Q3 2025 Hyster-Yale Materials Handling Inc Earnings Call
Speaker #1: Good day everyone , and welcome to the HYSTER-YALE, INC. third Quarter 2025 Earnings Call . All participants will be in a listen only mode .
Speaker #1: Should you need assistance , please note conference Specialist by pressing the star key , followed by zero . After today's presentation , there will be an opportunity to ask questions .
Speaker #1: To ask a question , you may press star and then one on your touchtone phones . To withdraw your questions , you may press star and two .
Speaker #1: Please note today's event is being recorded . I'd now like to turn the floor over to Andrea Sejba . Ma'am , please go ahead .
Speaker #2: Good morning and thank you for joining us for HYSTER-YALE, INC. third Quarter 2025 Earnings Call . I'm Andrea Saba , director of investor relations and Treasury .
Speaker #2: Joining me today are Al Rankin , executive chairman , Rajiv Prasad President and Chief Executive Officer . And Scott Minder senior vice president , chief Financial officer and treasurer .
Speaker #2: We'll be discussing . Hyster-yale website . The replay will remain available for approximately 12 months . Today's call contains forward looking statements subject to risks that could cause actual results to differ from those or expressed or implied .
Speaker #2: These risks are outlined in our earnings release and SEC filings . We'll be discussing adjusted results , which we believe are useful to supplement our GAAP financial measures .
Speaker #2: Reconciliations of adjusted operating profit , net income and earnings per share to the most directly comparable GAAP measures are available in our earnings release and investor presentation .
Speaker #2: With that , I'll turn the call over to Rajiv .
Speaker #3: Thanks , Andrea , and good morning , everyone . I'll begin with our view of the current economic environment . How is shaping customer behavior and how high HCL is responding ?
Speaker #3: Scott will follow with our financial results and outlook . And now we'll wrap up before we open the calls for questions . Throughout the first half of 2025 , we maintained a cautiously optimistic outlook , predicting an improvement in market demand in the second half of the year .
Speaker #3: However, since our last update in August, that optimism has faded, largely due to the impact from tariffs on the market.
Speaker #3: Demand and our costs. This shift in sentiment is not unique to our industry; it's a broad trend across the capital goods sectors.
Speaker #3: Customers are navigating volatile interest rates , tariff pressures and geopolitical developments . All of which are influencing long term investment decisions . This is reflected in our own experience during the third quarter .
Speaker #3: These were overall lift truck market demands declined across all regions , and most product categories compared to Q2 . Many customers are postponing capital expenditures and taking a more conservative approach to balance sheet management , citing uncertainty about the trajectory of the interest rates , inflation and broader economic stability .
Speaker #3: Despite the broader market contracting , Heister booking activity ticked higher compared to both the prior year and the previous quarter . This dollar value booking increase is partly due to higher prices on our trucks , driven by higher tariff related material costs .
Speaker #3: Bookings rose to $380 million in Q3 , up from 330 million in quarter two . Gains were led by the EMEA and APAC regions , while the Americas remained stable .
Speaker #3: Bookings improved across all product classes , with class one trucks showing solid growth , improving our position positioning in the warehouse segment . Notably , in October , we saw a strong bookings rate in the Americas for class five trucks and to a lesser extent , class two .
Speaker #3: While it's still early, this uptick may signal that the market is beginning to stabilize and that customers are recognizing the need to invest in new equipment.
Speaker #3: We view this as an encouraging indicator and amidst an otherwise cautious environment , while quoting activities remain solid . Ongoing macroeconomic uncertainty largely due to tariff and interest rate discussions , is causing delays in customer order conversions .
Speaker #3: To safeguard our competitive position , we're implementing targeted initiatives aimed at increasing bookings through enhanced market participation and , quote closure rates . These actions support our dual commitment to deliver optimal solutions and outstanding customer service .
Speaker #3: For example, we've enhanced our product offerings by expanding to our full range of modular and scalable lift truck models that support customer applications from basic to complex.
Speaker #3: This allows customers to select configurations that best fit their operational requirements and budget constraints . The flexibility of our solution helps customers increase productivity at the lowest cost of ownership in addition , our advanced warehouse truck technologies provide improved safety , efficiency and automation options , helping customers optimize their material handling processes and reduce operational costs .
Speaker #3: On the customer's care front, we're strengthening our connections with dealers and end customers by offering comprehensive support throughout the buying cycle. Our dedicated account teams work closely with customers to analyze fleet performance, identify opportunities for upgrades, and ensure recommendations are tailored to each customer's specific challenges.
Speaker #3: We also provide responsive after sales support , including rapid maintenance services and proactive parts availability to minimize downtime and keep operations running smoothly .
Speaker #3: Regular training sessions for dealer personnel ensure that our partners are equipped to deliver prompt , knowledgeable service to end users by engaging closely with our customers , we can better understand their changing priorities and collaborate to solve their most critical needs .
Speaker #3: We backed these efforts with robust support services , continuing to deliver value beyond the product . We strive to help our customers maintain efficient , reliable fleets across all business conditions .
We are moderating near-term production expectations to preserve manufacturing. Efficiency, optimizing inventory and maintain appropriate, backlog levels.
As a result, we anticipate further backlog degradation in the near term if shipments continue to outpace booking.
We?
We may need to take additional actions to better align our cost structure with evolving market conditions.
We've seen many Market cycles and our experience tells us that resilience and Readiness are key. Regardless of external factors. We remain focused on what we can control, efficiency, productivity, Innovation, and responsible cash management.
To ensure this commitment, we're executing on several fronts: the position and high steel for the long-term success.
These are operational efficiencies. We continue to streamline operations, optimizing inventory levels and improving working capital efficiency to generate cash.
In a lower revenue and profit environment.
Manufacturing flexibility in our modular vehicle designs allows us to produce the same model in multiple regions, giving us the flexibility to shift production in response to tariff changes or supply chain disruptions.
Customer engagement.
With our deepening relationships with our dealers and customers, we are listening closely to their evolving needs and co-developing solutions to address their most pressing challenges. Through product innovation, we're accelerating the rollout of new products and technologies that enhance performance, reduce total cost of ownership, and differentiate us in the marketplace.
Market Readiness. We're watching leading indicators closely and preparing to scale quickly. Our goal is to be a first mover ready to capture growth as soon as customer confidence returns.
Factoring in footprint and supply chain to ensure cost competitiveness and responsiveness across all regions.
These actions are enabling us to navigate the current environment with agility and discipline. So that when the market recovers
We're prepared to emerge stronger over the longer term. We're reducing earnings volatility.
Through a lower Break, Even point and more resilient product margins.
We remain committed to our strategy.
By maintaining operational discipline and investing in the right areas, we're confident in our ability to deliver sustainable growth and profitability over time.
Now I'll turn it over to Scott to walk through walk you through our financial results and outlook for the remainder of 2025.
Thanks Ari. Let's take a closer look at our Q3 results starting with the Lift Truck business.
Lift Truck revenues for Q3 were $929 million, reflecting a 4% decline compared to the prior year.
This decrease was primarily due to lower truck volumes across all product lines.
Lower volumes where direct results of ongoing economic uncertainty, which has led to a Slowdown in customer bookings, over the past, several quarters.
In response to the softer demand and lower backlog. We adjusted our production rates to better, align with current market conditions.
Looking at the results by region.
In the Americas, truck volume sales saw a significant drop in our higher value classes, 4 and 5 trucks, in the 1 to 3.5 times range.
Many industrial customers deferred and flipped truck purchases due to lower equipment utilization rates within their existing fleet.
these were largely caused by reduced manufacturing output, amid demand uncertainty
Looking at emea revenues increased to year-over-year primarily due to higher truck sales and favorable currency translation.
Sequentially overall, Lift Truck revenues, improved supported by stronger sales of higher value, 4 to 9 ton electric and internal combustion trucks.
Q3's, operating results. Still short of our expectations, primarily due to higher tariff costs.
Including new tariffs on steel Imports during the quarter.
Operating profit declined by 27 million a year over year mainly driven by lower truck volumes.
Some of these negative impacts were offset by our strategic pricing actions in a favorable sales, mix shift, toward higher value, 4 to 9 ton trucks in the Americas.
Additionally q3's operating cost decreased compared to Prior year, mainly because of lower employee related expenses, including reduced incentive compensation, and savings from Nova's previously announced strategic realignment.
Breaking down Regional performance operating profit in the America's declined, primarily due to higher tariff, costs and lower truck volumes.
These negative factors were partially offset, by increased selling prices and reduced Freight expenses.
In emea. The operating loss was mainly a result of pricing and margin pressures. As lower priced foreign trucks, increased their market share in a variety of European markets.
Additionally material costs were elevated due to inflation.
Sequentially, adjusted operating profit decreased largely due to lower product. Margins from increased tariff costs,
moving to the Zone. Q3 revenues were 87 million dropping 11% year-over-year. This decrease was primarily driven by our plan phase out of lower margin Legacy transmission components and softer Lift Truck demand in the US.
Gross profit declined moderately. But a favorable product mix offset, the impact from lower volumes and reduced manufacturing. Overhead absorption.
Q3 operating profit was 2.1 million down from 6.2 million in the prior year.
with higher employee related costs negatively impacting profitability,
On a sequential basis. All zoning, sales decreased, mainly due to lower, specialized attachment sales in the Americas.
Gross profit remains stable supported by a favorable product mix in emea. However, operating profit declined due to increased employee related expenses.
Next, I'll cover the company's tax position.
We recorded an income tax benefit of 2.9 Million in Q3 reflecting the positive impact. From 3 Cent us, tax reform,
this legislation allows us to immediately expense research and development costs.
Versus deferring, a significant portion over the next several years.
Looking at cash flow in our balance sheet.
Q3 operating cash flow of $37 million improved by nearly 25% from Q2's level.
This favorable move was largely driven by improved inventory performance.
Excluding foreign currency and tariff related, impacts of 40 million, Q3 inventory, decreased by 155 million year-over-year, and by 35 million sequentially.
Q3 working capital stood at 20% of sales.
Down from Q2 levels. But above our long-term Target,
Company continues to make progress on its initiatives to align production schedules with available materials and expects further inventory, improvements in the coming quarters.
Q3's net debt of $397 million remains a solid position, improving modestly from the prior year and prior quarter.
While our debt levels, did not reduce significantly stability in a volatile demand and cost environment highlights. Our focus on cash, generation and discipline, Capital allocation,
The company's unused borrowing capacity of 275 million increased by 6% from Q2.
Q3 financial leverage as measured by net debt, to adjusted ebit, knob increased to 2.9 times due to lower earnings,
We remain committed to managing our debt and leverage ratios across market cycles.
For focusing on the things that we can control optimizing working capital and maintaining operating and capital expense discipline.
These actions help to ensure that our leverage level remains supportive of our strength and credit ratings.
With that I'll move on to our fourth quarter Outlook.
First, how outlined some key tariff related assumptions in our guidance.
Chinese tariffs and aggregate of 79%.
Section 232: Tariffs included for steel and steel derivatives.
Our section 301, tariff exemption for Lift Truck Parts ends on November 29th, 2025.
There are no Lift Trucks. Specific tariffs put into place.
Our demand projections, lose bookings, backlog and market trends. We assume no demand drop due to a us or global economic recession.
finally, our proactive sourcing costing and pricing initiatives are expected to reduce but not fully offset negative tariff impacts
Recent informal announcements, suggest that Chinese tariff levels will be reduced. And that our section 301, tariff exemption will be extended by 1 year to November 2026.
These changes if finalized will benefit our Q4 Financial results by 2 to 3 million dollars compared to our current assumptions.
Evolving tariff, policies. Continue to shape our financial Outlook.
Despite our mitigation strategies, tariffs remain a major challenge for the company.
in Q3 direct tariff costs totaled, $40 million while also dampening demand levels across the
Variety of end markets and customers.
These negative impacts are expected to persist for the foreseeable future.
The business is working diligently to limit these negative impacts.
Our sourcing teams proactively seek alternative suppliers and Regional solutions to reduce our exposure to high tariff countries.
At the same time, we're driving operational efficiencies in maintaining cost discipline to enhance our margin resilience.
In addition to these actions, pricing has been a critical lever in our mitigation strategy.
As the Tariff landscape has shifted in value and focus.
We've seen a variety of competitor approaches in the market.
As an American company, with a significant domestic manufacturing base and a global supply chain, we felt the Tariff impact more quickly, and often more robustly than others in our Market.
As a result, we led with pricing actions that have delivered a strong year-to-date benefit.
They've not fully offset. The negative tariff impact is largely due to the rapid changes in tariff rates applied to different countries.
Competitive intensity has increased and our core markets as industry volumes have contracted as a result. We're focused on a range of tactical and strategic actions to support long-term growth and profitability.
The ongoing tariff policy uncertainty makes it increasingly challenging to predict future financial impacts.
And this environment we remain committed to cost discipline and to driving Revenue through higher truck volumes increased, penetration of new technologies and enhanced market adoption of our new products, including additional modular truck, configurations, and Lithium-ion batteries.
With the foundation laid, I'll cover our Q4 Outlook starting with the Lift Truck business.
We expect Q4 Revenue to decline compared to Q3 due to lower production rates caused by a reduced bookings over the past few quarters.
We're projecting a moderate operating loss, mainly due to lower production rates and persistent tariff. Headwinds
We anticipate that elevated. Tariff levels and softer market demand will remain negative factors into early 2026.
Our Outlook assumes positive impacts from cost control and prior pricing actions to serve as partial offsets.
We'll watch market demand and tariff rates closely, and we will take additional cost actions as needed to maintain profitability.
Longer term, we can continue to make progress on the project announced in late 2024 to streamline our U.S. manufacturing footprint.
So far this year we've invested 2.4 million dollars with another 3 million dollars planned for Q4.
This project is expected to deliver between 30 and 40 million dollars. In annualized savings by 2027 lowering our financial Break Even point and enhancing our margin resilience.
Returning to bonds Q4 Outlook revenues, are projected to decrease slightly. Compared to Q3 reflecting weaker demand in US operations.
Operating profit is expected to be modestly above Q3 as product, mix improvements compensate for lower sales volumes.
I'll close with a few comments on financial discipline and capital allocation and how they position us for the future.
Over the past several years, we've increased our business's resiliency improving product margins with pricing discipline and lowering costs.
Ultimately enabling us to better navigate challenging market cycles.
We continue to target a 7% operating profit margin across the business cycle. It's important to recognize that tariffs have significantly and unexpectedly increased our costs and created substantial market uncertainty.
Save negatively affected industry, demand our bookings, our backlog, and ultimately our revenue.
While we've taken meaningful actions to offset these impacts, we expect our near-term financial results to fall. Well, below targeted levels
Looking ahead, our focus remains on taking actions that further strengthen our financial performance during economic downturns.
We're driving. Significant fixed cost, reductions.
Building Greater Revenue resiliency and investing. In Innovative new products that we believe will allow us to capture profitable market share over time.
Generating, solid, operating cash flow and deploying Capital accredited remain top priorities throughout the business cycle.
For the full year 2025, we anticipate cash flow from operations to be solid but well below strong 2024 levels.
Reflecting significantly lower net income partially offset by working. Capital Improvements in cost-saving benefits.
Strategic Investments are core to our ongoing business strategy in 2025, we expect Capital expenditures to be between 50 and 60 million dollars with Investments focused on developing new Products Manufacturing efficiencies. And it infrastructure upgrades,
These investments will help to streamline our operations, lower our financial Break, Even point and position. The company for long-term profitable growth,
As we generate cash, we're committed to our Capital allocation framework producing debt.
Now, I'll turn the call over to Al for his closing remarks.
Thank you, Scott.
We are operating in a period of extraordinary transition.
Facing both significant challenges and new opportunities.
Today's environment is particularly shaped by the effects of elevated tariffs, which have operating costs and made supply chain planning and pricing more complex.
While these terrorists present a short-term obstacles, we expect their impact to gradually stabilized as prices and tariffs come into equilibrium.
This transitional phase is further Complicated by a cyclical low and Industry booking demand.
Following an unprecedented surge in bookings. During the co 19 pandemic.
however, shipment levels have remained significantly, higher than Factory booking levels which suggests to us that the time for new Factory booking orders is now being reached
As booking demand returns to more typical levels, we will also need to navigate the shift in competitive environment.
To increase value and standard applications with discipline and strategic foresight.
Rotary economic factors also influence our Outlook. The manufacturing sector is showing shipment resilience.
Yet ongoing volatility and fluctuating interest rates continue to affect both investment decisions and customer purchasing Behavior.
These conditions highlight the need for flexible and highly responsive forward-looking strategy, which allows us to adjust quickly to protect and build long-term Market position.
In response to these near-term pressures. Our strategic Focus remains on transformation and sustainable growth.
As Regime and Scott have described.
We are both strengthening our core counterbalance business and investing in Warehouse Lift Trucks, Technology Solutions, Energy Solutions, and attachments.
These initiatives are helping us address current challenges and position our company to capture future opportunities.
Our goal is to ensure both competitive advantage and market responsiveness in the next market upturn.
We remain committed to providing optimal solutions and exceptional care for our customers. We are confident that the actions we are taking today will deliver lasting benefits to our customers, shareholders, and stakeholders.
As we continue navigating this complex environment, we look forward to keeping you up-to-date on our progress and achievements.
This concludes our prepared remarks. We will now open the call for questions.
Please and gentlemen, at this time, we'll begin the question and answer session to ask a question. You may press star and then 1 using a touchtone telephone to withdraw your questions. You may press star and 2
If you are using a speaker-phone, we do ask that you please pick up the handset prior to pressing the keys to ensure the best sound quality.
Once again, that is star and then 1 to join the question queue.
First question today comes from Chip Moore from Roth. Please. Go ahead with your question.
Hey, thanks for taking the question. Hey everybody. Um thank you. I just want to hey what's what it asks on, you know, the current environment of Demand on certainty obviously every Cycles unique but just how would you compare this? I guess with some of the prior.
Uh abs and flows. You've been through over the years and and how long you think these deferrals could last. It sounds like you're thinking maybe you see some improvement perhaps early next year but but what are your thoughts?
yeah, maybe I'll get started and others and, uh,
Make the comment chip. Um, so I think the way that we see the market market is still pretty active in what I mean by that is there's still uh, request for quote processes running. Uh, you know, people are reaching out to our sales people and our dealers. Um, what
You know, slow decision-making.
Um, I think that's really driven by the volatility of the environment people find themselves in, whether they're worried about tariffs.
And then the other piece is they're worried about interest rates and what Dynamics that's going to have with the, uh, the, you know, that whole environment. There's a cutting environment, but there are other things going on.
So I think it's just a, uh, one last thing I would say, Chip, is a large number of our customers have still also been digesting trucks that they ordered in the past.
uh, which we've been, you know, we're towards the end of it, but we still got probably another quarter of production to go, which was ordered, you know,
A while back. Um, so if you look at it from a customer's point of view, they've been getting a series of trucks. They haven't been ordering anything because, you know, they've been digesting it. Um, and I think that's coming to an end.
Um,
So, we expect that slowly the market will start to recover, and people will begin to make those decisions because there is no avoiding it ultimately. Um, but I think the next 2 to 3 months, um, maybe a little longer, it's going to be that stop-start where processes are being implemented, but decisions are not being made.
Um, we've seen that open up a little bit, you know, over the last few weeks, but I think they've still got a ways to go the other. Last 1 last element is our dealers.
Were in the similar situation with their inventory and those inventories have worked mostly worked their way down. So we're starting to get orders from our dealers now as well to restock.
Got it. That's helpful color regime and I guess maybe a follow-up would be, you know, if you do see uh you know, more degradation, if we get some sort of, you know, macro downturn, you know what the actions could you take if if needed and you know, what would really trigger that
Yeah, I mean we're pretty much looking at everything right now. Um, you know, all of our cost structures, how we utilizing our plants, uh, is there a wet better way to run the plants. Uh, we haven't come to conclusions. We will come to conclusions. I would say in the next few weeks.
um so we are actually, I mean, if you look at it from a production point of view we're going to
right in a prepare for,
Something that you know like you're talking about uh but still stay vigilant and ready to ramp up. If we start to see bookings and backlogs grow,
uh so we are going to take a bit of a conservative posture uh, for the next uh,
Quarter or 2.
got it that's appreciate that and you know maybe just more long-term you know as as things do normalize just strategically uh around some of the Investments you're making just
You know, more of an update on, uh, the new modular, scalable platform. How, you know, how that's progressing, any challenges, and then...
Uh, lithium ion, right? Some some strategy there, just maybe speak to that, thanks.
Yeah. Um I think for much in the modular scalable products, if you look at our most important markets, uh North America and Europe, you know, those products, the full scale has just
Got to those, uh, those markets. Now, we've had it in APIC, Asia Pacific for a while and Latin America for a while, and we've had very, very positive feedback from those markets. Now, as our dealers and some customers start to see these full scale, we're getting similar responses.
Um, from them. Um, we've based on some advice from our dealers. We've updated some of our nomenclature to for them to better position the products in this new way. Um, so we feel really good. We still due to land and distribute M, you know, significant numbers of these trucks
Um, that will happen over the next three months or so. Uh, and then we'll start to get a better feel for how the customers are feeling about the more. Um, you know what, we're calling the prime match and the core match, um, which are, I would call, the standard and the prime kind of solutions in the field.
In North America, where we've put lithium ion batteries in a large number of their operations, it's been very successful.
Um, and then we're launching our integrated lithium ion solution. What we call the XT,
LG, or MX, LG LG is lithium ion. And the xtm x is the name of the model. Um,
these will be rolled out both in North America Europe. They're already in asia-pacific and being very successful. So we feel really good about where lithium ions going, um, early next year will have it will introduce a new set of electric trucks, which will come ready to ready with lithium ion batteries.
Great. Thanks very much. I'll hop back in queue.
Our next question comes from Ted Jackson from Northland Securities, please, go ahead with your question.
Thanks for taking my questions. Good morning.
Hey.
Um so uh first question would be, you know, with regards to the weaknesses you're seeing. I know, you talked about it, some more of a macro level with, you know, uncertainty
Tariffs and you know whatever um what about from like a vertical level. So the Americas is the key 1, you know? I mean I I've understood from, you know, people I've talked to that, you know, in particular like for instance, you know, the auto market has been a little soft because
You know, you have, you know, a few things in headwinds. One is the, um, you know, sort of a redeployment of assets around the EVs that weren't necessarily needed. So, you know, there were some excess there. And then I'm also curious with, you know, you can this aluminum issue and the impact.
You know with the auto markets because you know like they there was a bunch of news with regards to, you know, over trust and stuff. So I guess what I'm asking is is is is there any kind of, you know, vertical for you that
Stands out in terms of some of the headwinds you would... and then how is it auto? And if it's not, can you talk a little bit about how? So that's your auto exposure on what's going on in America, and then you got to come.
Yeah, I think in terms of material availability, I don't think we have any specific issues. I mean we obviously have our um in a normal I would say back to 2018209 type of things. Where you know, we get stuck out because of some reason or suppliers late with delivery, but no foundational issue with our uh materials or um you know components.
the, the other, the other
In a piece though is is the cost of it, right? I mean, certainly we're not so aluminum intensive, but we are definitely steel and iron intensive and those are
Those are, you know, kind of uh, been a significant issue for cost, but also of transition, we, we were using Global steals in North America, you know? And we're transitioning to, um, now mostly us steel as much as we can, especially in our Mexico operations.
Um,
so,
you know, so that that's
good. I mean from a customer's point of view in terms of how they're being impacted, we've certainly seen us slow down on the manufacturing side. You know, we you've touched on auto, um, you know, we would also put kind of most heavy Manufacturing in that environment, um, you know, I think retail has been fine. Uh, I think, um, you know, I would say, even light manufacturing and distribution has been fine food, and beverage has been. Okay.
So I think a majority of it has been the heavy side, you know? And obviously that's very important to us. While we're talking about the paper industry, the metals, uh, large, um you know, equipment um so that that that's been uh the big
The big customer, uh, issue. We starting to see that is a little bit. But as I said, we we just, we, it's very new. We haven't seen that spread yet.
on that front because it's keeping, you know, cheaper Chinese stuff out or
I think, I think price pricing pressure is everywhere. And normally that happens when we're not fully utilizing our capacity, everybody wants the extra capacity, extra share to drive it. Um,
what I was saying is that we didn't have all the right Solutions in place the scalable solutions they were going through their validation process, you know, we need to meet some very specific requirements. For instance, UL in North America and we need to meet all the CE requirements in in Europe.
Um, so that’s taken a while and now we’re, uh, we’re ready to, um, to deliver trucks. Um, so it was more an availability issue, not so much, you know, that we didn’t see the competitive pressure. Now, I would say that certainly from, if I look at how the Chinese competitors are.
Behaving in EMA and apic.
Versus North America. There's definitely, there's some, um.
Inhibition in the North in the USA, from
Because of the tariffs. Now we're also being in a some of these trucks that we compete with uh them on. Do also come from China for us. So it's not as if we have a
An advantage. But, um,
But it's at least until recently we didn't have the availability because of completing our validation processes.
So we're not listening to the um, some of the things that's saying with pricing pressure and irresponsible pricing pressure, the the biggest response for pricing pressure for you is, I mean, not that, it's not that you're going to get, you're getting more aggressive than discounting. It's that you're going to have the new modular products and allow you to be able to offer a lower price product. Absolutely. So the idea behind this whole scalability was give the customer the product that works in their application.
Um, and if we can do that, they'll get the productivity they need at the lowest cost of ownership. So that is the mission behind um this whole scalability. And
You know, it's going to take a little bit of time to get that through to our network and, uh, and our customers, but we've been working on that, getting everybody ready. We had some feedback, we've adapted to that feedback. And so I think now it's just a case of getting the products out in the hands of our customers so they can see how good these are, uh, and um,
and feel that if A is the right option for them,
Well, you're absolutely right. We expect our margins to be.
Around that Target margins because we're putting the right track at the right customer. Whereas in the past, we would have taken what we had and tried to put it into segments where it didn't work, compromising of margin.
Um my last question is um you referenced in in the fresh release that uh you're going to be taking actions to increase, your closure rates, you know where I got.
The quoting activity is fine.
Yeah, the quote, the quoting act.
Yeah, I participation is fine. Um what we're starting to do is work closely with customers to understand what their actual Fleet position is
Um, you know, customers focus on what their core, um, value proposition is, and material handling for a number of them isn't. So, we're going to do some extra work with them to show them that if they have older vehicles in their range, that they should,
You know, that could lead to being on the wrong side of the cost of ownership.
We will also, you know, create some um, you know, working with our partners, create some very specific solutions for them in terms of
what's in the truck but also you know how we Finance it Etc. So there are a number of steps with really going customer by customer and looking at what it would take for the customer to get over the hurdle on not wanting to make this decision. When there is all this volatility around, uh, around them.
You would then. Yep. And and making that whatever whatever we're doing, much more focused on that customer rather than a general.
Um, hey, look, let's do this. Let's reduce the price, or let's offer an extended warranty, or let's do something else, right? I mean, if the customer is concerned about something, we want to be able to solve their problem.
Okay, I understand. Okay, thank you for taking my questions.
Thanks, you're welcome.
Our next question comes from Kirk Lucky from imperial capital. Please go ahead with your question.
Um, hello everyone. Thank you. Thank you for the call.
Thank you. Uh I just had a I had a follow-up on on the automation uh topic. You know, their Amazon's
Efforts to automate their facilities have have, has been in the Press recently and, you know, I was hoping maybe you could expand on.
The pace of automation. Is it, is it accelerating?
And, and what impact that has on your mix?
Yeah. The um
Let's say the interest in automation is enormous.
uh because of the um you know, some of the basic um trends that we're seeing, you know, availability of people, you know kind of and if you do get people what is their expertise like in driving drugs,
Um, you know the implementation has been slower than we would expect. And part of that is as you as you automate, you have to redesign some work. You have to redesign some of the material flow. Uh, and so the approach we've taken is we're working with customers in a very partnered approach, um, so that they can experience what automation can do for them.
Once they realize that, then they're able to.
then identify how they could reconfigure their operation to better suit. Um, and we're working at the moment, we're working with some of the largest
Companies, I won't go into those, but, uh,
but all the ones that are
Talking and writing about automation, we're working with at the moment, but I think it's going to take a...
I think it's 1 of those things that's going to take some time for people to really understand how best to deploy these Technologies how to implement them and integrate them into their operations and then it will take off. So I expect um
A build up. Uh but then a a a
you know, kind of
fast, uh, acceleration after that.
Yeah and Kirk I I would add that as that Trend takes hold uh those trucks whether they be with um our hybrid automation or our full automation come with higher prices and higher margins generally so the benefit will occur to the customer and their total cost of ownership but will come back to us as well. Uh from sale of the unit in the ongoing revenue of the technology.
So, so, so, you, you would consider...
This automation is expected to be a positive for your business.
Yes, absolutely. I mean, we have automated trucks. We have about 600 or 700 of them running around today.
And, uh, we're building that up. But slowly, we have, uh, a primary product released now, um, and in the marketplace, uh, we'll, and then every 6 to 9 months, we'll be releasing another automated product.
Excellent, thank you. And then a follow-up on the excess equipment that you see out there. When do you expect that excess equipment to be?
Uh, depleted and orders to pick up, you know, quarter. Any guesses to timing?
Yeah, I think we're working with our network to get their excess inventory in the right place by the end of the year. So we expect our dealers, and they're selling signs of it, as I said, to start ordering at, you know, to the factory rather than.
There haven't been running rfqs.
You know, some of them, specially the heavy side of the business and really making decisions. And that's where I talked to Ted about that. We're putting some special activities in place to help customers, get through that process efficiently.
Got it. And then, lastly, um, you know, I guess we're...
is some of the of your customers hesitancy on on placing orders.
Are they waiting for interest rates to come down? Is that part of what is going on here or or are there other? I'm sure there are other a lot of things but is that is that a meaningful?
Uh, Factor.
I think, you know, if I just think about ourselves, right? We we're like them, um, you know, we're, we're kind of think looking at the ism numbers, you know, the, uh, we're looking at. You know, what is going to happen to interest rates, we're looking at tariffs in, in the Dynamics of tariffs and what it means to us.
Um, we're also looking at, you know, in the worst conditions, what sort of capital requirements do we have? And then, once you've evaluated all of that, you know, you go, all right, what can I, what should I do now?
The one thing that gets left out because it's not obvious to the customer is they're flat. Fleet has aged as well.
And the downside of that is that their cost of operation is going to go up.
And so, we just want them to put that into the mix of their analysis, um, and help them with it. So.
That's the way we feel. We can move them off center because we can absolutely understand why. You know, those elements could create a bit of a freeze moment.
For making capital.
At least capital expenditures that you feel you have some flexibility with.
Got it. That's super helpful. And then I, if I could just sneak 1 last 1 in, um, on the Tariff front, I think I heard you say, you know, you're not at an advantage. I mean, everyone's sourcing the same components from the same company, uh, countries. Uh, you're not in an advantage. You're not at a disadvantage with respect to the other, with your competitors, with respect to your competitors.
I think I think that's generally true, but there are definitely exceptions, you know, I mean, I think, you know, if I just take South Korea as an example,
uh, so
You know, if you are a South Korean manufacturer, you can pretty much import parts from anywhere, mostly tax-free.
You can build with Korean Steel.
And you know when you bring it in, you'll have to pay.
You know, the duty on steel and then, on top of that, 15%.
Duty on the truck.
Uh, I think that and I think the same thing from Japan. So I think those end up being, whereas we're buying us steel, which is, you know, it because of the duty, those
just I need to look at the price of steel and see what's happened. Um, then we're paying Duty.
Depending on where it comes. If you know a lot of our components come flow from globally, so, China, India, you know, other Far, East and Eastern European countries and you could be paying significant
Um, tariffs on those specially from China and India.
and then, when you build trucks with those in North America,
Um, I think under those conditions, we feel ...
That's a bit of an unfair situation.
Our next question comes from.
Our next question comes from Jack Fits Simmons from Credential. Please go ahead with your question.
Hey thanks for taking my question. Um I think you mentioned cancellations in the prepared remarks. So it was just wondering if you saw a pickup in cancellations and 3 q and and if so if you could just quantify that number
Yeah, I mean, I think now we're not, you know, the majority of our cancellations are behind us. They were particularly, uh, difficult during the, I would say, second quarter, first and second quarter.
I think, you know, as our backlog has come down.
Those are really, um, we're told out. So we wouldn't expect many cancellations. Looking, you know, there weren't many during this quarter, and we wouldn't expect many.
Moving forward.
And these cancellations were from orders that were made in.
2020, late 2023 or 2024, so, um,
You know, they weren't recent cancellations of recent orders.
Was helpful, um, and then just 1 more for me, I, I guess in the release, you mentioned, 40 million, tariff impact in 3Q. Just clarification is that net of price increases in other actions and if not kind of how much of that costs, were you able to mitigate? And do maybe I could say if you guys, and then Scott can, um,
So, you know, don't forget we build trucks in backlog. And as I already said, the market is pretty intense because of, you know, we us not all fully utilizing our capacity.
So we felt that there wasn't an easy way for us to go back. We tried to go back to the marketplace customers. Pretty much said, hey, we'll just just go back to the market. So on these backlog trucks,
We weren't able to get any extensive way, any pricing on it?
So we took the cost, and we had to. And that's, majority of that $40 million was the tariff, and it mostly hit our, um...
in a p&l.
And, you know, I think that will still be somewhat the case next quarter because we're still in that situation. Uh, and then, you know, the things that we're booking now.
You know, are better from a uh incorporating the tariffs in them um either at s charges or price increases.
so,
We'll get Scott. Well, I think you covered it pretty well, I would say, yeah. The the 40 was the gross tariff cost. And we were able to offset less than half of that with price in the quarter for the factors that receive laid out.
And our next question comes from Eric Valentine from CVC. Please go ahead with your question.
Hey guys, thanks for taking the call. Just kind of a follow up on that, on that question, on the backlog and the pricing, I know in the past, you've talked about that, you know, you want a profitable backlog and so forth. Now, it sounds like there's some still some unprofitable or
Lower profitable.
Units in the backlog of the overall backlog. What kind of percent is related to?
Those kind of unprofitable.
Lower profitable units. And, and so, when do we think that, you know, when you start showing the value of the backlog, you know, 1 billion, 1.2 billion, whatever that number is, that's really 100% profitable.
Or, you know, pretty close to. Yeah, I think we get there.
Yeah, I think we'll get there in January. Uh, January February. I think we still have some and I wouldn't say that these were uh, bad margins. When taken those were actually very good margins, but then we've had, you know, as you heard $40 million worth of tariffs.
Which went around when we took those, uh, bookings. So um so really the uncovered
UNT tariff covered backlog will be out of mostly by
you know, early first quarter next year,
In terms of what we building.
And of course, we're booking those right now.
Yeah. Okay. Okay. And then on your comments about the kind of the fourth quarter and the profitability falling off, I know you've talked about how you didn't want to go back to the days of EBITDA negative and so forth. I mean, obviously, the Do's are falling off pretty significantly this year. I mean, are we looking at a situation where we could potentially be back into that EBITDA negative sometime in next year until the industry flips around? Or are you pretty confident that you're going to?
Stay at least positive.
I think it's really difficult to tell at the moment. Um,
you know, you saw us
You know, we're pretty close to break even this quarter. Um, I think, as we've guided, we're going down. So going a little lower for the next, uh,
Next.
Couple of periods. So I think that's the best I can do right now.
You know, you're working with the customers, is it, is it really? The customers are the the issue and the sense of you have the product that you can deliver to them? That's you know, functional
AI automated and so forth. It's really the customers that need to kind of figure out their plants and figure out, you know what they want to to how they want to operate. Or is there something else? That's kind of limiting you guys. Yeah. It's a the way we've designed our automated solution is really more from Material, Handling point of view. We're not, uh,
In our software, you know, we use software, but really, my material handling people know the most effective use. Again, we are using our own solutions in our own plants.
So we know what it takes to optimally use it.
And we think we have a role to play in that with our customers. We've always felt that with the solutions we put in place. That's part of our value proposition. That's how we can differentiate ourselves and provide the customer with a solution that is better value for them.
uh so we're getting all of our uh salespeople dealers ready as well as customers to be able to uh do the same thing and we have a pilot going on right now with a a number of key customers working with our our internal uh automation implementation team to
To pilot these concepts, we’ve had very, very positive feedback from those customers.
In what we're doing.
And it's seen as very differentiated.
And with that, we'll be concluding today's question and answer session. I'd like to turn the floor back over to Andrea Saba for closing remarks.
Thank you for your questions. A replay of our call will be available online later today and the transcript will be posted on the Hyster. Yale website. If you have any follow-up questions, please feel free to reach out to me directly. My contact information is included in the press release.
Thank you again for joining us today, and I'll turn the call over to Jamie to provide the replay information.
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