 for operating profit decreased due to higher operating expenses moving to Nevada.
Scott A. Minder: Nivera's Q1 revenue decreased year over year due to fewer customer shipments. However, the first quarter's operating loss improved slightly as government funding to cover certain research and development expenses offset the impact of lower shipments. I'll explain this government funding in more detail in a moment. But before I move to our cash and balance sheet results, I'll outline the effects of taxes on our business. Our first quarter income before income taxes was $77 million, up 114% compared to the prior year. However, net income increased at a slower pace due to a significantly elevated income tax rate.
Scott A. Minder: <unk> Q1 revenue decreased year over year due to fewer customer shipments.
Scott A. Minder: First quarter's operating loss improved slightly as government funding to cover certain research and development expenses offset the impact from lower shipments I'll explain this government funding in more detail in a moment.
Scott A. Minder: The company's Q1 2024 effective income tax rate is 33%, this compared to a 24% rate in the prior year quarter. This large tax rate increase is a result of the combination of the U.S. government's current R&D capitalization requirements and the company's inability to put tax assets on its balance sheet given its U.S. valuation allowance position. Businesses that invest in R&D activities are required to capitalize these expenses and recognize them over time.
Scott A. Minder: Before I move to our cash and balance sheet results I'll outline the effect of taxes on our business.
Scott A. Minder: Our first quarter income before income taxes was $77 million.
Scott A. Minder: Up 114% compared to the prior year. However.
Scott A. Minder: However, net income increased at a slower pace due to a significantly elevated income tax rate.
Scott A. Minder: The Companys Q1, 2024 effective income tax rate was 33% this.
Scott A. Minder: This compared to a 24% rate in the prior year quarter.
Scott A. Minder: This large tax rate increase is a result of the combination of the U S. Government's current R&D capitalization requirements and the company's inability to put tax assets on its balance sheet given its U S valuation allowance position.
Scott A. Minder: Businesses that invest in R&D activities are required to capitalize these expenses and recognize them over time.
Scott A. Minder: This effectively increases taxable income over 5 to 15 years, depending on the circumstance over which the R&D expenses are amortized. This reduces cash available to make further R&D and capital investments. We continue to work with industry groups and elected representatives to correct the situation and to restore the incentive for companies like Hyster-Yale to make future R&D investments. Next, I'll turn to the balance sheet.
Scott A. Minder: This effectively increased the taxable income over five years to 15 years, depending on the circumstance over which the R&D expenses are amortized this reduces cash available to make further R&D and capital investments.
Scott A. Minder: We continue to work with industry groups and elected representatives to correct the situation and to restore the incentives for companies like Hyster Yale to make future R&D investments.
Scott A. Minder: Next I'll turn to the balance sheet.
Scott A. Minder: Improvements in our financial results and cash generation were very significant in 2023, and we expect increased momentum in this area as 2024 progresses. Given these broad business and financial improvements, our credit rating agencies, S&P and Moody's, upgraded our credit ratings in March and April, respectively. Financial leverage continued to improve in the quarter with a 4% debt reduction compared to December 31st. Our debt-to-total capital ratio of 53% improved by 200 basis points sequentially as a result of higher earnings and lower debt. Additional cash generated from operations was used to reduce debt levels in the quarter. Our unused borrowing capacity of $269 million was generally comparable to the December 31st level.
Scott A. Minder: Improvements in our financial results and cash generation were very significant in 2023, we expect increased momentum in this area as 2024 progresses.
Scott A. Minder: Given these broad business and financial improvements, our credit rating agencies, S&P and Moody's upgraded our credit ratings in March and April respectively.
Scott A. Minder: Financial leverage continued to improve in the quarter with a 4% debt reduction compared to December 31 levels.
Scott A. Minder: Our debt to total capital ratio of 53% improved by 200 basis points sequentially as a result of higher earnings and lower debt additional cash generated from operations was used to reduce debt levels in the quarter.
Scott A. Minder: Our unused borrowing capacity of $269 million was generally comparable to the December 31 level.
Scott A. Minder: Working capital improved modestly from Q4 2023, but it remained above desired levels at 18.9% of sales. While we improved inventory efficiency as measured by day's inventory outstanding, significant further working capital reductions, largely from inventory, are expected across the remainder of 2024. On an absolute basis, Q1 2024 inventories increased compared to the prior year and the prior quarter. This was largely due to a higher finished goods inventory, driven by trucks completed but not shipped at quarter end, and extended transit times due to internal global production shipments. As we execute our strategic initiatives, we're utilizing our global production system's flexibility to manufacture trucks efficiently. However, trucks coming to the U.S. from our non-U.S. facilities take longer to receive.
Scott A. Minder: Working capital improved modestly from Q4, 2023, but remained above desired levels at 18, 9% of sales.
Scott A. Minder: While we improved inventory efficiency as measured by days inventory outstanding significant further working capital reductions largely from inventory are expected across the remainder of 2024.
Scott A. Minder: On an absolute basis, Q1, 2024 inventory increase compared to the prior year and prior quarter. This was largely due to a higher finished goods inventory driven by trucks completed but not shipped at quarter end and extended transit times due to internal global production shipments.
Scott A. Minder: As we execute our strategic initiatives, we are utilizing our global production system flexibility to manufacture trucks efficiently.
Scott A. Minder: Therefore trucks coming to the U S from our non U S facilities take longer to receive.
Scott A. Minder: We expect finished goods inventory to decrease in the second quarter as the Q1 shipment days are cleared. However, positively, raw material and component parts inventory improved compared to the previous quarter and Q1. Looking ahead, the outlook for full year 2024 remains favorable and better than we anticipated last quarter. For the lift truck business, we expect continued revenue and operating profit growth in Q2 compared to the prior year. This growth is driven by an increase in expected shipments of higher-priced, higher-margin backlog units. We anticipate the potential expiration of tariff exemptions in late May 2024 to modestly temper Q2 results compared to Q1 levels. The company is actively working with federal regulators to have these exemptions extended.
Scott A. Minder: We expect finished goods inventory to decrease in the second quarter as the Q1 shipment days are cleared.
Scott A. Minder: Positively raw material and component parts inventory improved compared to the previous quarter and <unk>.
Scott A. Minder: Q1 2023.
Scott A. Minder: Looking ahead the outlook for full year, 2024 remains favorable and better than we anticipated last quarter.
Scott A. Minder: For the lift truck business, we expect continued revenue and operating profit growth in Q2 compared to the prior year. This growth is driven by an increase in expected shipments of higher priced higher margin backlog units.
Scott A. Minder: Anticipate the potential exploration of tariff exemptions in late May 2024 to modestly tempered Q2 results compared to Q1 levels. The company is actively working with federal regulators to have these exemptions extended.
Scott A. Minder: Full year 2024 lift truck revenues and operating profit are anticipated to increase over 2023. Our Q1 results were higher than expected, largely due to continued strong unit margin. We anticipate our strong margin trend to continue for the balance of 2024. As a result, we expect higher full-year revenue and profit in the lift truck business compared to our prior guidance. For Baldoni, we anticipate 2024 revenue to be comparable to 2023. Bolzoni will continue to focus on increasing production of higher-margin attachments.
Scott A. Minder: Full year 2020 for lift truck revenues and operating profit are anticipated to increase over 2023.
Scott A. Minder: Our Q1 results were higher than expected largely due to continued strong unit margins, we anticipate our strong margin trend to continue for the balance of 2024 as a result, we expect higher full year revenue and profit in the lift truck business compared to our prior guidance.
Scott A. Minder: For <unk>, we anticipate 2020 for revenues to be comparable to 2023.
Scott A. Minder: Although he will continue to focus on increasing production of higher margin attachments, while it executes the planned phase out of legacy components sales to the lift truck business as.
Scott A. Minder: While it executes the planned phase out of legacy component sales to the lift truck business, operating profit is expected to increase modestly year over year, leading to higher gross profits, partly offset by increased operating expenses. To increase sales, Nuvera is focused on more global customer product demonstrations and expanding its presence in Europe and China.
Scott A. Minder: As a result, the operating profit is expected to increase modestly year over year, leading to higher gross profit, partly offset by increased operating expenses.
Scott A. Minder: To increase sales new Vera is focused on more global customer product demonstrations and expanding its presence in Europe and China.
Scott A. Minder: Booked orders from current customers are expected to boost 2024 sales above last year's level. However, the benefit from these higher sales will likely be offset by increased development costs, leading to comparable year-over-year operating results. Fuel Cell Customer Adoption has a long sales cycle. Therefore, we expect increased 2024 demonstrations to support fuel cell engine technology adoption and revenue growth over time. To offset manufacturing costs, Nuvera was granted up to $30 million in matching funds from the U.S. Department of Energy in April. This is part of a $750 million federal government investment in dozens of hydrogen projects as part of the National Clean Hydrogen Strategy.
Scott A. Minder: Orders from current customers are expected to boost 2024 sales above last year's levels.
Scott A. Minder: The benefit from these higher sales will likely be offset by increased development costs, leading to comparable year over year operating results.
Scott A. Minder: Fuel cell customer adoption has a long sales cycle there.
Scott A. Minder: Therefore, we expect increased 2020 for demonstrations to support fuel cell engine technology adoption and revenue growth over time.
Scott A. Minder: To offset manufacturing cost <unk> was granted up to $30 million in matching funds from the U S Department of energy in April. This was part of a $750 million federal government investment in dozens of hydrogen projects as part of the national clean hydrogen strategy.
Scott A. Minder: Also in early April, Nuvera was awarded up to $14 million in investment tax credits from the U.S. Internal Revenue Service based on future spending levels. This is part of the Qualifying Advanced Energy Project Tax Credit Initiative funded by the Inflation Reduction. This program, which provides up to a 30% investment tax credit for selected clean energy manufacturing projects, is designed to support secure and resilient domestic clean energy supply chains. Nuvera anticipates using the tax credits to expand fuel cell production capacity at its Billerica, Massachusetts headquarters.
Scott A. Minder: Also in early April <unk> was awarded up to $14 million of investment tax credits from the U S. Internal revenue service based on future spending levels.
Scott A. Minder: This is part of the qualifying advanced Energy project tax credit initiative funded by the inflation reduction Act.
Scott A. Minder: This program, which provides up to a 30% investment tax credit for selected clean energy manufacturing projects is designed to support secure and resilient domestic clean energy supply chain.
Scott A. Minder: <unk> anticipates using the tax credits to expand fuel cell production capacity at its still Richter, Massachusetts headquarters.
Scott A. Minder: At the Hyster-Yale consolidated level, we expect increased full-year revenue, operating profits, and net income compared to prior year levels. As I said earlier, this outlook builds on a strong 2023. Due to the better-than-expected Q1 2024 results and Anticipated Forecast Improvements in the following quarters, full year 2024 results should improve compared to our prior full year guidance. In the second quarter, we anticipate continued strong product margins from shipments of higher-margin backlog units to drive year-over-year profit growth.
Scott A. Minder: At the Hyster Yale consolidated level, we expect increased full year revenue operating profit and net income compared to prior year levels.
Scott A. Minder: As I said earlier this outlook builds on a strong 2023 year do.
Scott A. Minder: Due to the better than expected Q1 2020 for our results.
Scott A. Minder: And anticipated forecast improvements in the following quarters.
Scott A. Minder: Full year 2024 results should improve compared to our prior full year guidance.
Scott A. Minder: In the second quarter, we anticipate continued strong product margins from shipments of higher margin backlog units to drive year over year profit growth.
Scott A. Minder: Q2 profits are expected to increase significantly versus prior year levels but be modestly lower than Q1 results. This decrease is largely due to the anticipated expiration of Section 301 tariff exemptions on May 31st. For the full year 2024, we expect continued progress toward our 7% operating profit goal in our core lift truck and attachment business. We started the year off with first quarter margins of 8.9% in our lift truck business and 7.9% for the Consolidated Company.
Scott A. Minder: Q2 profits are expected to increase significantly versus prior year levels, but the modestly lower than Q1 results.
Scott A. Minder: This decrease is largely due to the anticipated exploration of section 301 tariff exemptions on May 31.
Scott A. Minder: For the full year 2024, we expect continued progress toward our 7% operating profit goal in our core lift truck and attachment businesses.
Scott A. Minder: We started the year off with first quarter margins of eight 9% in our lift truck business and seven 9% for the consolidated company. These were well ahead of our previously expected levels we.
Scott A. Minder: These were well ahead of our previously expected levels. We anticipate operating profit margins to moderate somewhat over the remaining 2024 quarters because of increased material costs. This is partly due to the assumed tariff exemption expiration I mentioned earlier.
Scott A. Minder: We anticipate operating profit margins to moderate somewhat over the remaining 2024 quarters because of increased material costs.
Scott A. Minder: This was partly due to the assumed tariff exemption exploration I mentioned earlier.
Rajiv K. Prasad: We remain committed to systematic and sustainable progress toward our financial goals over time. We remain focused on improving operating cash flows by decreasing working capital through improved inventory efficiency and strong production rates. As a result, inventory levels are expected to decrease substantially in 2024. Consolidated 2024 capital expenditures are estimated to be $84 million, down modestly from our initial projection of $87 million. While we anticipate substantial investments in our business, maintaining adequate liquidity remains a priority.
Scott A. Minder: We remain committed to systematic and sustainable progress toward our financial goals over time.
Rajiv K. Prasad: We remain focused on improving operating cash flows by decreasing working capital through improved inventory efficiency and strong production rates.
Rajiv K. Prasad: As a result inventory levels are expected to decrease substantially in 2024.
Rajiv K. Prasad: Consolidated 2024 capital expenditures are estimated to be $84 million.
Rajiv K. Prasad: Down modestly from our initial projection of $87 million.
Rajiv K. Prasad: While we anticipate substantial investments in our business maintaining adequate liquidity remains a priority.
Rajiv K. Prasad: As a result of our efforts, we expect a significant increase in free cash flow in 2024 compared with the prior year. This would enable further financial leverage reduction. Now, I'll turn the call back to Rajiv to discuss our strategic initiatives and recent progress.
Rajiv K. Prasad: As a result of our efforts, we expect a significant increase in free cash flow in 2024 compared with the prior year.
Rajiv: This would enable further financial leverage reductions.
Rajiv K. Prasad: Now I'll turn the call back to Rajiv to discuss our strategic initiatives and recent progress.
Rajiv K. Prasad: Thanks, Scott. Our vision is to transform the way the world moves materials from port to home by promising customers optimized product solutions and exceptional care. To fulfill these promises and achieve long-term growth rates, all product segments are executing established strategic initiatives and key projects. I'll share some highlights here so you can learn more about additional strategic projects in the Q1 2024 news release and in our shortly-to-be-released investor presentation. The lift truck business has three core strategies to transform our competitiveness: market position and economic performance over time.
Rajiv: Thanks Scott.
Rajiv: Vision is to transform the way the world moves material from port to cone by promising customers optimize product solutions I am exceptional care.
Rajiv K. Prasad: To fulfill the promises and achieve long term growth rates all product segments are executing established strategic initiatives and key projects.
Rajiv K. Prasad: Some highlights here.
Rajiv K. Prasad: Can learn more about additional strategic projects in the Q1 2024 news release and in our shortly to be release investor presentation.
Rajiv K. Prasad: The lift truck business has three core strategies to transform our competitive.
Rajiv K. Prasad: Yes.
Rajiv K. Prasad: Market position and economic performance over time.
Rajiv K. Prasad: The first strategy is to provide products that increase customer productivity at the lowest cost of ownership. At the heart of these initiatives are our award-winning modular, scalable lift trucks. With the March 2024 launch of the full 2 to 3 ton internal combustion modular scalable product line in JPEG, these products are now produced and available in each of our major geographies that can be configured at value standard and premium trucks to fit the customer's exact specific needs. For Hyster-Yale, this modular, scalable product platform enhances multiple areas of the business. Including reducing supply chain costs, improving working capital levels, and providing customers with customizable solutions, such as bookings and shipments of these.
Rajiv K. Prasad: The first strategy is to provide products to increase customer productivity at the lowest cost of ownership at the heart of this initiative our award winning modular scalable lift trucks.
Rajiv K. Prasad: With the March 2024 launch of the full two to three ton internal combustion modular scalable.
Rajiv K. Prasad: <unk> and <unk>.
Rajiv K. Prasad: J P. These products are now produced and available in each of our major geographies that can be configured.
Rajiv K. Prasad: Value standard and premium trucks to fit the customer's exact specific needs.
Rajiv K. Prasad: For <unk> this modular scalable product platform enhances multiple areas of the business.
Rajiv K. Prasad: Including reducing supply chain costs, improving working capital levels, and providing customers with customizable solutions.
Rajiv K. Prasad: Bookings and shipments of these.
Rajiv K. Prasad: Tracks are accelerating in EMEA and American markets where they were first launched in 2022 and 2023. We continue to capitalize on advancements in electric powertrains for applications now dominated by internal combustion engine trucks. As a result, an electrified fuel cell container handler is now operating at the Port of Los Angeles. An electrified fuel cell re-stacker is operating at the Port of Valencia in Spain.
Rajiv K. Prasad: Trucks are accelerating in EMEA and America markets, where they were first launched in 2022 and 2020.
Rajiv K. Prasad: We continue to capitalize on the advancement in the electric powertrains for applications now dominated by internal combustion engine trucks as a result, an electrified fuel fell container handlers now operating.
Rajiv K. Prasad: The Florida Floss Angela.
Rajiv K. Prasad: And in electric <unk> fuel cell risk factor is operating at the port of Valencia in Spain.
Rajiv K. Prasad: In March 2024, we agreed to supply 10 zero-emission battery-powered terminal tractors to APM terminals at the Port of Mobile in Alabama. This was part of an electrification pilot for port equipment decarbonization. The lift truck business is also focused on applying technological advancements to operator assist and automated product options. In March 2024, we began our first test of an internally developed automated truck at a customer location. This builds on our prior offering using third-party software.
Rajiv K. Prasad: In March 2024, we agreed to supply tends to be ROI mission battery powered.
Rajiv K. Prasad: I'm going to practice.
Rajiv K. Prasad: <unk> terminal at the Port of mobile.
Rajiv K. Prasad: Now a AMA. This was positive from electrification pilot reported CT equipment decarbonization.
Rajiv K. Prasad: The lift truck business is also focused on applying technology in <unk>.
Rajiv K. Prasad: Operator, assist and automated product options and.
Rajiv K. Prasad: In March 2024, we began our first.
Rajiv K. Prasad: Rest of an internally developed automated truck at a customer location.
Rajiv K. Prasad: This builds on our prior offering using third party software.
Rajiv K. Prasad: At the recent MODEX material handling trade show, we announced the stand-alone availability of our Advanced Dynamic Stability Technology, or ADS. ADS helps maintain overall vehicle stability and minimizes the potential for lift truck tip-overs, thus addressing a key industry risk factor. The even more powerful Yale-reliant Operator Assist technology, which helps forklift operators avoid potential hazards, received global recognition by earning an honorable mention in Fast Company magazine's Innovation by Design Award. Bozzone's core strategy is to be the leader in the attachment business and to continue that journey in Q1 2024.
Rajiv K. Prasad: At the recent <unk> material handling trade show, we announced the stand alone the availability of our advanced dynamics stability technology or Aes.
Rajiv K. Prasad: It helps to maintain overall vehicle stability and minimize the potential for lift truck tip over.
Rajiv K. Prasad: Pressing a key industry risk factor.
Rajiv K. Prasad: So even more powerful Joe reliant operator assist technology, which helps forklift operators avoid potential.
Rajiv K. Prasad: It received global recognition by earning a non ruble mentioned and fast company magazine innovation by design Awards.
Rajiv K. Prasad: <unk> core strategy is to be the leader in the attachment business to continue that journey in Q1 2024.
Rajiv K. Prasad: The New, Home Appliance Telescopic Plant for Lift Rods Designed to Easily Handle Home Appliances and Palletless Loads in Confined Spaces was Introduced in March. In addition, Bolzoni launched its Easy Connect product range in February. These products feature technology to collect and analyze truck performance data. This allows customers to optimize their material handling process, including maximizing warehouse space and reducing handling time. Nouvera's core strategy is to be a leader in the heavy-duty fuel cell market. Using the funds granted by the DOE and its own funding, Nivera will develop high-volume production processes needed to scale up its next-generation fuel cell stack technology for heavy-duty vehicles. Now I'll turn the call over to our Executive Chairman, Al Rankin.
Rajiv K. Prasad: The new.
Rajiv K. Prasad: Home appliance telecom Capex plan for lift trucks designed to easily handle home appliances, and pallet loads and confined spaces was introduced in March and.
Alfred Marshall Rankin: In addition, <unk> launched this DC connect product range in February these products feature technology to collect and analyze truck performance data. This allows customers to optimize the material handling process.
Alfred Marshall Rankin: <unk> maximizing warehouse space and reducing time lead times.
Alfred Marshall Rankin: <unk> core strategy to be a leader in the heavy duty fuel cell market using the funds granted by the Dod and its own funding.
Alfred Marshall Rankin: Nevada will develop high volume production processes needed to scale up this next generation fuel cell stack technology for heavy duty vehicles.
Rajiv K. Prasad: Now I'll turn the call over to our executive Chairman Al Rankin.
Alfred Marshall Rankin: Thanks Rajiv.
Alfred Marshall Rankin: Building on the robust 2023 financial results, our results were obviously very strong in the first quarter. This reflects sound performance in our core lift truck and attachment businesses and continued progress at Nuvera to better reflect our company's business activity focus. Last month, we announced new names for some of our businesses. As of May 31st, the public company will be known as Hyster-Yale Inc. The lift truck business will then take on the Hyster-Yale Materials Handling name.
Alfred Marshall Rankin: Building on our robust 2020 through financial results. Our results were obviously very strong in the first quarter.
Alfred Marshall Rankin: This reflects sound performance in our core lift truck and attachment businesses and continued progress with Humira.
Alfred Marshall Rankin: To better reflect our company's business activity focus.
Alfred Marshall Rankin: Last month, we announced new names for some of our businesses.
Alfred Marshall Rankin: As of May 31, the public company will be known as <unk>, Inc.
Alfred Marshall Rankin: The lift truck business will then take on the highest two year materials handling.
Alfred Marshall Rankin: In order to better align its name with its broad material handling capabilities, which have evolved beyond its core lift truck product. The names of the other two Hyster-Yale strategic business units, Baldoni and Nuvera, will remain the same.
Alfred Marshall Rankin: In order to better align its name with its broad material handling capabilities, which have evolved beyond its core lift truck products.
Alfred Marshall Rankin: The names of the other two <unk> strategic business units, both Sony and <unk> will remain the same.
Alfred Marshall Rankin: We believe these changes give more clarity to our company's future evolution as three distinct but interrelated businesses with lift trucks at the core. The strategic business unit names also help underscore our commitment to each frame. Under the umbrella, Hyster-Yale, Inc.
Alfred Marshall Rankin: We believe these changes give more clarity to our company's future evolution as three distinct but interrelated businesses with lift trucks at the core.
Alfred Marshall Rankin: The strategic business unit names also help underscore our commitment to each brand.
Alfred Marshall Rankin: Under the umbrella of <unk>, Inc.
Alfred Marshall Rankin: These business segments are positioned to deliver on the promises of their key brands, Hyster, Yale, Balzoni, and Nuvera, to provide optimal solutions and exceptional customer care in their areas of business focus. As I reflect on our business performance and outlook, I believe our future prospects are excellent. We're in the midst of a fundamental redesign of our vehicle architecture, which is off to a strong start. Our new modular, scalable designs will help us meet customer needs more effectively, operate more consistently at target margins, improve manufacturing, and also lower inventory levels.
Alfred Marshall Rankin: These business segments are positioned to deliver on the promises of their key brands Hyster, Yale also oney and <unk> to provide optimal solutions and exceptional customer care and there are areas of business focus.
Alfred Marshall Rankin: As I reflect on our business performance and outlook I believe our future prospects are excellent.
Alfred Marshall Rankin: Just a fundamental redesign of our vehicle architecture.
Alfred Marshall Rankin: <unk> is off to a strong start.
Alfred Marshall Rankin: Our new modular scalable designs will help us meet customer needs more effectively.
Alfred Marshall Rankin: Operate more consistently at target margins improved manufacturing.
Alfred Marshall Rankin: And also lower inventory levels.
Alfred Marshall Rankin: We're a leader in on-vehicle technologies with our dynamic stability, operator assist systems, and fully automated trucks. Similarly, our initiatives at Bolzoni and Nuvera are expected to continue to position those businesses as leaders in their industries. In closing, I'd also note that while economic activity will vary globally and by quarter, our businesses should be stronger and better able to deal with whatever volatility occurs. Now I'd like to open the floor to
Alfred Marshall Rankin: We're a leader in on vehicle technologies with our dynamic stability.
Alfred Marshall Rankin: Operator assist systems and fully automated trucks.
Alfred Marshall Rankin: Similarly, our initiatives at <unk> and <unk> are expected to continue to position those businesses as leaders in their industries.
Alfred Marshall Rankin: In closing I'd also note.
Alfred Marshall Rankin: That well economic activity will vary globally and by quarter, our businesses should be stronger and better able to deal with whatever volatility occurs.
Speaker Change: Now I'd like to open the floor to questions.
Operator: Thank you. Ladies and gentlemen, we will now begin the question and answer session. Should you have a question, please press star followed by one on your telephone keypad. You will hear a prompt that your hand has been raised. Should you wish to decline the polling process, please press star followed by two. And if you are using a speakerphone, please leave the handset before pressing any key. Our first question comes from the line of Chip Moore. Please go ahead.
Speaker Change: Thank you ladies and gentlemen, we will now begin the question and answer session should you have a question. Please press star followed by one on your telephone keypad, you will hear a pump that Johan has been with circulation decline from the polling process. Please press star.
Chip Moore: Followed by <unk>.
Chip Moore: And if you are using a speaker phone please lift the handset before pressing any.
Operator: Our first question comes from the line of Chip Moore. Please go ahead.
Chip Moore: Hey everybody, thanks for taking the question. Congratulations on the strong quarter. I wanted to ask first, you know, last quarter, I think we talked about maybe some larger accounts that maybe overordered and deferred some of their orders. Can you just give us an update there? Have you continued to see that at all? Has that normalized, or how are those trends?
Chip Moore: Hey, everybody. Thanks for taking the question congrats on the strong quarter.
Speaker Change: I wanted to ask first.
Chip Moore: Last quarter, I think we talked about maybe some larger accounts.
Chip Moore: Maybe over ordered and deferred some.
Chip Moore: Some of their orders can you just give us an update there have you continued to see that at all as that normalizes.
Chip Moore: Strengths.
Rajiv K. Prasad: Yeah, Chip, this is Rajiv. I think those have generally normalized. We haven't seen any out of the ordinary cancellations during last quarter, so I think those of, gone back, I think it was one or two key customers that had, you know, delays and, and so either deferred or canceled.
Chip Moore: Yes chip. This is rajeev I think those have generally normalized.
Rajiv K. Prasad: We haven't seen any.
Chip Moore: Got it. Thanks. Thanks, Rajiv.
Rajiv K. Prasad: Out of the ordinary cancellations during last quarter.
Chip Moore: <unk>.
Chip Moore: Joseph.
Chip Moore: Going back I think it was one or two key customers.
Chip Moore: And the delays and.
Chip Moore: And so either deferred or canceled.
Unknown Attendee: And then on the margin side, I think you talked about in the prepared remarks, strong margin trends continuing for the balance of the year. I think it was maybe just expand on that. Help us think about, you know, sort of near-term mix impacts, obviously, this quarter, skewing towards larger trucks, it sounds like maybe next quarter as well, just something about that and lead times as well.
Speaker Change: Got it thanks, Thanks Rajiv.
Speaker Change: And then on the margin side. Thank you.
Unknown Attendee: You talked about in the prepared remarks.
Unknown Attendee: On margin trends continuing for <unk>.
Unknown Attendee: For the year I think it was maybe just expand on that and help us think about.
Unknown Attendee: Sort of near term mix impacts obviously this quarter.
Unknown Attendee: Skewing towards larger trucks, it sounds like maybe next quarter as well just something about that in and lead times as well.
Rajiv K. Prasad: Yeah, so as we have worked through our backlog, the dynamic that we've experienced is that typically, our dealers order these, you know, let's say, simpler configuration trucks, and we've been able to build those much more easily because they use more standard components. So, those we built and shipped, you know, kind of in 2022, 2023, and now as we deplete our backlog, what's left are these, you know, high-priced, complex trucks which have a lot of special engineering in them.
Speaker Change: Yes, so as we have worked through our backlog what the dynamic that we've experienced.
Rajiv K. Prasad: That does.
Rajiv K. Prasad: Typically our dealers order.
Rajiv K. Prasad: Let's say simple configuration trucks, and we've been able to build those.
Rajiv K. Prasad: Much more easily because they use more standard components.
Rajiv K. Prasad: So those we built and shipped.
Rajiv K. Prasad: Kind of hit in 2022 2023, as we end the now as we deplete our backlog.
Rajiv K. Prasad: What's left are these.
Rajiv K. Prasad: Hi, Hi priced.
Rajiv K. Prasad: Complex trucks, which have a lot of special engineering in them.
Rajiv K. Prasad: And those are more difficult to build to give you an idea, let's say if.
Rajiv K. Prasad: And those are more difficult to build. To give you an idea, let's say if, you know, typically you'd have a certain tag time for each of our manufacturing stations, but, you know, let's say 20 minutes per station.
Rajiv K. Prasad: Typically you would have for each of our manufacturing stations you would have a certain tax time.
Rajiv K. Prasad: But let's say 20 minutes per station.
Rajiv K. Prasad: These trucks may be taking 50% more time to get through some of the stations, and that's reducing the amount of volume throughput we can get, but at the same time, their value is much higher. So that's why you've seen the dynamic this quarter where, you know, although the number of units was lower, the actual revenue was pretty good. Now these trucks also have good margin. As we get into the second half of the year, you know, we'll see. We plan to build these mostly in the first, early first half of the year, and in the second half, we'll get back to a more normal mix.
Rajiv K. Prasad: Used trucks, maybe taking 50% more time to get through some of the stations.
Unknown Attendee: for that. Got it.
Rajiv K. Prasad: And that's reducing the amount of volume throughput we can get.
Unknown Attendee: At the same time the value is much higher so thats the way you've seen the dynamic this quarter were.
Unknown Attendee: Although the number of units was lower.
Unknown Attendee: Actual revenue was pretty good.
Unknown Attendee: That's why that's happened now these trucks also have good margin as.
Unknown Attendee: As we get into the second half of the year, and we will see and we plan to build these.
Unknown Attendee: Mostly in the first early first half of the year and second half, we will get back to more normal.
Unknown Attendee: Normal mix.
Speaker Change: Does that got it.
Unknown Attendee: Okay, that's very helpful. And maybe if I could ask another question on modular and scalable, you know, how that process is going. I guess what you've learned so far from the rollout of some of those products, you know, some of those hiccups, do you think things get a bit smoother as you roll out to new lift truck classes? And then maybe with the supply chain, that helps.
Unknown Attendee: Okay.
Speaker Change: Very helpful.
Unknown Attendee: And maybe if I could ask another one on on modular and scalable.
Unknown Attendee: How that process is.
Unknown Attendee: As Don I guess, what you've learned so far from the rollout.
Unknown Attendee: Some of those products.
Unknown Attendee: Some of those hiccups, you think things get a bit smoother as you rollout the new lift truck classes and then maybe with the supply chain that helps that helps im not sure, but just give us a little bit more of an update there yes.
Rajiv K. Prasad: I'm not sure. But just give us a little bit more of an update there. Yeah, sure. I mean, the primary.
Rajiv K. Prasad: Yeah, sure. I mean, the primary hiccup was some technical issues with the rollout of those trucks, mostly software. We've got the majority of that behind us. The trucks are ramping up nicely. We are adding models. So, you know, today we have two to three ton pneumatics in production, and then over the next few quarters, we'll add the cushion trucks, two to three ton, and then one to two ton pneumatic, and then one to two ton cushions at our Craig Oven and Berea plants.
Speaker Change: Yes, sure I mean, the primary hiccup was some technical issues on the rollout of those trucks.
Rajiv K. Prasad: Mostly software.
Rajiv K. Prasad: We've got the majority of that behind us the trucks are ramping up nicely.
Rajiv K. Prasad: We are adding models.
Rajiv K. Prasad: So.
Rajiv K. Prasad: Today, we.
Rajiv K. Prasad: What we have in production is two to three ton pneumatics and then over the next few quarters, we will lap the cushion trucks due to three ton and then one to two ton pneumatic and then one to two time cushions.
Rajiv K. Prasad: Craig oven.
Rajiv K. Prasad: Maria plant and then we will also start manufacturing.
Rajiv K. Prasad: And then we'll also start manufacturing the, you know, the value and the standard platform, the value standard platform, at our Fuyang plant. It's already started for the APIC part of the market, and the rest of the world will come online in the third quarter. So there's still quite a bit of phasing in of all the different models that we sell off that platform. And that will happen through the rest of this year.
Rajiv K. Prasad: See the value in the standard platform value standard platform and App.
Rajiv K. Prasad: Yeah.
Rajiv K. Prasad: It's already started for the APEC part of the market. The rest of the World will come online in the third quarter. So there's still quite a bit of phasing in of the all the different models that we sell off that platform.
Rajiv K. Prasad: That will happen through the rest of this year.
Chip Moore: And sorry, one last one, maybe for you, Scott, on the balance sheet, the inventory position, I think you called out just the larger finished goods position. It sounds like maybe that unwinds fairly near-term, but just how to think about inventories and, obviously, that's working capital is key to receivable flow here, just thoughts on how that plays out this year.
Speaker Change: Great and sorry, if I could one last one maybe for you Scott on the balance sheet.
Chip Moore: The inventory position I think you called out.
Scott: Just the larger finished goods position.
Chip Moore: It sounds like maybe that on lines fairly near term, but just how to think about inventories and obviously thats working capital is keyed up.
Chip Moore: Free cash flow here, just thoughts on how that plays out this year. Thanks.
Scott A. Minder: Sure, Chip. Yeah, I think what we saw was a slower unwind of the inventory in Q1. Largely in finished goods, raw materials did come down as expected, so we expect to pick up the pace on the inventory reductions and make good progress on our long-term goal of 15% working capital as a percent of sales across 2024 and into 2025. So I think it's a good positive for the business, and that will translate into increased free cash flows.
Scott: Sure Chip Yeah, I think what we saw was a slower unwind the inventory in Q1.
Scott A. Minder: Largely in finished goods raw materials did come down as as expected. So we expect to pick up the pace on the inventory reductions and made good progress on our long term goal of 15% working capital as a percent of sales.
Scott A. Minder: Across 2024 and into 2025.
Scott A. Minder: I think it's a good positive yet to come for the business and that will translate into increased free cash flows.
Scott A. Minder: Yeah, maybe I could just add a little bit more color to that. So, as you know, one of the plants that had the longest backlogs was our big truck plant in Nijmegen, and those guys are making some really good progress now. Also, Fuyang is now starting to build trucks for other regions. So what that does is it puts a lot of trucks on the water, and that goes into our marketing inventory as trucks that are in the shipping process.
Speaker Change: Maybe I could just provide a little bit more color to that so as you know one of the plants that was.
Scott A. Minder: Had the longest backlogs were a big truck plant in.
Scott A. Minder: In Nijmegen, and those guys are making some really good progress now.
Scott A. Minder: Also fully Angus now starting to build trucks for.
Scott A. Minder: The other regions.
Scott A. Minder: So what that does it puts a lot of trucks on the water and that goes into our marketing inventory.
Scott A. Minder: As trucks that are in the shipping process, so that that happened it was.
Scott A. Minder: So that happened better than we expected, but that does trap trucks in that category. And now, of course, as soon as they arrive, they're sent to their customers an invoice. So we think it will transition into, you know, receivables fairly quickly.
Scott A. Minder: Better than we expected.
Scott A. Minder: But that does trap trucks in that in that category and now of course as soon as they arrive.
Scott A. Minder: They are sent to their customers and invoice. So we think it will transition into <unk>.
Scott A. Minder: Receivables fairly quickly.
Chip Moore: All right, appreciate all the color. I'll hop back in queue. Thanks.
Speaker Change: Alright, I appreciate all color I'll hop back in queue. Thanks.
Speaker Change: Thanks Chip.
Operator: Our next question comes from The Lion of Bed, Jackson. Your line is open.
Chip Moore: Our next question comes from the line of Ben Jackson. Your line is open.
Edward Randolph Jackson: Thanks. Congratulations on the quarter. It's days like this that make me sad that sell-side analysts aren't allowed to own their own coverage anymore.
Operator: Thanks.
Speaker Change: That's in the quarter stays like this it makes me sad that sell side analysts aren't allowed to own their own cupboard anymore.
Edward Randolph Jackson: Thanks, Ted. I have a few questions. I think some of them have been touched on, actually, in the last conversation, but let's get into them. So, talking about production issues, it sounds like most of the production issues were, I mean, am I correct, they were around the modular stuff, and that that is now fading out. Resolved, yeah, and then.
Jackson: Thanks Ted.
Speaker Change: I have a few questions.
Edward Randolph Jackson: Some of them been touched on actually in.
Edward Randolph Jackson: The last dialogue, but let's get into them.
Edward Randolph Jackson: So I'm talking about production issues it sounds like most of the production issues were.
Edward Randolph Jackson: I mean am I correct they were around.
Edward Randolph Jackson: <unk>.
Edward Randolph Jackson: The modular stuff and that that is now fading out I mean, when do we see these production issues fully <unk>.
Edward Randolph Jackson: Resolved.
Edward Randolph Jackson: Yes.
Unknown Attendee: I'll stop at that right now. The design that's in the backlog now that we're building. These are major account trucks with quite a lot of additional content. And so that's kind of restricting the throughput we can achieve. You know, I think
Edward Randolph Jackson: I'll stop with that right now, yes, so I think.
Unknown Attendee: I think generally the and then the new platform was okay. The majority of the issues, we had were around 4% to seven ton truck.
Unknown Attendee: And also some big trucks.
Unknown Attendee: The issue as I said, the chip was really around the throughput we can achieve because of the complexity of that.
Unknown Attendee: The design that's in backlog now that we are building.
Unknown Attendee: These are major account trucks with quite a lot of additional.
Unknown Attendee: Content.
Unknown Attendee: So thats kind of restricting the.
Unknown Attendee: Throughput we can achieve.
Unknown Attendee: You know, I think another factor that you might want to think some more about is that units aren't necessarily the best indicator of what's going on in the plan. I mean, in another way, that's what Rajiv just said. Um, If you have fewer units going through, but they have higher revenue and a very good margin, that's full utilization of the line. And so, we're tending much more as time goes on to think of revenue throughput rather than individual units. Because remember, in the backlog, we have trucks that range from what to what, Rajiv? Three.
Unknown Attendee: I think another.
Unknown Attendee: Factor you might want to think some more about that.
Unknown Attendee: Units arent necessarily the best indicator of what's going on in the plan and then another way that's what Rajiv just said.
Unknown Attendee: And.
Unknown Attendee: If you have fewer units going through but they have higher revenue and very good margins.
Rajiv: That's a full utilization of the line.
Unknown Attendee: And so.
Unknown Attendee: We're tending much more as time goes on to think of revenue throughput then.
Unknown Attendee: Individual units because remember.
Speaker Change: In the backlog, we have trucks that range from what to what Rajiv 3000 to 500000 so.
Unknown Attendee: So really, to look at the single numbers in the backlog. In terms of units, it's probably not as helpful as understanding and focusing on revenues. That's something we've got to think about as well as you all.
Unknown Attendee: It really to look at the single numbers in the backlog.
Unknown Attendee: In terms of units is probably not as helpful as understanding and focusing on the revenues. That's something we've got to think about is as well as you all and we are okay.
Unknown Attendee: So I'm taking that those answers, then, in the dialogue with and commentary with regard to guidance, that sounds to me like the production issues which are related to the bigger trucks really will be resolved as we get out of the second quarter and you deliver those. We should see again; I just want to be careful about the usage issues.
Unknown Attendee: So taking that those answers been in dialogue with the commentary with regards to guidance that it sounds to me like the production issues, which are related to the bigger trucks really will be resolved as we get out of the second quarter and you deliver those we should see again the highest wanted to be careful about the use.
Speaker Change: Issues, it's okay.
Unknown Attendee: It's okay. These trucks have to be produced. They're very good trucks. And we want to produce them. And we want to take the time that it takes to make them. Yeah, it just, Rajiv used the right word, there's less throughput in terms of units. But the dollar throughput is pretty darn good.
Unknown Attendee: Happy to be produced there very good trucks, and we want to produce and we wanted to take the time that it takes to make them. Yeah. It just rajiv used the right word there's less throughput in terms of units, but the dollars throughput pretty darn good very good.
Unknown Attendee: Very good. So I understand. I understand. I'm just trying to get, but let me get to my question, because my question is really, it's not about terminology, it's, it's, it's tying into that as you deliver that backlog, we will see a gross margin in the lift truck business comparable to the first quarter and the second quarter. And then, because the mix of your production changes, the unit volume will go up, the ASP will go down, and we will see, for lack of a better term, a contraction and gross margin in the second half. That's kind of where I'm going. It's just kind of a cadence of kind of how your backlog is going to be going through your financial statements and how I feel. That's what I'm asking.
Speaker Change: I understand I understand I'm, just trying to get but let me get to my question. Because my question is really it's not about terminology. It's it's.
Unknown Attendee: It's.
Unknown Attendee: Tying into that is as you deliver that.
Unknown Attendee: Backlog that you we will see.
Unknown Attendee: Gross margin in electronics business comparable to the first quarter in the second quarter and then because of the mix of your production change is the unit volume will go up.
Unknown Attendee: The ASP will go down and we will see.
Unknown Attendee: A.
Unknown Attendee: For lack of a better terms a contraction in gross margin in the second half that's kind of where I'm going just kind of the cadence of kind of how how your backlog is going to be going through your financial statements.
Unknown Attendee: And how I see it toward I'm asking yeah.
Unknown Attendee: Yeah, I mean, the way that we're thinking about it right now is that we think the second quarter is going to be like the first quarter. The second half, we're still doing a lot of work to figure out how exactly to execute the second quarter.
Unknown Attendee: Yes.
Unknown Attendee: I think.
Unknown Attendee: The way that we're thinking about it right now is we think the second quarter is going to be like the first quarter.
Unknown Attendee: The second half, we're still doing a lot of work to figure out how exactly to execute.
Unknown Attendee: The second quarter, because execute the second half second half sorry.
Unknown Attendee: second half, sorry. It's, and you know, part of it is that our customers are concerned about getting some of these trucks. So I'll just give you an example, for the second half, we're considering and exploring getting EMEA to build some of the trucks for North America because they have caught up in a much better way, you know; their lead times are now lower than the Americas, so we feel they could build some trucks for America.
Unknown Attendee: It's in a.
Unknown Attendee: Part of it is our customers are concerned about getting some of these trucks. So I'll just give you a for instance for the second half with considering and we're exploring getting EMEA to build some of the trucks for North America, because they have caught up.
Unknown Attendee: In a much better.
Unknown Attendee: Lead times now are lower than the Americas.
Unknown Attendee: We feel that could build some trucks for America. So that's where the second half is still something that we're in the middle of planning.
Unknown Attendee: So that's where, you know, the second half is still something that we're in the middle of planning. So, you know, it's really difficult to comment on that. I think another way to think about it is just the backlog, which really takes this, largely through the year. Yeah, has pretty darn good margins. I think you showed that at this point.
Unknown Attendee: <unk>.
Unknown Attendee: So.
Speaker Change: It's really difficult to comment on that.
Unknown Attendee: I think another way to think about it is the backlog.
Unknown Attendee: Which is.
Unknown Attendee: Really takes us.
Unknown Attendee: Largely through the year, yes.
Unknown Attendee: Yes.
Unknown Attendee: Pretty darn good margins.
Unknown Attendee: Thank you showed that.
Unknown Attendee: We did call out the negative which of course is the likelihood is we see it now that tariff exclusions will not be kept up that'll be a headwind for us in the second half and so it's more of those kinds of things and I guess, the other headwind, we're going to get dialysis the.
Unknown Attendee: Transcripts provided by Transcription Outsourcing, LLC. [inaudible] Because we are getting increasingly more pressure from customers to get these trucks, which are really production-oriented trucks. You know, they're really a core part, you think about the automotive industry, think about the paper industry, the steel industry. These trucks aren't support trucks; they're an integral part of the production system.
Unknown Attendee: <unk> costs and logistic costs because of the Red Sea issues, we've had and it's a longer trip more expensive trip for our material and trucks coming out of Asia.
Unknown Attendee: Two to our plants. So those two are headwinds and we're trying to figure out what is the right way to and where to build some of the trucks as well. So I know, there's a fair bit of complexity, we're trying to manage that ourselves trying to figure out the best way to get through this.
Unknown Attendee: The situation, we find ourselves in.
Unknown Attendee: Because we are getting increasingly more pressure from customers to get these trucks, which are really production oriented trucks and they are really cool part. If you think about automotive think about paper industry steel industry.
Unknown Attendee: These trucks aren't support trucks that are integral part of the production system.
Unknown Attendee: Yep, that's the case, I know. I'm going to beat the unit thing one more time, and then I've got another question behind that. And so when I think about the last call, you know, there was, for lack of a better term, like a shortfall in terms of deliveries, and they got delivered in the first quarter. And, you know, honestly, I was kind of expecting to see, you know, growth in units, at least on a sequential basis. And I did not do it.
Speaker Change: Yep Okay.
Unknown Attendee: So I know.
Unknown Attendee: I'm going to beat the unit thing one more time and then I've got another question behind that and so when I think about the last call.
Unknown Attendee: Was.
Unknown Attendee: For lack of a better term like a shortfall in terms of deliveries and they got delivered in the first quarter.
Unknown Attendee: And honestly I was kind of expecting to see.
Unknown Attendee: Tom.
Unknown Attendee: Growth in units at least on a sequential basis.
Unknown Attendee: And I did not and so I wanted to go into units in <unk> because of if we're going to see units grow.
Unknown Attendee: And so I want to go into units, and why I want to is because if we're going to see units grow... In fiscal 24, relative to fiscal 23, you know, given where you started the first quarter, will we see meaningful unit growth in the second quarter? And because I'm trying to understand, again, kind of the cadence of this as we roll through the fiscal year. So that's kind of where I'm going with it. It's just kind of like, what do I think about the second quarter? And then I do actually have a much more fun question after this. Okay.
Unknown Attendee: In fiscal 'twenty four relative to fiscal 'twenty three.
Unknown Attendee: Given where you started the first quarter.
Unknown Attendee: Will we see meaningful unit growth in the second quarter.
Unknown Attendee: Because I'm trying to understand again kind of the cadence of this as we roll through the fiscal year.
Unknown Attendee: So that's kind of where I'm going with it is just kind of like how do I think about second quarter, and then I do actually have a much more fun question. After this.
Unknown Attendee: Okay, so the way I would think about it is the second quarter is going to be similar to the first, and then the second half, I think, will do better on the build rate.
Unknown Attendee: Hey.
Unknown Attendee: So the way I would think about it the second quarter is going to be similar to first and then the second half I think we will do better on the build rates.
Unknown Attendee: Okay, that was actually easy. Okay, now here's my more fun question for you. Are you ready?
Unknown Attendee: Okay.
Speaker Change: Actually easy Okay now here's my more final question for you you are ready.
Edward Randolph Jackson: So, you commented in the press release and in your presentation about the success you had in the EMEA with warehouse truck work. You know, I know from your investor day that you highlighted the warehouse market as an important opportunity for longer-term growth because you have an underrepresented market share in that vertical. So when I hear that, my question is, is this the success that you had in the first quarter? And what will that success, as you progress through it, mean to your margin structure over time?
Unknown Attendee: So.
Speaker Change: You you commented in the press release and in your presentation about the success you had in EMEA EMEA with warehouse truck orders.
Edward Randolph Jackson: I know from your Investor day that you have highlighted the warehouse market.
Edward Randolph Jackson: Important opportunity for longer term growth because you are underrepresented underrepresented market share in that vertical so when I hear that my question is is the success that you had in the first quarter of 2000 and for an early indication of the success.
Edward Randolph Jackson: Yes, a success in terms of taking market share in that segment.
Edward Randolph Jackson: And what will that success as you progressed through it mean to your margin structure over time.
Rajiv K. Prasad: So, you know, let's just think about share as having two components, participation and close rates. And so where we are very, very focused right now, Ted, is increasing our participation. And there's a huge amount of work going on in every region for us to increase our participation in the warehouse in a very significant way. Now, with some engagements, that can turn into orders fairly quickly. And that's been the case with a couple of major account customers in EMEA. With others, it's a longer lead time to get the clothes and turn those into orders.
Edward Randolph Jackson: And so.
Edward Randolph Jackson: Let's just think about share has two components as participation.
Rajiv K. Prasad: Close rates.
Rajiv K. Prasad: So where we are very very focused right now Ted is increasing our participation.
Rajiv K. Prasad: And there is huge amount of.
Rajiv K. Prasad: Work going on in every region for us to increase our participation in warehouse and a very significant way now with <unk>.
Rajiv K. Prasad: Some engagements that can turn into orders fairly quickly.
Rajiv K. Prasad: And Thats been the case with a couple of major account customers in EMEA.
Rajiv K. Prasad: With others it takes.
Rajiv K. Prasad: It is a longer lead time to turn those into to get the close and turn those into orders.
Rajiv K. Prasad: So, but I would just talk about our focus is to increase participation. And as we start to participate, we'll get a sense for, you know, what we need to do to improve our close rates as we start to get feedback from customers on our initial quotes. So that's the way we're kind of trying to serve the market. Does that make sense in terms of the process and how we're going after it? Yep, you're learning.
Rajiv K. Prasad: So, but I would just talk about our focus is to increase participation.
Rajiv K. Prasad: And as we start to participate we'll get a sense for.
Rajiv K. Prasad: What we need to do to improve our close rates as we start to get feedback from customers on our initial quotes so that's the way we're kind of.
Rajiv K. Prasad: Trying to serve the market.
Rajiv K. Prasad: Does that.
Rajiv K. Prasad: It makes sense in terms of a process.
Rajiv K. Prasad: And how we're going after it.
Edward Randolph Jackson: Yep, you're learning. Well, you have to understand what the market wants so that you can deliver it. That's what you have to say. Yeah, it's that you need the experience. Yeah. Okay, um, I have a couple other questions, but I'll step out of line because I've been on for a while.
Speaker Change: Yes, you are learning what you have to understand what the market wants that you can deliberate that so yes, it's a yes.
Edward Randolph Jackson: You need the experience.
Edward Randolph Jackson: Yes.
Edward Randolph Jackson: Okay.
Speaker Change: Have a couple of other questions, but I'll step out of lines have been on for a while.
Edward Randolph Jackson: Yes.
Operator: There are no further questions at this time. I would like to turn the call back to Christina Kmetko.
Speaker Change: There are no further question at this time I would like to turn the call back to Christina can Matt.
Christina Kmetko: Yes, Pat if you've got some more questions. Please go ahead.
Operator: Yes.
Operator: Okay.
Operator: Please go ahead. If you've got some more questions, please go ahead. Okay. Alright, I will now open the line for Ted Jackson. Please go ahead.
Christina Kmetko: Alright, I will now open the line of Bad Jackson. Please go ahead.
Edward Randolph Jackson: Yeah, sorry, I just didn't want to hog up the call. So I want to talk then about the SG&A line, you know, particularly in lift trucks. It was heavy in both, you know, Americas and EMEA, and I'm just kind of curious about what drove the increases. I should caveat that. And so my question is, kind of what drove the increases? Should I view that as kind of a new baseline going forward?
Ted Jackson: Yes, sorry, I, just didnt want to hang up the call. So I wanted to talk then about.
Speaker Change: Kind of.
Edward Randolph Jackson: The SG&A line, particularly in lift and lift trucks.
Edward Randolph Jackson: It was heavy in both Americas, and EMEA and I'm, just kind of curious what drove that mean relative to my expectations I should caveat that until my question is just kind of what drove the increases should I view that as kind of a new baseline going forward.
Unknown Attendee: I think there are two key elements. The first one is something that we've been saying for a while, that we want to find a way to invest more in some of our strategic initiatives. So we are increasing our headcount a little bit. But the big, big element of it was actually incentive comp, which was incentive compensation, which was paid in March of this year. Two things drove that.
Edward Randolph Jackson:
Speaker Change: I think I think there are two key elements. The first one is something that we've been saying for a while that we want to find a way to invest more on some of our strategic initiatives.
Unknown Attendee: So we are increasing our head count a little bit, but the big big element of it was actually incentive comp which was.
Unknown Attendee: Incentive compensation, which was paid in March of this year and.
Unknown Attendee: Firstly, our performance for 2023 was better than we expected, so the incentive comp program paid out better than we had planned. The other piece was that our share price appreciated, and that has an impact on the equity part of our long-term incentive. So both of those elements are actually the larger element, and that is done for 2023. Now, now we're kind of, you know, accruing for 2024 at the normal rate.
Unknown Attendee: Two things drove that firstly outperformance for 2023, it was better than we expected.
Unknown Attendee: So the incentive comp program paid out better than we had planned the other piece was our share price appreciated and that has an impact on the equity part of our long term incentive.
Unknown Attendee: So both of those elements are actually the the larger element and that that is done for.
Unknown Attendee: 2023, now now we're.
Unknown Attendee:
Unknown Attendee: I will now we're kind of.
Unknown Attendee: In accruing for 2024 at the normal rate.
Unknown Attendee: Okay, so we could actually see that line item pop down in the second quarter and, hopefully, given the trajectory you're on and what you're doing, have the problem of seeing it pop up again, you know, if we get to the end of the year. Okay, I'm going to leave it at that.
Speaker Change: Okay. So we could actually.
Unknown Attendee: That line item pop down in the second quarter, and hopefully given the trajectory you're on and what Youre doing have the problem of seeing a pop up again.
Unknown Attendee: If we get to the end of the year.
Edward Randolph Jackson: Congratulations on the quarter. It was really, really great. Thanks. Thanks for your questions. We appreciate it.
Unknown Attendee: Okay.
Speaker Change: I'll leave it at that congrats on the quarter. It was really really super attentive for your.
Speaker Change: Your questions. We appreciate it.
Operator: If there are no questions at this time, please continue.
Speaker Change: There are no question at this time please continue.
Operator: Okay, with that, we'll conclude our Q&A session. We do thank you for participating.
Christina Kmetko: A replay of our call will be available later this afternoon. We'll also post a transcript on the Investor Relations website when it becomes available. If you have any follow-up questions, please reach out to me. My contact information is on the press release, and I hope you enjoy the rest of your day. Now, I'll turn it back to Chloe to conclude the call.
Speaker Change: Okay with that we'll conclude our Q&A session. We do thank you for participating a replay of our call will be available. Later. This afternoon. We will also post a transcript on the Investor Relations website. When it becomes available. If you have any follow up questions. Please reach out to me My information is on the press release and I Hope you enjoy the rest of your day.
Chloe: Now I'll turn it back to <unk> to conclude the call.
Operator: Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. A replay of this call will be available at 1-888-866-06345, and the passcode will be 72173. You may now disconnect. Thank you.
Chloe: Ladies and gentlemen. This concludes today's conference call. Thank you for your participation a replay of this call will be available at 1888606345 and the pass code will be 7217 suite you may now disconnect. Thank you.
Operator: Oh.
Operator: Okay.
Operator: Okay.
Operator: Okay.
Operator: Yes.
Operator: [music].