Good morning, ladies and gentlemen. Welcome to the Hyster-Yale Materials Handling Third Quarter 2024 Earnings Conference Call. Following the presentation, we will conduct a question-and-answer session. This call is being recorded on Tuesday, November 5, 2024. I would now like to turn the conference over to Ms. Christina Kmetko with Investor Relations. Please go ahead.

Good morning, and thank you for joining us for Hyster-Yale's 2024 third quarter earnings call. I'm Christina Kmetko and I'm responsible for Investor Relations. This morning we published our third quarter 2024 results and filed our 10-Q. These documents are available on the Hyster-Yale website. We're recording this webcast and a replay will be on our website later this afternoon. The replay will remain available for approximately 12 months. I'd like to remind you that our remarks today, including answers to any questions will include comments related to expected future results of the company and are therefore forward-looking statements. Our actual results may differ materially from our forward-looking statements due to the wide range of risks and uncertainties that are described in our earnings release, 10-Q and other SEC filings. We may not update these forward-looking statements until our next quarterly earnings conference call. Our presenters today are Al Rankin, Executive Chairman, Rajiv Prasad, President and Chief Executive Officer, and Scott Minder, our Senior Vice President, Chief Financial Officer, and Treasurer. With the formalities out of the way, let me turn the call over to Rajiv to begin.

Thanks, Christina. Good morning, all and thank you for joining us today. I'll start by providing my operational perspective and some commentary on our markets. Scott will follow with the detailed financial results and outlook. Al will close the call with his perspective. And then we'll open it up for your questions. Before I discuss the quarter, I'd like to comment on the impact of Hurricanes Helene and Milton last month. These hurricanes were nothing short of devastating. Thankfully all of our employees in the Southeastern United States are safe. Furthermore, daily operations were not directly affected. We've worked with our dealers, suppliers and communities in the affected areas to provide support where needed. Now I'll move on to our Q3 results. I'm pleased to say that we executed well in what is normally a seasonally lower third quarter, primarily related to European plant shutdowns. Our current quarter results are also being compared against an exceptionally strong prior year. Once again we generated strong product margins and delivered year-over-year revenue growth. This was led by the Americas Lift Truck and Bolzoni businesses. However, third quarter financial results were below our expectations. Let me explain why. In short, we did not achieve our expected production volumes. Our manufacturing operations were hampered by supply chain constraints and a handful of product introduction issues. This resulted in missed sales, creating manufacturing inefficiencies and increasing costs. While our results were lower than planned, the company's foundation remains solid. Pricing and unit margins continue well above target levels. Operating expenses remained in check and below our expectations. We'll continue to balance expenditures with growth needs moving forward. Now I'll share our market views and its impact on our business. Based on global market industry data and internal estimates, the company believes that quarter three 2024 global lift truck market declined moderately from prior year levels. The rate of decrease accelerated compared to Q2 2024 as most regions saw a deterioration. Quarter four global market is estimated to decline further with the Americas and EMEA decreasing at a faster pace and JAPIC generally stabilizing. These below-trend market booking levels are expected to balance out the significantly above-trend market booking rates experienced between 2021 and 2023, returning the market to more normalized long-term growth rates. In 2025, we expect the global lift truck market to decrease modestly year-over-year with a first half decline mostly offsetting a second half increase. Regionally, a moderate decrease in the EMEA market is likely to be partly offset by a stable Americas market level. Within the Americas our largest region North America is expected to increase moderately in 2025 compared to 2024, with improvements occurring in the second half of the year. This improvement is expected to be mostly offset by a decrease in the Latin America market. We are working diligently to offset the effects from these market decreases on our business through share gains and sales of new advanced technology products. However, the company's business has been negatively impacted in 2024. Year-over-year dollar-value factory booking decreased 36% to $370 million in quarter three. Sequentially booking dropped by 3% broadly suggesting stabilization at a lower rate. While our global bookings were down compared to quarter two, dollar-value bookings improved 8% in the Americas largely due to increased volume of higher-priced Class 1 trucks and the company's new modular scalable Class five trucks. EMEA and JAPIC offset this improvement with a combined 19% drop. Our long-term strategic initiatives are gaining momentum. In warehouse applications, we continue to make inroads with our advanced technologies and strong product lineup. We expect quarter three 2024 Americas and EMEA bookings to reflect warehouse market share gain when final industry data are released. Additional gains are expected in quarter four and 2025. Our modular and scalable products are also expected to increase market share in all regions as we broaden this product portfolio lineup to include Class 1 electric trucks in 2025. The work continues to aggressively and profitably extend our roughly seven-month backlog while we continue to focus on increasing our bookings and our share. We're also focused on aligning our production schedule to match market demand. At this point, new bookings will fill open 2025 production slots which are in the second half of the year. The combination of rising market share and new bookings along with the company's $2.3 billion backlog should help support the business until market levels improve in the second half of 2025. This sets the stage for higher production levels in 2026. Overall, we believe the current backlog should support 2025 shipment levels that are generally in line with 2024. That said, global production levels may moderate in 2025 without market share improvements or share gains. For much of the last two years we've benefited from strong pricing tailwinds and a significant order backlog. This led to product margins well above our targeted levels. Looking ahead we are focused on maintaining competitively priced products at or above targeted margin levels. We expect to achieve our targets with continued new model introductions and ongoing cost and pricing discipline. I'll add one final comment on the market. The Lift Truck industry is very resilient and has gone through similar cycles in the past. We plan to push through this latest downturn while still delivering on our customers' promises to provide optimized product solutions and exceptional customer care. We'll continue to execute our strategic initiatives and key projects to fulfill these promises. I encourage you to learn more about these initiatives and projects in our updated investor deck currently available on the Hyster-Yale website. I'll turn the call over to Scott to provide more detailed financial results outlook. Scott?

Thanks. As Rajiv mentioned, our Q3 2024 results were solid. Consolidated revenue of $1 billion grew year-over-year, while operating profit of $33 million declined compared to an exceptionally strong prior year. Net income was $17 million, decreasing from $36 million in Q3 2023. I'll cover the results by segment to provide color on the performance drivers. Lift Truck revenues grew 2% versus prior year due to higher average sales prices and a favorable sales mix shift. Americas sales volumes increased, but were more than offset by a decline in EMEA volumes. Due to our ongoing pricing discipline, average sales prices rose 25% year-over-year. Sales mix improved mainly due to increased sales of Class 1 and Class 4 trucks as well as higher-priced higher-capacity Class 5 trucks in the Americas. Unit volumes declined year-over-year in EMEA, primarily due to lower production rates. This was a consequence of supply chain challenges and shipping delays on new products. Quarter-over-quarter, revenues decreased in the Americas and EMEA as seasonal plant shutdowns led to lower Q3 production rates. Lift Trucks Q3 operating profit was $39 million, declining 40% against the strong prior year period. Lift Truck product margins remained well above targeted levels due to continued favorable sales prices and product mix. However, these benefits were more than offset by lower margins on parts and fleet services. Specifically, our parts sales have shifted from extensive repairs on aged units to more preventative maintenance on newer units, which generates lower margins. Lift Truck gross profit declined by 7% year-over-year due to overall sales margins as well as higher freight costs and other cost inflation-related variances. These factors, combined with increased operating expenses, led to the operating profit decline. With regards to operating expenses year-over-year, these expenses increased due to investments required to accelerate our key strategic initiatives. We've added sales and marketing staff to help launch new products and technologies that support our share gain efforts. We're investing in new information systems that create a more efficient and seamless customer-facing experience that will launch in 2025. In addition to these investments, employee-related expenses rose due to wage increases and higher incentive compensation related to our strong 2024 year-to-date results. Looking at profitability by geographic segment, Americas gross profit declined modestly, with improved pricing and higher sales volumes offset by increased freight costs and other cost inflation-related variances. Freight costs remain elevated due to ongoing geopolitical tensions. The U.S. dockworkers strike in Q3 added to this challenge. As a result of our U.S. manufacturing locations, we relied heavily on East Coast ports. We took proactive steps to mitigate potential problems, including expedited shipping and container unloading to minimize the impact on our operations. These actions came at a higher price. In Q3, EMEA experienced an operating loss compared to prior period profits due to lower unit volumes and unfavorable pricing. Operating expenses were higher, largely to support future business growth. The increased year-over-year operating loss in our JAPIC segment was mainly attributable to reduced unit volumes partly offset by lower operating expenses. Beyond the Lift Truck business, Bolzoni's Q3 results were very strong. Revenues increased 5% while operating profit improved by more than 100% over prior year due to increased sales volumes of higher-margin products. These additional volumes allowed Bolzoni's manufacturing plants to run more efficiently, thus lowering costs year-over-year. Bolzoni's profits increased sequentially despite an expected seasonal revenue decline. There's one additional item to mention for Bolzoni. In July, the business acquired a majority equity interest in one of its machining suppliers. This includes an option to purchase the remaining portion in future periods. This $2 million acquisition is an important investment. It helps to ensure the supply of competitively priced high-quality components. Its results were included in Bolzoni's Q3 financials. Moving to Nuvera, where the business remains focused on increasing its sales pipeline. The hydrogen fuel cell industry continues to face slow customer adoption. This is due to ongoing hydrogen supply constraints and delayed vehicle fuel cell development programs. Despite Nuvera's robust demonstration pipeline, these industry constraints are delaying Nuvera's bookings and reducing its shipments. As a result, Nuvera's Q3 revenues decreased to $0.3 million from $1.5 million in Q3 2023. Nuvera's revenue increased compared to Q2 levels. Nuvera's operating loss exceeded prior year, largely due to increased utility expenses and facility lease costs. In addition, Nuvera incurred a $0.2 million severance charge for headcount reductions needed to rightsize the organization given the slower hydrogen product adoption rates. Next, I'll cover the company's tax position. Our Q3 income tax rate was 37%. This is higher than 2024's forecasted annual rate of 32%. Our third quarter tax expense and tax rate included a year-to-date true-up adjustment necessary to reflect the increased estimated annual effective income tax rate. 2024's year-to-date effective income tax rate of 32% is above the prior year's 27% rate. The elevated 2024 rate largely relates to the ongoing capitalization of research and development costs for US tax purposes, combined with the ramifications from the company's US valuation allowance position. This combination also affected 2023's tax rate, but the impact was partly offset by our ability to utilize US net operating losses during the 2023 calendar year. Looking beyond the income statement, we generated $70 million of cash from operations during Q3, and the company's financial leverage continued to improve. Our debt-to-capital ratio of 46% improved by 500 basis points from the June 30 level. The combination of lower debt and increased cash drove a significant improvement. As the business generates more free cash, we'll continue to follow the capital allocation framework laid out at our November 2023 Investor Day. In the third quarter, we used free cash to further reduce financial leverage, fuel growth-related capital expenditures and fund Bolzoni's small acquisition. At quarter end, the company had unused borrowing capacity of $262 million compared with $217 million as of June 30. We continue to focus on reducing working capital, particularly through inventory efficiency. However, total inventory increased over Q2 2024 levels, in part due to trucks being completed but not shipped by quarter end as well as shipping delays on new products. Working capital represented 21% of sales in Q3 as a result of these elevated inventory levels and reduced annualized sales in the seasonally lower third quarter. I'll shift to our Q4 outlook and make some brief comments on 2025. Looking ahead, we expect Q4 consolidated revenues and net income to be roughly comparable to robust prior year levels. Consolidated full year 2024 financial results are still expected to improve significantly year-over-year, primarily driven by the robust first half results. We believe the company's strong 2023 and 2024 financial performance benefited significantly from actions we've taken over the past few years to position the company for profitable growth and to deliver on our promises to provide optimal solutions for our customers and deliver exceptional customer care. Overall, these longer-term product development and process improvement projects initiated in prior years are leading to a more efficient and flexible organization. We're now better positioned to further optimize our operations and costs. As a result, in October 2024, we concluded that new programs should be undertaken in the Americas to lower costs, optimize our manufacturing footprint, reduce lead times and better position the company for improved margins and further growth. We expect to incur future restructuring charges as we fully execute these manufacturing improvement programs over the next 12 to 36 months. The details of these programs are still being finalized. An estimate of charges and expected benefits has not yet been fully determined. We'll provide more details with our Q4 earnings results. For the Lift Truck business, we anticipate Q4 revenues and operating profit to be roughly comparable year-over-year. Strong product margins from the shipment of higher-priced, higher-margin backlog units are anticipated to be offset by higher freight and material costs and increased operating expenses. The company's solid backlog and ongoing pricing discipline are providing a foundation that limits the negative impact of the current lower demand environment on our results. Looking forward to 2025, our backlog is expected to decrease toward more normalized levels in the first half of the year. This will likely lead to a moderate decrease in Lift Truck's full year revenue versus 2024. The revenue decline combined with anticipated cost inflation and modestly higher operating expenses are expected to significantly lower 2025's operating profit compared to an exceptionally strong 2024. For Bolzoni, we anticipate lower Q4 revenues compared to prior year as the phase-out of legacy components for the Lift Truck business exceeds attachment sales growth. Increased costs for material, freight and employee-related items will likely moderate Bolzoni's improved product margins. As a result, operating profit is likely to decrease compared to prior year. In 2025, operating profit is expected to improve year-over-year, despite lower sales volumes, due to the continued phase-out of low-margin component sales. At Nuvera, the business remains focused on increasing customer product demonstrations and orders. This includes its new portable hydrogen fuel cell-powered generator, which began dealer and customer demonstrations in September. Q4 revenues are expected to increase year-over-year and should be comparable to Q3 2024 levels. Increased product development costs will likely drive a modest operating loss increase compared to the prior year. Nuvera expects improved year-over-year revenues in 2025 due to higher fuel cell sales. The benefits of these higher sales are expected to be partly tempered by a modest year-over-year increase in new product development costs. Nuvera's overall operating results should improve in 2025 compared with prior year in part due to benefits realized from the reduction in force action taken in Q3 2024. We continue to make progress toward our 7% operating profit margin target across the business cycle for the Lift Truck and Bolzoni businesses. We exceeded this target in Q1 and Q2 of 2024, both periods of robust demand. During this current soft demand environment, our extended backlog of higher-margin trucks continues to provide a shock absorber for our financial results. We expect production levels to continue to outpace bookings for the next several quarters, bringing our backlog to more normalized levels by mid-2025. Bookings are expected to accelerate in the second half of 2025, driving improved production levels in 2026. In the meantime, strategic actions to reduce costs, improve productivity and deliver high quality, highly customizable products made consistently around the globe should enable us to be more profitable in all phases of the business cycle. These actions are ongoing and will gain momentum in the coming quarters. As a result of the factors I've mentioned, we expect lower 2025 revenues and a significant operating profit and net income decrease at the consolidated level compared to robust 2024 levels. We've made progress on reducing the impact of cyclicality on our business and have plans in place to further stabilize our results in cyclically lower periods. We'll continue to focus on improving our cash conversion rate, primarily by reducing inventory levels. Beyond working capital, we expect 2024 capital expenditures to be $49 million, down from our initial projection of $87 million. While we still anticipate meaningful growth in efficiency investments, liquidity is our top priority. 2024's cash flow from operations should increase significantly compared to the prior year. In 2025, cash flow from operations is expected to remain strong but decline from 2024's level. As we continue to generate cash, we'll follow our disciplined capital allocation framework to reduce leverage, make strategic investments that support profitable growth and generate strong returns for our shareholders.

Thanks, Scott. As Rajiv and Scott have outlined, we had a strong quarter. Our foundation remains strong despite challenges due to the global market decline. We believe the programs we have in place will help us navigate more effectively through the natural fluctuations of this current market cycle than has been the case in the past, and that the continued maturation of our strategic initiatives will return us to target levels as the market improves. We are delivering on customer promises to provide optimal solutions and exceptional care, by providing high value-adding systems such as our modular scalable technology and our operator assist and full automation technologies. We're already beginning to see the benefits of our ongoing transition to these technologies. We have also taken important steps to improve Lift Truck production efficiencies. And in our newly announced restructuring program, we will now be implementing projects to further optimize the company's operations and cost structure. All of this supplemented by Rajiv's and Scott's remarks leads me to believe our company is well positioned for substantial longer-term profitable growth. Now, we would like to open the call to questions.

Ladies and gentlemen, we will now begin the question-and-answer session. One moment for your first question. Your first question comes from Chip Moore with ROTH. Please go ahead.

Hi, everybody. Thanks for taking the question. Good morning. I want to start with the weakness in EMEA this quarter. I think you referenced some supply chain challenges and perhaps some new product rollout issues. Maybe just expand on that what you saw there? How big was that impact?

Yes, sure. I think it affected our shipments in EMEA. We had some product introduction issues where some rework of the product was required, which did not make the end of quarter shipment as well as just reduced production rate due to component availability. I'll also say that the market in Europe is slow; it's weaker. And so our booking rates aren't at the expected level. But we think that's stabilizing, so we should start to see that can improve a little as we get into the first quarter of 2025.

And in terms of some of those supply chain and reworks, is that any continued impact there? Or do you think that was more –

No, I think it was a one-off. We're launching some additional features and scalability on our modular and scalable programs. These were the more sophisticated systems, and the issues are more related to software and interface problems. The teams worked through that, and I think we're starting to ship those trucks.

That's helpful. And if I could ask on cost and productivity initiatives, you called out, I appreciate you probably can't give too much detail, but I imagine this is something you've been contemplating for a while. Just maybe high-level thoughts on what you're thinking about and when we might start to see some of those benefits start to roll through? Would this be back half of next year, we start to see benefit? Or how do we think about that?

Yes, you are correct that this has been our plan. We've mentioned in our investor meetings that we are developing new modular scalable products to manufacture both internal combustion engine trucks and electric trucks on the same production line. Now that this is feasible and the development of the electric truck is progressing, we believe it's a promising path for us. However, currently in North America, those trucks are produced in separate plants, so we need to rationalize our operations. We are currently working through the specifics of that transition. Strategically, this is what we aimed to achieve, and now our teams are diving into a detailed analysis to determine how to implement this effectively. There are additional secondary decisions to consider alongside this strategic approach, and we expect to address those in the first two quarters of next year. Some of the transitions have already begun, while the more significant changes will likely occur in late 2025 and 2026, with benefits beginning to materialize towards the end of 2026.

Got it. That's helpful. And I'm sure we'll learn a lot more next quarter. And I guess maybe if I could sneak in a last one just around, I guess, margin trajectory a lot of moving pieces more so on next year. And then I think you referenced looking for bookings to pick up again in the back half just your confidence there? Thanks.

Yes. I think I will take it up and perhaps Scott you could add a bit as well. We have done exceptionally well at achieving and sustaining margins well above our targets over the past three years. As the markets normalize and currently dip below our expectations, which we believe is temporary, this situation is not really tied to the economy. It stems from the dynamics in our industry, where there was a significant amount of overbooking in 2022 and 2023, leading to a slight decline now. Consequently, there is fiercer competition for business, requiring us to be more competitive with our pricing. However, I also want to highlight that another strategic element we are implementing is our modular and scalable platform, which will assist us in matching the right truck to the right application for our customers, thus providing an appropriate margin profile. I anticipate that the next two or three quarters may be quite competitive, but I then expect to leverage the modular scalable platforms to return our margins to above-target levels, though likely not as elevated as what we experienced in the bookings of 2022 and 2023, but somewhere between our target margins and what we've observed previously.

Yes, Rajiv, I'll add just one thing to that. Our backlog today is more robust in the first half of the year and the more competitively priced bookings that Rajiv referred to are probably more in the second half of the year. So when you think of unit margins in the context that, Rajiv, gave we expect to stay above target margins, but you probably have a higher first half and a lower second half because of the market dynamics. I think importantly though, as we think about our goal of remaining achieving 7% operating profit across the business cycle, as we go through this market downturn the business is going to perform better than it has in prior cycles.

Great. Appreciate all the color, Rajiv and Scott. I'll hop back in queue. Thanks, everybody.

Your next question comes from Ted Jackson with Northland Securities. Please go ahead.

Thank you. I've got a few questions for you. First of all, with the delay in some of the shipments and the elevated inventory that you had in the third quarter, will we see a substantial decline in inventory in the fourth quarter? I mean are we going to see a pretty substantial kick up in free cash flow because of that? And if so, what kind of decline would we expect? And then, given kind of the outlook you have for '25 how would we think about working capital in particular inventory as we think through 2025? That's my first multipart question.

Yes. I'll address the first part, and then Scott can provide additional details. What’s happening, Ted, is that during some operational transitions, various regions are affected. For instance, our European plant, which manufactures the same trucks as our North American plant, has been producing some trucks for North America while we organize changes. Meanwhile, China is manufacturing some of our higher-value trucks. This creates a situation where many trucks are either being transported, stuck in the logistics chain, or awaiting shipment from our plants. Consequently, our finished goods inventory, essentially our marketing inventory, increases, which significantly impacts our working capital. Additionally, we are experiencing a slower installation of trucks from our customers. We are currently fulfilling orders received in late 2022 and early 2023, primarily from early 2023. Customers have undergone significant changes, and as we notify them that their trucks are ready to be built, they are rethinking where these trucks will be utilized, which requires time for reorganization. These two factors are driving the rise in our marketing inventory. However, our manufacturing inventory has improved since last quarter, and we expect further improvements by the end of the year. Some issues may extend into the first quarter of 2025 due to the longer supply chain for trucks and finished goods.

Yes. Just to add on to that a little bit. The company does expect a significant cash flow increase as a result of lower working capital in Q4. And as Rajiv laid out, we expect those benefits to continue in 2025. There's the short-term nature of marketing inventory. There's also the long-term nature of the programs we have in place to be more efficient and get back to working capital as a percentage of sales around 15%. So, big opportunity in Q4, as well as 2025, as revenues are expected to decline to decrease inventory and generate additional cash flow.

Okay. Shifting over to Nuvera. I know in the last call, you anticipated an increase in revenue for the fourth quarter, but that seems unlikely now. Regarding Nuvera, as we look to 2025 and the expected growth, how should we consider that growth? There has been significant effort from the Biden administration to push through funding that could greatly benefit Nuvera before the end of the administration. Is that a major factor for you? If so, I would expect there is some concrete visibility on that that you could share. Also, concerning Nuvera, I missed part of your comments on the severance. Did you mention that there was a downsizing and $0.2 million in severance? If that’s correct, could you clarify that amount and explain how it impacts the cost structure for Nuvera as we formulate our 2025 models?

Yeah, Ted. So maybe I'll start with the second one because it was actually $0.2 million.

Yeah, I got a little better.

That's okay. I have a cold, so I'm not sure how clear I am on these topics. Let me return to your first question before addressing the second one. What we are seeing is that the market for fuel cells is being delayed. The primary reason is the availability of hydrogen. We have conducted tests in Europe and North America, and those pilot projects have been significantly impacted by hydrogen availability at the ports. There is a substantial investment underway to increase hydrogen availability, but it has not yet materialized. This situation is influencing equipment builders, including us, and our programs are being postponed until we believe hydrogen will be more accessible for specific applications. That has caused some delays. We still firmly believe that hydrogen is the ideal solution for high productivity, large vehicles that require significant energy consumption. We also have electric trucks operating on batteries, which has given us more insight into the challenges they face. Therefore, while our long-term hypothesis remains valid, the timing is shifting. Regarding the incentive and investment programs announced by the government, I believe they will have an impact. We have pilot programs scheduled with select customers for late 2026 and 2027, with the majority of those deliveries occurring during that time. This situation indicates how the application of technology is being pushed back. We are collaborating with the Department of Energy to identify programs we can implement to expedite progress. Some of these initiatives have been announced, and Nuvera has secured some of them, which will assist with costs as we navigate the delayed hydrogen implementation. In response, we have not eliminated anyone from our product development team because we believe we possess leading technology and continue to invest in it. However, we have optimized our operational group based on the expected volume for 2025 and 2026, which is what prompted some of the workforce reduction.

I appreciate it. I have two more questions if that's alright. Let's simplify things. The next topic is Bolzoni. I want to focus on the cost and acquisition because I honestly thought the SG&A expenses were a bit higher than I expected. According to the guidance, the fourth quarter seems a little higher than expected, but I also didn't realize you had made an acquisition. So, regarding the expense structure for Bolzoni in the near term, is that what's happening? Have you purchased this business and added a modest amount of expenses to it? If so, how should I view that for 2025?

This is a temporary issue, Ted. It relates to our other cost of sales. There's some connection to that, but we've also faced logistic disruptions affecting all businesses due to significant challenges. While things are starting to normalize, the businesses haven’t accounted for the higher logistic costs they’ve been experiencing. We're uncertain if this will materialize, as we've seen a drop in shipping rates since the peak holiday shopping period wrapped up around mid-October. Perhaps it won't occur after all. For 2025, I would recommend using the SG&A figures from 2024 for Bolzoni, applying just inflation to that.

Okay. And then my last question is actually two parts. Regarding capital expenditures, I know you significantly reduced CapEx compared to your initial plans for the year. Should I expect those investments to take place in 2025, where you mentioned around $80 million for that year, particularly in light of what you’ve discussed about improving efficiency and streamlining your manufacturing? Additionally, did you provide any guidance on your expected effective tax rate for all of 2024? Or did you mention anything about the fourth quarter related to that? I think you might have addressed it, but I missed it while taking notes.

Okay. I'll address the first part, and then I'll ask Scott to handle the second part. What was that?

The CapEx.

CapEx yeah. I was thinking about tax for a moment. The CapEx, I think it's because we really pushed hard on what we talked about the optimization of our operational footprint. There's been a large team working on that program for a while. And as that program has used up a lot of the resources that would typically be available for other operational capital programs, those have started to run a little late. We've prioritized this above pretty much everything else. And so we will see some of that happen in 2025 that was planned for 2024. But I also think there's going to be some other lower priority capital programs that will be pushed out of 2025 into 2026, so that we can execute this large program that we mentioned in our release. So I think it's not to do with funding issues; it's to do with resource available to execute. And some of these programs are fairly complex to pull up. So we need the right people working on it, and that's more of the issue, Ted.

Yeah, Ted, I'll take the tax one. So we increased our full year estimated tax rate from 31% to 32%. That caused a true-up adjustment in Q3, which made the Q3 rate a little bit higher at 37%. So for the full year we expect 32%. We haven't given guidance on 2025 yet at this point. We'll do that in our Q4 call coming up.

Okay. Thanks for the patience of taken all that for me.

No.

Yeah. No problem.

Your next question comes from Kirk Ludtke with Imperial Capital. Please go ahead.

Hello Rajiv, Scott, Al, Christina. I appreciate the call. I thought maybe we could just talk about your core North American market for a second in terms of overall demand. And when you talk to your customers, are you hearing any themes from them? Are they waiting for rates to come down? Are there any catalysts on the horizon that come up in your conversations?

I think it's important to consider the cycle we've experienced in North America. From 2021 to today, and likely extending to the end of 2025, the industry has booked nearly 200,000 more trucks than usual. However, those trucks were not delivered during that period, as we are currently delivering trucks ordered mainly in early 2023. Customers are now receiving those trucks, and many noticed a surge in demand just after COVID, as people were buying more goods while staying at home. That demand has since decreased as consumers have shifted their spending towards travel and other activities, rather than solely purchasing goods that require transportation. This shift has created a need for customers to manage the influx of trucks they are receiving, and we believe this dip in demand will start to stabilize by the second half of 2025. After that, the market is expected to return to levels similar to those seen in 2018-2019, with growth anticipated as we typically perform above GDP. We're confident in this outlook, as discussions with our customers support our understanding. While demand has softened somewhat, underlying demand remains strong, and consumers are still actively engaged in the market. We do not anticipate any economic factors driving this situation; it reflects industry trends.

Got it. I appreciate that. Thank you. And you mentioned your market share; you're gaining market share. Are you gaining market share in North America? And do you think that you'll continue to gain share?

That's our plan. A lot of our strategies are focused on increasing market share, and we have been successful in doing so. Quarter three of 2023 was particularly strong for us. Looking at quarter four and comparing it to the previous quarters, quarter three of 2024 looks promising, and we anticipate continued growth in market share moving forward.

Got it. Thank you. And shifting topics. You mentioned an adverse shift in mix on the parts side. And can you elaborate on that a bit? And is this the new normal? Or do you expect this mix to persist or revert to where it was?

Yes, there are some short-term and longer-term factors influencing our mix. In the short term, it's about the balance between parts used for service and those for repair. We've sold more service-related parts recently, which impacts our margin profile, but this will balance out over time. The longer-term change relates to electrification; as we transition from internal combustion engines to electric trucks, the parts profile changes as well, with fewer parts needed for service in electric trucks. We are responding by incorporating more electric-oriented solutions into our offerings and will provide more updates on that in the future. For now, our focus is on integrating lithium-ion batteries into both our unit sales and parts infrastructure.

Got it. What percentage of the installed base is electric do you think?

For us let's say just take North America for example it's I would say 40-60. But if you think about it from a value point of view in terms of the value of the truck and the value of the parts it's probably more closer to 50-50.

Got it. I appreciate it. Thank you very much. That’s it from me. End of Q&A

Ladies and gentlemen, there are no further questions at this time. Please proceed.

Okay. With that we'll conclude our Q&A session. Thank you so much for participating. A replay of our call will be available later this morning. We'll also post a transcript on the website when it becomes available. If you have any questions please reach out to me. My information is in the press release. Hope you enjoy the rest of your day and I'll turn it back to Pamela to conclude the call.

Thank you. This does conclude your conference call for today. We thank you for participating and ask that you please disconnect your lines. Have a great day everyone.