Prepared remarks
Good day, and welcome to the Hyster-Yale Inc. Second Quarter 2026 Earnings Conference Call. Please note that today's event is being recorded. I would now like to turn the conference over to Andrea Sejba, Director of Investor Relations and Treasury. Please go ahead.
Good morning, and thank you for joining us for Hyster-Yale's Second Quarter 2026 Earnings Call. I am Andrea Sejba, Director of Investor Relations and Treasury. Joining me today are Al Rankin, Executive Chairman; and Rajiv Prasad, President and Chief Executive Officer. We will be discussing our Q2 2026 earnings release issued yesterday. You can find the release and a replay of this webcast on the 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 materially from those expressed or implied. These risks are outlined in our earnings release and SEC filings. We will also discuss adjusted results, which we believe are useful supplements to GAAP financial measures. Reconciliations of adjusted results to the most directly comparable GAAP measures are available in our earnings release and investor presentation. Before turning the call over to Rajiv, I will briefly highlight our second quarter results. The second quarter of 2026 represented another step forward in what we continue to view as a gradual market recovery. Compared with the first quarter of 2026, we improved in several key metrics, including bookings, revenue, operating performance and cash flow. While volumes remain below optimal levels and profitability is still under pressure, the trends during the second quarter provide evidence that demand and business activity are moving in the right direction. Bookings for the quarter were $680 million, up 17% sequentially and more than double the level of the second quarter of 2025. This marks our fourth consecutive quarter of bookings growth. Revenue was $813 million, up 2% compared to the first quarter of 2026 as stronger bookings began translating into higher shipments. Consolidated operating loss improved to $18 million, approximately $10 million better than the first quarter of 2026. Most of that improvement came from the lift truck business, where higher shipments, favorable pricing and lower employee-related expenses helped offset ongoing market challenges. The quarter also included a $35 million in tariff refunds. However, those benefits were largely offset by unfavorable capitalized material costs and $10 million in higher gross tariff expenses. Bolzoni also improved sequentially during the second quarter of 2026, returning to profitability as favorable product mix, lower freight costs and disciplined cost management more than offset slightly lower revenue. In the second quarter of 2026, net loss was $32 million and includes the establishment of a $3 million noncash valuation allowance related to Brazilian deferred tax assets. Second quarter operating cash flow was a source of $17 million, improving approximately $50 million from the first quarter of 2026 despite continuing losses. The improvement was driven primarily by lower inventory levels and favorable changes in accrued liabilities following first quarter annual incentive compensation payments. The positive operating cash flow reflects the disciplined working capital actions the company executed during a challenging operating environment. With the second quarter results outlined, I'll now turn the call over to Rajiv to discuss the market environment, progress we are making on our strategic initiatives and our consolidated outlook.
Thanks, Andrea, and good morning, everyone. As Andrea highlighted, we saw encouraging signs of improvement during the quarter. I will start with our perspective on the current market cycle and demand environment, then discuss the actions we are taking to strengthen our competitive position before reviewing our consolidated outlook. We believe the first half of 2026 marked the financial low point of the current lift truck cycle. While we are still in the early stages of recovery, demand improved during the second quarter and several important operating indicators moved in a positive direction. We are beginning to gain financial traction from the stronger booking trends we have since the low point in the second and third quarters of 2025. What is particularly encouraging is sequential improvement across several key operating indicators. Bookings increased, revenue improved, operating results moved in the right direction and quarterly cash flow turned positive compared to the first quarter of 2026. That shift to positive cash flow is especially important because it reflects the working capital discipline we have been maintaining even while profitability remains under pressure. While we are far from full recovery, the business is beginning to move in the right direction. At the same time, we are seeing encouraging results from strategic initiatives that are expanding our participation across the market and creating opportunities for future growth. One of the developments we are most encouraged by is the momentum we are seeing in our value product offerings. These products are opening opportunities in areas of the market where our competitiveness has historically been more limited, helping us reach a broader range of customers and applications. Importantly, this is the result of a deliberate strategy that began several years ago. We invested in modular, scalable product platforms designed to expand our portfolio and improve our ability to compete across multiple price points and customer requirements. As those products have become more broadly available, customer adoption has been strong and demand continues to build. More broadly, these investments reflect our commitment to expanding our addressable market and strengthening our competitive position. Today, we offer value, standard and premium products across our key markets. As customers' buying patterns have shifted towards a broader mix of applications and price points, we've been well positioned to respond. That has enabled us to broaden market participation, support market share gains and create additional growth opportunities over time. What is particularly attractive about this strategy is the modular architecture behind it. We leverage common platforms, components and manufacturing processes across multiple product categories. That allows us to serve more customers, while maintaining scale efficiency and attractive margin opportunities. Simply put, it enables us to offer the right truck at the right price for a broad range of customers, while supporting stronger margins, improved manufacturing efficiency and better long-term return on our product investments. As volumes grow, we expect these platforms to provide additional benefits through improved manufacturing scale, product cost management and operating efficiencies. They also increase our flexibility as we continue adopting sourcing and production activities in response to tariff and other external factors. The benefits of these portfolio investments are increasingly showing up in our order activity. During the quarter, customers engaged with a broader portion of our product offering, contributing to stronger bookings across multiple categories. Bookings reached their highest quarterly levels in three years, driven primarily by the Americas. The improvement reflects both strengthening customer activity and the benefit of actions we have taken to broaden our participation across customer segments. Greater demand visibility supports the production rate increases we are implementing across the business, which we expect will drive higher shipments over time. While bookings have strengthened, shipments have not increased at the same pace. Customer order patterns continue to include a mix of near-term demand and deliveries scheduled for further in the future, including some beyond six months. In addition, increases in production require time to move through the supply chain and supply network. As a result, there remains a lag between booking growth and shipment realization. Some customer delivery schedules have shifted later into the year, including orders where customers modified requested delivery times after the original booking was placed. At the same time, certain sourcing and production transitions associated with tariff mitigation initiatives are affecting shipment timing. As a result, production growth is expected to temporarily lag booking growth, and we expect improvements to be weighted more heavily towards the latter part of 2026. Both sourcing and production changes reflect the actions we are taking to manage a challenging cost environment, while positioning the business for stronger long-term performance. More broadly, we remain focused on improving operating efficiency and aligning our cost structure with current market conditions. Turning to tariffs. They remain a headwind and continue to influence both cost and production decisions across the business. Our focus is not only on managing today's impact, but also on positioning the company with a more resilient and flexible supply chain over the long term. To reduce future exposure, we are implementing sourcing and production changes, including relocating certain activities to the United States and other lower-tariff regions. While these actions are creating some temporary disruption to production schedules and shipment timing, they're expected to strengthen our cost position over time and provide greater flexibility across our business. We expect pricing, sourcing and product cost initiatives to deliver increasing benefits in the second half of the year. Although these actions are not expected to fully offset tariff-related costs, they are helping mitigate the impact, while preserving our competitive position. Beyond our tariff mitigation actions, we are continuing to focus on improving our cost structure. Our 2025 restructuring program captured approximately half of the expected annualized savings in the first half of this year. These actions are establishing a lower ongoing cost structure for the business rather than simply delivering near-term savings. As demand recovers and production volumes increase, we expect that lower cost base to contribute meaningfully to earnings growth and improved operating performance. We continue to expect the program to deliver approximately $40 million to $45 million of annualized savings. More importantly, these actions are lowering the underlying cost structure of the business and should provide increased profitability as demand and production volumes recover. We're also seeing encouraging progress at Bolzoni as it continues to expand its growth opportunities through the integration of Walmart's mass business, new attachment introductions and the expansion of its camera vision systems. Together, these initiatives broaden Bolzoni's addressable market, enhance its product offerings and support long-term profitable growth. Let me now turn to our consolidated outlook. Our overall view of the recovery remains unchanged. Demand has improved, bookings have strengthened, and we are raising production rates to meet the increased demand. However, customer delivery schedules and sourcing transitions associated with our tariff mitigation initiatives have shifted some of that recovery later into the year. As a result, we expect a moderate operating loss for full year 2026 with the most significant improvement occurring in the second half as production levels increase. As we move through the second half, we expect performance to improve as production levels rise and shipments increase. Higher volume, pricing actions, manufacturing efficiency improvements and cost reduction initiatives are expected to support earnings growth. At the same time, tariff-related costs and competitive pricing pressures are expected to moderate the pace of recovery. Our priorities remain unchanged. We are focused on converting stronger bookings into shipments, improving manufacturing efficiencies, managing tariff exposure through pricing and sourcing actions and maintaining working capital discipline and generating cash. We believe these actions position us to improve performance through the balance of 2026, while continuing to advance our long-term objective of achieving 7% operating profit over the business cycle. Looking beyond 2026, we continue to believe the building blocks for a stronger earnings profile are in place. As production volumes recover, we expect profitability and cash generation to improve. Based on our current outlook, we expect trailing 12-month EBITDA to be above pre-COVID levels in the second half of 2027. Importantly, this expectation is supported not only by a cyclical recovery in demand, but also by structural improvements we have made to the business, including portfolio expansion, cost reduction initiatives, modular product platforms and manufacturing footprint optimization. Our manufacturing footprint optimization projects remain on track and are expected to provide further benefits to earnings as implementation activities are completed. We currently expect these initiatives to begin contributing meaningfully in the second half of 2027, with approximately $15 million to $20 million of annualized benefits expected as volumes recover. Over time, these actions are expected to improve efficiency, lower our cost structure and reduce our long-term breakeven point and support stronger operating results. The manufacturing footprint optimization, in addition with the 2025 restructuring program, position us to enter the next phase of the cycle with more efficient manufacturing footprint and a lower structural cost base. Combined with our expanded product portfolio and modular platform strategy, we believe these initiatives will strengthen our competitive position and support sustainable profitable growth over the long term. With that, I'll turn the call over to Al for a few closing remarks before we open the line for questions.
Thank you, Rajiv. In summary, while the recovery remains gradual and external challenges persist, we are encouraged by the company's progress. Bookings have increased for four consecutive quarters. As a result, production rates and shipments will be increasing. Second quarter operating cash flow has returned to positive and many of the strategic actions we have been implementing are beginning to gain traction. Importantly, we are not simply waiting for the market to recover. We are actively strengthening the business through disciplined actions in portfolio expansion, manufacturing footprint optimization, restructuring initiatives, tariff mitigation actions and responding appropriately to competitors' activities. Together, these efforts are lowering our structural cost base, building resilience across the cycle and positioning us to have greater value as market conditions continue to improve. Overall, we remain fully committed to serving our customers exceptionally well, as well as to creating sustainable long-term shareholder value through growth, stronger profitability over the cycle and strong cash generation. That concludes our prepared remarks. We will now open the line for questions.
Questions and answers
And today's first question comes from Ted Jackson at Northland Securities.
Congratulations on the quarter, guys. So, I wanted to start out just a simple thing. I mean it's good to see all the bookings growth. The business is turning around, the market is turning around. Is it fair to assume, given the commentary, Rajiv, that you continue to see a pickup — the pickup in bookings continue at least to date with regards to in the third quarter?
Yes, we're seeing the same trend. Obviously, as we have said multiple times before, the third quarter is when we have our July and August holidays around the world. So that does affect our bookings, but the trend has definitely continued.
Okay. And so, when I listen to your commentary, I mean, you're clearly signaling that you feel that the strength that you've seen in bookings is going to really start to kick in, and we're going to see it more on the top line as we get into the second half of '26. But I perceive from the press release and the commentary you provided that perhaps some of the revenue that you thought you might recognize in the third quarter will shift out into the fourth quarter. And is that a correct read of your commentary? Or am I parsing too much?
Yes. I think that would be the case. Maybe I can give you a solid example of what's happening. Our original plan was to build some of the trucks for North America in Europe. With the April change to the Section 232 tariffs, which was quite dramatic for us, we changed those plans. Those trucks have now been rescheduled to be produced in North America and, of course, our customers are aware of this with some changes in delivery timing. That's one example of something that happened because, as you know, initially that tariff was 25% on the cost of imported trucks from Europe, which was then reduced to 15%. But still, that is a significant cost impact. So we've reacted to that and changed production plans. The other thing we talked about is that some customers, as they start to get trucks and their own operations have generally lower utilization rates, are making decisions on where to put the truck and at times are asking for changes in delivery dates. That's a minor part. The bigger part has been our own production changes due to tariffs.
Well, it sounds like a smart strategic move on your part to make that change. Obviously, you wouldn't have done it if you didn't think so. But we're seeing bookings and everything else. You're commenting that your production rates are going to be continuing to run behind your bookings. So then implicit in that is that as we think about — I mean not maybe on a quarter-to-quarter, but for the remainder of the year and quite possibly into 2027, we should continue to see backlog?
I think we'll see it flatten out in 2027. But you're right about this ramp-up. As you know, this has been a significant ramp-up and it's still in progress. We're in the early stages and that will continue throughout this year. Based on our expectation for the 2027 market, I think we'll be at a good rate by the first quarter of 2027.
Shifting over into production rates. Maybe to give a little color, when you look at the capacity that you have in place, maybe think about it from what is the utilization rate and where do you think you can get it to? How far under, for lack of a better term, retail demand do you think you might be producing this year? I'm kind of getting a sense in terms of how you are going to fill that capacity and what's driving this along with that?
So, it's best to give you a bit of resolution. In terms of our plant capacity, we have more capacity than we need right now. What it requires is hiring more people and getting the supply chain to fire. We've checked with our suppliers, and given enough lead time they can respond. So we don't think there is any infrastructural issue. It's just a question of hiring and training the people for our plants and then providing our suppliers enough lead time so they can respond. As you know, if we don't have one part, we don't build a truck. So we are being very careful with that ramp-up. All the lessons learned during COVID we are using to ensure our ramp-up is very disciplined.
Okay. Well, I'm going to let other people ask some questions and I have a few more. Again, congrats on the quarter and looking forward to seeing the back half of this year and 2027.
And it looks like we do have another follow-up from Ted Jackson of Northland Securities. Okay. Well, I'm going to let other people ask some questions and I have a few more. Again, congrats on the quarter and looking forward to seeing the back half of this year and 2027.
I like it. You guys, I own you right now. I wanted to shift over because we spent a lot of time kind of talking about backlog and bookings from a revenue perspective. When we think about it from a unit perspective, how has the turn in bookings been? You've got four quarters of growth. How has it looked from a units perspective? Does it align similarly with the dollar amounts you put out? Or as you're having more and more success with the modular product offering, is the unit view different? If so, how?
The way I would characterize it is that the ramp-up in volume is pretty even across our product lines. Now within the product lines, there is a trend towards the simpler trucks. We think that's the right thing. Those customers — we're always very focused on making sure the customer gets the right truck for their application. As we have done a better job of understanding their application, some of the simpler, what we call our standard and value trucks are the right trucks for those applications. For example, in retail — imagine a big box store — they typically have our 5,000-pound counterbalance truck in some form. Three years ago, we were selling them a premium truck. That truck does about 700 hours a year. There's no need for that. Those premium trucks are designed for 3,000 to 4,000 hours a year. Now we have the value and standard product. We've shared it with those customers. They have had them in their applications. They like the simplicity of it and the ease of operation for casual drivers. So that's the right solution for them at the right price and the right value. We feel good about that. The width of our offering has widened and customers are appreciating that. There is a little bit more bend towards the standard and value, but again, we're in the early stages of this.
And then my next question, and it might be my last one, is you've talked about a strategy to grow your parts and aftermarket business. I know it's early innings with regards to laying out that strategy. But can you provide some color around where you are in terms of progress with that initiative and provide an example or two as well?
Sure. We're early. We're launching some new part solutions as we speak. One example is tires. In the past, we weren't actively marketing tires. We were making our OEM tires available to the market, mostly through drop-ship arrangements. As we've discussed this more with our dealers and customers, customers want to see some scalability in tires. There are two ways tires end their life: either they wear out or they age out. If I go back to my retail truck example, if you put a premium tire on those trucks, those tires will age out. After four years, they need to be replaced because the rubber deteriorates. It's often a better solution in that case to put a tire with more of a wear characteristic. In four years, it will both age out and wear out, and upfront it will be a lower-cost tire. Because we're matching tires better to our trucks, we are now developing them with our suppliers jointly and labeling them as high-source tires. That's one example of business where margins are appropriate for that type of solution and availability and service are better for customers. We're doing similar things on the battery side. We've also had one line of product go out of production — our previous 1 to 3.5 ton model. There are 300,000 to 400,000 of those trucks in the marketplace and customers are starting to ask for primary components to be refurbished and remanufactured because with a five-year-old truck it's tough to put a brand-new transmission in. We've started rebuilding some of those axles and transmissions at the plant where Bolzoni originally built them and are making those remanufactured components available to the market with warranty. That's another example of what we're doing.
And then just a final kind of follow-up to this discussion, what percentage of Hyster-Yale's revenue comes from the parts business and where do you want it to go? And then what's the margin differential between parts and the core?
Those are things we don't talk about publicly. Maybe outside the meeting Andrea can help you with that, but I would prefer to keep that out of the public answering.
And that does conclude our question-and-answer session. I'd like to turn the conference back over to Andrea Sejba for any closing remarks.
Well, we thank you for your questions today. 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 earnings release. Thank you again for joining us today. I'll now turn the call over to Rocco to provide the replay information.
Thank you. To access the audio replay of today's event, please dial 1 (855) 669-9658 or 1 (412) 317-0088 and enter access code 4850489. The replay will be available until August 12, 2026. Today's conference has now concluded, and we thank you all for attending today's presentation. You may now disconnect your lines and have a wonderful day.