HY Q3 2026 earnings call transcript, November 6, 2026

Good day and welcome to the High Studio Inc. third quarter 2026 conference call. All participants will be in listening mode. Switching to assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star than one on your screen. Telephone keypad, and to withdraw your question, please press star than two. Please note that today's event is being recorded. I'd now like to turn the conference over to Andrea Saba. Director of Investor Relations and Treasury. Please go ahead.

Good morning, and thank you for joining Heister Yale's third quarter 2026 earnings call. Joining me today are Al Rankin, Executive Chairman, Chief Prasad, President and Chief Executive Officer, and Matt Cornell, our new Chief Financial Officer. We're pleased to welcome Matt to today's call. We will discuss our third quarter 2026 earnings earnings release, which was issued yesterday. The release and a replay of this webcast will be available on the Heister Yale website. Today's call contains forward-looking statements. These statements are subject to risks and uncertainties that could cause actual results to differ materially from those expressed or implied. These risks are described 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 cover third quarter highlights. Third quarter 2026 results improved sequentially. Stronger bookings began.

To translate into higher shipments and structural cost savings supported operating performance. Revenue increased 2% sequentially to $827 million as higher shipments volumes more than offset lower part sales. Operating results improved by $10 million driven. By higher shipment volumes and lower employee related expenses. These improvements more than offset $20 million of lower tariff. Related recoveries compared with the second quarter. As a result, both operating loss and net loss narrowed compared to the second quarter of 2026.

Thank you, Andrea, and good morning, everyone. Third quarter performance showed further signs of the company's recovery. Most importantly, we're beginning to see stronger bookings convert to production and shipments. At the same time, our pricing... and cost actions are helping us manage challenging cost environment. I'll first discuss demand and fourth quarter outlook. Then I'll explain the structural actions we're taking to improve our competitive... position, cost structure, and cash generation. Industry conditions have continued to improve from 2025, although demand varies by region and customer application. Deferred fleet replacement needs are converting into new equipment purchases. Customer acceptance of our value and standards. Product offerings continue to grow. As noted, third-quarter bookings remain well above the cyclical low. Backlog held steady as production approximated shipment during the quarter. Together, they give us a solid base of demand as we increase production. Our product investments are a key reason. This momentum, they're broadening the portion of the market we can address. As customer demands shifted, recently introduced lighter incentives. In terms of the lower price products, helped offset lower sales of higher values, standard and premium counterbalance trucks. These expanded product offerings are not simply substitutes for our previous models, they extend our reach into applications and price points where we historically had less.

They also help us with new customers and create opportunities to increase manufacturing scale over time. Looking ahead, we expect our value and standard offerings to continue supporting volume growth, profitability and market share gains. This includes the one to three and a half ton, the four to nine ton and the big truck product lines. Our objective is to match product capability and total cost of ownership more precisely to each application. We're also using modular and scalable product solutions, which reduce complexity across engineering, sourcing, and manufacturing. Building on this momentum, we are We expect fourth quarter bookings to exceed both the fourth quarter of 2025 and the third quarter of 2026. This is supported by improving industry conditions. Anticipated market share gains and broader customer acceptance of our expanded product portfolio. However, inflation, tariffs, geopolitical uncertainty, and increased... Competition remain important variables. Strong booking activity is expected to translate into meaningfully higher production and shipment volumes in the fourth quarter. Higher shipments are expected to drive sequential revenue growth. Increased production should also improve manufacturing absorption and operating efficiency. This is the key operating lever in our fourth quarter outlook. More volume moving through our plants is expected to improve the utilization of our people and facilities and better...

...absorbs fixed manufacturing costs. Converting bookings into shipment is our priority. That is not automatic. During the third quarter, customer delivery schedules and production transitions slowed expected conversion. These transitions were associated with tariff mitigation and sourcing initiatives. They could continue to affect shipment timing. Our teams are focused on sequencing production, managing component availability, and coordinating delivery. We're also closely managing delivery date and product mix. This will help us convert the backlog efficiently on schedule. And without compromising customer service. Based on these factors, we expect gross profit and gross margin to improve. Sequentially, primarily due to higher... ...production and shipment volumes, improved manufacturing efficiencies, and the benefits of pricing, sourcing, and cost reduction actions. These benefits are expected to be... ...specially offset by elevated tariff-related costs, inflation, and competitive pricing, particularly in South America and Europe. Operating results for the... The fourth quarter, I expect it to include anticipated implementation costs associated with the new programs I will discuss shortly. Excluding these costs, the same drivers expected to improve gross profit are expected to support stronger operating performance. As a result, adjusted net income is expected to be above the third quarter and return to positive levels. Alongside the expected fourth quarter

earnings improvement, we remain focused on cash generation. and working capital discipline. Our inventory and working capital progress provides a strong foundation as production and shipment increase. Priority is to have the right inventory to convert backlog into revenue while managing working capital. In 2027 we expect demand and production levels to remain healthy. This is supported by gradually strengthening market conditions and our growth initiatives. It should drive volume and revenue growth. However, we expect operating profit improvements to be more gradual than the recovery in demand. The reasons are continued cost pressure, a competitive pricing environment, and the time required for strategic growth initiatives to mature.

The announced 2024 U.S. manufacturing footprint optimization projects remain on track to deliver increased operational benefit. These benefits are expected to help offset ongoing cost increases and support underlying product margins. They're not expected to translate fully into incremental margin expansion. Our 2025 restructuring program is progressing as planned and we expect to realize the full benefit of 40 to 45 million. dollars of savings by year-end 2026 together with the completed Nuvera realignment which delivered 15 million of savings in 2025. These programs have lowered our structural break-even point. This progress gives us a stronger base. It has also allowed us to identify additional opportunities to strengthen our business and improve our operation. These opportunities are driven by the market. The types and volumes of lift trucks customers demand have changed significantly. Customers want a broader mix of value, standard, and premium solutions. with competitive lead times and strong route-to-market coverage. Regulatory requirements, tariffs, inflation, and shifting regional demand adds to these changes. to compete. We need a cost structure that performs across the cycle with a more selective use of capital and resources. We are continuing to adapt to the market. And build a more focused and flexible operating model. In the fourth quarter of 2026, we launched a major set of projects to strengthen our cost structure.

Capital efficiency and long-term competitiveness. Our modular scalable products have created new product opportunities and production efficiency. Together with our previous previously announced restructuring plans, they provide the foundation for these projects. The project should improve operations and better align our business with evolving market and regulatory requirements, including changes in the types and volumes of lift truck customers' demand. The projects are focused on five key areas. First, we're reshaping the product portfolio and route to market. Second, we're reducing manufacturing complexity and cost, including plant consolidation. Third, we're consolidating supporting facilities and activities. Fourth, we're simplifying the organizational structure. And fifth, we're reducing capital intensity. These five areas work together. A more focused portfolio reduces complexity across engineering, sourcing, and manufacturing. A simpler organization and footprint improves execution. Lower capital intensity helps convert more of our earnings improvements into cash. We're targeting at least $100 million of annual cost reduction at maturity, which is anticipated in 2029. These savings come from direct cost reduction and from mitigation. We're targeting future expense associated with higher volumes and inflation. This is important because it allows us to grow volumes while keeping our costs.

structure under control. The target is measured against 2026 results and is in addition to the benefits from our earlier program. These savings will build over time. Rather than arrive all at once. We expect some benefits to start in 2027 and the full run rate to be reached in 2029. The pace will depend. On the timing of implementation. So we are sequencing the projects to capture benefits as quickly and as responsibly as we can. Achieving these savings requires investment upfront. Implementation costs are currently estimated at no less than $50 million over the duration of. These costs may include severance, impairment charges, contract terminations, and other exit-related costs. Some costs will come ahead of savings while other will be recognized as incurred. We continue to pursue opportunities to mitigate these costs. The first set of action to sharpen our focus on strengthening our core truck business, improving execution, and directing resources to the areas where we see the greatest opportunity to create long-term strategic and some financial value. are the following difficult but necessary decisions. We are pausing the electric terminal tractor program globally and discontinuing our effort to establish big truck production in Greenville, North Carolina in the United States. We'll continue to serve the U.S. market through our existing big truck manufacturing operations. Effective immediately, we're also discontinuing the development and production of hydrogen-related solutions, including the hybrid electric charging platform and associated.

Fuel cell technology and engines. At the same time, we will continue to invest in and accelerate our lithium-ion battery and charger solutions. Well, we believe we can deliver greater value to our customers, dealers, and business. We'll implement the remaining projects in stages through 2029. Some are underway. Most remain subject to final planning, legal, and regulatory requirements, consultation obligations, and customary approvals. As a result, the scope, timing… and financial effect of individual actions may change. We'll update you as material plans, savings, and implementation costs are finalized. On cost saving and cost mitigations, these programs are designed to strengthen cash generation. To preserve cash are made a slower than anticipated recovery. We expect 2020... 26 capital expenditures of 50 to 60 million. We plan to limit 2027 capital expenditure to 40 to 50 million. Over time, a simpler portfolio, less... Manufacturing complexity and lower capital intensity should also reduce working capital requirements. This supports our continued... ...target of working capital at approximately 15% of revenue. Importantly, the cost programs are just one part of our broader company strategy. Our focus is on strengthening the core... ...serving customers more effectively, and expanding our market reach. We are concentrating resources on product platforms, market segments, and commercial capabilities.

...with the strongest strategic and financial potential. This includes modular, scalable lift truck solutions for lighter intensity. And standard applications together with broader self-coverage across the addressable market. The cost programs support that strategy by reducing complexity. And creating a more efficient operating model. Alongside disciplined capital allocation and working capital management. These actions should. Support strong financial performance and business growth. Our objective is not simply to operate at a lower cost. It is to emerge as a stronger, more focused company. Better position. to pursue the opportunities with the greatest long-term impact. Our long-term priorities remain consistent. We are focused on converting bookings momentum into shipment so that stronger demand translates into revenue growth. As production increases, improved manufacturing efficiency should help us earn more from that growth. Our modular product platforms and broader market coverage expand the opportunities we can serve, while simpler operations and our cost reduction initiatives should strengthen profitability. We will support this program. by managing tariff exposure and maintaining discipline in working capital and capital allocation. That discipline is important to improve cash generation while preserving So, thank you very much for having me. Flexibility to support future growth. Together, these efforts support our objectives of 7% operating profit over the business cycle.

With that, I'll pass the call over to Al for closing remarks before we open the lines for questions.

Thank you, Rajiv.

That concludes our prepared remarks. We'll now open the line for questions.

Moore. Your line is open.

Sorry. Can you hear me now? We can hear you now. Yes, sir. Awesome. Unmute. Sorry about that.

Thanks, everybody.

Thanks for taking the question.

I wanted to ask on the. And environment, particularly around some of these deferrals of fleet replacement. Can you expand on on sort of the pent up demand you're seeing out there and some of the. applications on, you know, trajectory next year? Yeah, Chip, Ms. Rajiv. So, you know, as I think we discussed last time. We see continued growth with certain customers of their fleet age as they have retained trucks longer than you would normally expect them to retain. Mainly because I think our customers were unsure of the utilization and also, you know, kind of trying to manage their internal budgets. We're seeing the... We're coming to the end of that. You know, we've had good bookings, you know, in the third quarter. And as you know, our third quarter is normally weaker in bookings. Because of July and August when, you know, there's a slowdown in the industries that, you know, we serve. But it came... Back pretty well in September. And then October's been also good. So, you know, so I think we still feel... good about the market and the market potential going into the rest of this year and looking ahead into next year. Pipelines look pretty strong.

Thanks, Rajiv.

And he also talked a little bit about, you know, just sort of managing the timing of deliveries. And some of the puts and takes there. Maybe talk about that a little bit more, about what you're watching closely. Yeah, I think there's been a little bit more dynamics on that, you know, that customers have asked for us. Especially through that third quarter to, you know, delay some deliveries as they've, you know, kind of made some changes into their own, you know, kind of infrastructure. You know, we've had that. We continue to see some of that. So that's been one factor. The other factor has been, as we said in our discussion, that we are sorting trucks from different locations, and we're in a transitioning production. And what the modular scalable product allows us to do is build this product. in multiple locations. And based on some tariff changes, we've changed the location of where they're built, and therefore, you know, some of the product require... Increased logistics, particularly across the ocean. And so again, timing of that's been a little difficult, especially... When there's quite a bit of, again, I'll call it dynamics in the ocean freight market. In availability, particularly, you know, you can imagine the Middle East has been very difficult, and we still have a lot of deliveries to make to the Middle East. To our dealers and customers. But also, you know, for instance, from, you know, kind of some of the China to North America routes.

Are still very busy. We're coming to the end of that because it's really driven by the Christmas season. And so we should see that ease off. But we've seen. More difficult, you know, kind of availability on some of these lines.

Great. Very helpful. Yeah. Yeah.

Thanks for.

But, you know, maybe I could sneak one more in, you know, simplifying the portfolio, you know, makes a lot of sense and never easy actions. But those savings are. So, Daniel, maybe, you know, flipping the other way, I think you talked about you called out investing or accelerating on the lithium and charging side. Just talk about. opportunity a little bit. Thank you. Yeah, I mean, we continue to see growth of electric trucks pretty much globally as a share of the market. Especially, I would say, the counterbalance trucks, and we're starting to see also the big trucks electrify. In the early stages of these, we didn't have our own... Battery and charger solutions. And what we've seen is customers struggle with the integration of these systems. So when you have a truck, which has quite a lot of software these days... Then you have the battery with the battery management system, which also has a lot of controls. And then you have the chargers, smart chargers these days, which also has a lot of software. You know, you've got to keep these systems synchronized. And when you have two or three different suppliers providing these things, we've certainly seen customers struggle to keep them fully. Integrated and synchronized. And when they're not, then you get truck down times now because the trucks are in charge. We've seen an increasing case of that. And, you know, towards the end of. Last year, we decided that we needed to, you know, solve these issues for our customers.

And the best way for us to do that is bring it to a central point. Of course, we do all the electronics and software on our trucks. Now we're developing batteries, systems, and especially all the control systems around it. And again, we have partners for the charging system. And so the plan is to be able to offer integrated solutions moving forward with a single point of service. And management of the infrastructure. And we think customers are very happy about that. Our dealers are feeling good about that as they've struggled to maintain. These type of systems in the field. So we think it's a very positive move. And we expect this to be a good growth part of the business.

Thank you. And as a reminder, to ask a question, please.

Our next question comes from Ted Jackson at Northland Securities.

Thank you, and have a great day.