Manitowoc Company, Inc. Aktie

Good day, and welcome to The Manitowoc Company, Inc. First Quarter 2026 Earnings Conference Call. [Operator Instructions] Please note this event is being recorded.

I would now like to turn the conference over to Ion Warner, Senior Vice President of Marketing and Investor Relations. Please go ahead.

Good morning, everyone, and welcome to our earnings call to review the company's first quarter 2026 financial performance and business update as outlined in last evening's press release.

Joining me this morning with prepared remarks are Aaron Ravenscroft, our President and Chief Executive Officer; and, our Executive Vice President and Chief Financial Officer. Earlier this morning, we posted our slide presentation to the Investor Relations section of our website, www.manitowoc.com, which you can use to follow along with our prepared remarks.

Please turn to Slide 2. Before we start, please note our safe harbor statement in the material provided for this call. During today's call, forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995 are made based on the company's current assessment of its markets and other factors that affect its business. However, actual results could differ materially from any implied or actual projections due to one or more of the factors, among others, described in the company's latest SEC filings.

The Manitowoc Company does not undertake any obligation to update or revise any forward-looking statement, whether as a result of new information, future events or other circumstances.

And with that, I'll now turn the call over to Aaron.

Thank you, Ion, and good morning, everyone. I'd like to take a moment to thank the Manitowoc team for their unwavering commitment to serving our stakeholders. Over the last 12 months, the team has continued to execute our CRANES+50 strategy, enabling us to weather the downturn in the crane cycle and be better positioned for the next leg up. Although there is a great deal of uncertainty in the Middle East, Ukraine and even in the United States with respect to tariffs, the overall market has been resilient. Our orders during the first quarter were almost $650 million, and our backlog ended the period at $940 million. In addition, order rates in April remained strong.

Please turn to Slide 3. Starting with the Manitowoc Way, I recently challenged our organization to eliminate hammers, similar to what we did with ladders a few years ago. We are simply too reliant on hammers that create quality problems and are a major source for safety risk. In the Shady Grove plant alone, we had over 1,200 hammers in use. Thus far, we've eliminated 264. As you can see on the slide, the organization has quickly developed a variety of improvements ranging from simple to ingenious solutions. Eliminating hammers not only helps create a safer workplace, but also supports the Manitowoc Way culture as we consistently drive for continuous improvement and innovation.

Ultimately, our goal is to have 0 injuries. In terms of new product development, in March, we unveiled an 80-ton boom truck and an 800-ton 8-axle all-terrain crane at CONEXPO, both received outstanding feedback from customers and crane operators. The 8-axle crane was a real headturner at the show, and I really look forward to getting the first units into the field in 2027.

Please move to Slide 4. Turning to our CRANES+50. Our non-new machine sales for the quarter grew 3% year-over-year. On a trailing 12-month basis, we improved 8% to $696 million. Growing this part of our business, which is less impacted by economic cycles and produces higher returns is a key part of our strategic plan and is working well. As I preach to our teams, for us to continuously grow our non-new machine sales, we have to focus on 4 major buckets. Number one, we are adding more service locations. For example, in Australia, we doubled the capacity of our Sydney facility, and we recently approved new service centers in Brisbane and Melbourne.

Brisbane will host the 2032 Olympics, and we're preparing for a lot of activity in the region. Number two, we are adding more aftermarket sales representatives and field service techs. We ended the first quarter with 567 field service techs up 50 techs in just 3 months. The growth was driven by 2 major actions. First, we reorganized our approach to talent acquisition in North America by enhancing our recruiting team. And second, in India, we transitioned from a dealer model to a direct model in order to better service our customers. The third bucket, we are increasing sales of complementary lifting accessories. In Europe, our tower crane team has introduced anti-intrusion panels to reduce theft and to discourage curious social media influencers during the off hours.

In addition, the team has introduced journals to replace the less than desirable traditional bucket system. In the U.K., our mobile team has started selling outrigger pads and a rear-mounted storage compartment, which they designed in-house. Our goal is straightforward. We want to make our customers' lives easier so they can focus on executing lifts. And the fourth bucket is the fact that we are leveraging technology. I've mentioned our implementation of ServiceMax a few times. This tool has several different modules to help us better track machines and more effectively fix and build crane repairs. In April, we completed the implementation of ServiceMax asset management system. We are now under the development of the dispatching and work order module, which increases our visibility to service work and enables us to capture more incremental revenue opportunities.

Please move to Slide 5. For my regional update, let's start with the Americas. First and foremost, overall customer sentiment at CONEXPO was very positive. Crane rental houses were quite optimistic throughout the market outlook. While everyone is unhappy with tariffs, customers told us project work is abundant. In addition, dealer inventory levels declined during the first quarter, which is a great sign that folks are buying again. For example, all-terrain crane inventory levels are at a 10-year low. In Europe, the crane business feels pretty good. Demand for tower cranes continues to grow with new machine orders up 76% year-over-year, and mobile demand has remained relatively steady.

In the Middle East, many big projects like the new Dubai Airport continue to move forward. Not surprisingly, Saudi Arabia has pulled back on NEOM and Trojena, but considerable development activity remains underway in Riyadh. Given the circumstances around the Iran conflict, we find ourselves in a wait-and-see mode as we monitor the situation, and I am very encouraged by the level of optimism in the region with construction companies eager to get back to business.

Finally, Asia Pacific continues to gain momentum with increasing demand in Hong Kong, Vietnam, Australia and South Korea. I recently visited the new SK hynix and Samsung semiconductor projects where roughly 100 tower cranes are currently operating. Korean construction companies continue to leave me in awe of their scale and speed. The Samsung site alone will reach 70,000 workers at its peak. I left South Korea very optimistic about demand in the coming quarters.

With that, I'll hand it over to Brian to walk you through the financials before I make a few closing remarks.

Thanks, Aaron, and good morning, everyone. Please turn to Slide 6. Our financial performance for the quarter tracked largely in line with expectations, which supports reaffirming our previously issued guidance. We anticipated difficult comps as tariffs were a headwind to the quarter versus the prior year. The tariffs introduced in 2025 didn't fully impact us until the second half of the year. Moving to the numbers. We had orders of $646 million in the first quarter, relatively flat from a year ago on a currency-neutral basis. Order activity was solid and broadly consistent with recent trends. Keep in mind, order comps were difficult in Q1 due to the post-election bump in 2025 and the large stocking orders we received at the end of the year.

Backlog ended the quarter at a strong $940 million, up $146 million from where we exited 2025 and up $142 million year-over-year. This supports our revenue expectations for the full year. Net sales in the quarter were $495 million, essentially flat on a currency-neutral basis. Non-new machine sales in the quarter were $166 million and on a trailing 12-month basis reached a record $696 million, up 8% from the prior year. While growth lagged our expectations in the first quarter, mainly due to used sales, the overall mix of non-new machine sales favored our higher-margin categories.

SG&A expenses were $91 million in the quarter. On an adjusted basis, SG&A was up $7 million with foreign currency accounting for $3 million of the increase. The remaining increase was driven primarily by the CONEXPO trade show and inflation from other employee-related costs. Adjusted EBITDA in the quarter was $20 million, down $2 million or 10% year-over-year. As expected, tariffs impacted our results by $2 million.

Please turn to Slide 7. Net working capital ended the quarter at $536 million, an increase of $47 million year-over-year, driven primarily by inventory. The higher year-over-year inventory was driven by $26 million from foreign currency, $15 million from tariffs and $10 million in prototypes and was partially offset by operational improvements. Moving to cash flow. Operating activities provided $27 million of cash during the quarter. Capital expenditures were $8 million, including $6 million for our rental fleet, resulting in free cash flow of $19 million. This was a $17 million improvement year-over-year, driven by increased collections on accounts receivables.

We ended the quarter with $316 million in liquidity, and our net leverage ratio was 3.1x. In April, S&P upgraded our corporate credit rating from B to B+. This upgrade underscores the progress we are making in strengthening our financial profile through the cycle, while investing in long-term growth through our CRANES+50 strategy. Looking ahead, first quarter results didn't change our expectations for the full year. And as such, we are affirming our previously issued guidance of net sales of $2.25 billion to $2.35 billion and adjusted EBITDA of $125 million to $150 million.

With that, I'll turn the call back to Aaron.

Thank you, Brian. Please turn to Slide 8. Standing back and looking at the forest for the trees, I think there are many reasons to be optimistic. Number one, Europe is on the rebound. For sure, towers has rebounded more aggressively than mobiles, and there's still a big need for residential housing and power generation. Number two, in the Middle East, all things considered, folks are pretty optimistic to get back on track. In normal times, all construction would have dried up overnight with such regional conflict. Number three, in Asia, our strongest markets are pumping even in the face of weaker currencies. Number four, in LatAm, copper has traded above $6 per pound.

With several new governments in the region, I believe we'll start to see more investments in brownfield and greenfield mining projects. Number five, in the U.S., although fleet ages continue to increase, customers are grudgingly making purchases. Data centers continue to expand rapidly, and there is a strong need for additional power generation and transmission infrastructure. And finally, number six, the success of our CRANES+50 strategy is increasingly helping us weather this economic cycle and positioning us for a higher margin profile in the long term. Of course, there is still a lot of uncertainty in the market, but I believe that we are starting to see light at the end of the tunnel. Keep in mind, we've been living in this mode essentially since 2020. There is plenty of pent-up ambition from folks to renew and expand their businesses, which is why I believe that the markets have held up steady.

With that, operator, please open the line for questions.

[Operator Instructions] And the first question comes from Jerry Revich from Wells Fargo.

This is Kevin on for Jerry. Just had a question on the changing tariff dynamics as it relates to your outlook. Would be helpful to get more color on that, maybe bifurcating between impacts from the IEEPAoverturn and the new Section 232 ruling.

Yes. So thanks, Kevin. So a lot is going on with the tariff landscape, as you can imagine. I'll start by saying that the net go-forward impact of what is in place today is in line with what we thought coming into the year. So no real changes to our expectations based on those changes. With that said, there's still uncertainty regarding what the Section 301 country-by-country tariffs will be and what net effect they'll have on us versus the Section 122 current tariffs. Related to IEEPA, so we did file our refund through the K process. So we did pay approximately $25 million in IEEPA. So we're in a wait-and-see mode as far as that process goes.

But additionally, you'll see in our Q, we voluntarily submitted a prior disclosure to customs related to potential errors in our methodology in calculating the 232 steel and steel derivative tariffs. This will allow us to review our calculation to determine if we had any adjustments required. To give some perspective, we paid approximately $18 million prior to the April change in the 232 tariffs.

Got it. Very helpful. And then given that 2Q is typically a seasonally strong quarter for both a net sales and margin perspective, how should we think about performance versus normal seasonality? Any onetime impacts we should be thinking about from 1Q?

Yes. And I said in the prepared remarks that we still -- from a comp standpoint, the second half is going to look better just because of the impact of the tariffs. They really hit us more in the second half than the first half. With that said, I think we talked about restructuring in our plan, and that's still in place. Again, that's going to affect us more favorably in the second half. So I think Q2 will be better than Q1, but I think the second half is going to be better than the first half.

We received several calls this morning -- for this morning, and I'd like to read them to you. The first question that I received online was, could you provide more color on these lifting accessories as part of your CRANES+50 strategy?

Yes. So the analogy that I use with our team internally is that the crane business is a lot like a restaurant. When you think about the restaurant, it's the steak that brings us all to the restaurant. It's that main platter. But the reality is the restaurant is living off of the appetizers, the desserts and the wines. And I think that the crane business is exactly the same as that. I mean, obviously, you got to have a crane to be in the lifting business, but there's a lot of accessories that go around that product and really add value to our business and to our customers. And I think what really brings it all home is great service.

And a great example of that recently, we got an order in France for 7 tower cranes. That was for EUR 6.5 million. But on the back of that, the sales team was able to add the commissioning and dismantling services for [ 900,000 ] and then several accessories for a total of [ 300,000 ]. So on top of your normal crane order, they added anti-intrusion panels, lighting, cameras, anticollision software, aircraft warning systems and lifts. So I think to me, that's a great example of what the team can add when they really start to think outside of the box and have a bigger view of the customer and how we service those customers. So hopefully, that's a little color that helps.

We received another e-mail. What are your orders in April?

Yes. So Aaron mentioned that the orders were strong. We're still rolling up the numbers, but we expect between $225 million and $250 million of orders in April, which is good, a little bit higher than the run rate we saw in Q1.

Okay. I just received this e-mail. You seem more optimistic on this call. And how do we think about the full year guidance?

Yes. So we reaffirmed our guidance, but you look at it, orders have been strong. April, as Brian just said, is looking good. Backlog is strong. Dealer inventory is on the low end in the United States and really starting to see some momentum in places like South Korea. So I think there's a lot of optimism out there, a lot of opportunity. I think the big question mark is just how the Strait of Hormuz situation plays out because we still have plenty of orders that need to make their way into the Middle East through that Strait. And as of right now, it's shut down. So I think there's some good opportunities, but still there's some uncertainty there in terms of our ability to execute within the year, depending on how that situation plays out.

I received another e-mail, and I would just read it to you. How is the implementation of the Manitowoc Way lean practices impacting the aftermarket business?

Yes. So I mean, traditionally, we're manufacturing folks. So we're still sort of figuring it out. And I think we're in the early innings, but we're starting to see some good gains. I think when you look at what we did in terms of our new hires of field service folks during the quarter, that's a good example of how we're gaining. So we continue to sort of tweak how our approach to recruiting and how we manage the organization. I think it looks like we found the right formula. I think that's a real success of us trying to continuously do a better job and be more effective at it.

We've got some good kaizens going this year that are more than just sort of the weak kaizen. It will take us a few weeks to work through those. We do predelivery inspections at our dealerships. We've never really gotten good feedback. There's a lot of fixes that happen that people just don't report. So we built a system around that to start to get feedback closer to our -- to the assemblers and [indiscernible]. I think that's going to yield good results for us. In our Jeffersonville distribution center, this is where we typically ship out parts, but there's a lot of kits that go with oncore work and upfit and some bigger projects. I can best describe that as a terrible IKEA project at the moment.

So a lot of work for us to do and improve in terms of kitting because when we do that, there's going to be a significant productivity gain at our service centers when they're doing that work because it's hard to figure out all the different nuts and bolts and parts that are in some of these boxes. So I think that's great. And a big shout out to our team in Chesapeake, and Meghan Gowder, she's done a fantastic job. She was a Manitowoc Way winner last year for improvements. And in the first quarter, she put forward improvement around using QR codes to manage TPM on forklift. So I just love the amount of creativity we have in those locations.

To me, the big challenge and why I see we're in the early innings is just around how we collaborate and we share all these lessons learned. So it's a lot of cats to herd in all these different locations, but we're gaining speed. So I'm really looking forward to what we're able to do as we move forward.

Thank you. Those are the questions that we received in the queue. Operator, any other questions in the queue?

No, sir. There is nothing at present.

Okay. Very well. Please note that a replay of our first quarter 2026 earnings call will be available later this morning by accessing the Investor Relations section of our website at www.manitowoc.com.

Thank you, everyone, for joining us today and for your continued interest in The Manitowoc Company. We look forward to speaking with you again next quarter.

Thank you. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect your lines.

Good morning, and welcome to The Manitowoc Company Fourth Quarter 2025 Earnings Conference Call. [Operator Instructions] Please note, this event is being recorded.

I would now like to turn the conference over to Ion Warner, Senior Vice President, Marketing and Investor Relations. Please go ahead.

Good morning, everyone, and welcome to our earnings call to review the company's fourth quarter and full year 2025 financial performance and business update, as outlined in last evening's press release.

Joining me this morning with prepared remarks are Aaron Ravenscroft, our President and Chief Executive Officer; and Brian Regan, our Executive Vice President and Chief Financial Officer. Earlier this morning, we posted our slide presentation to the Investor Relations section on our website, www.manitowoc.com, which you can use to follow along with our prepared remarks.

Please turn to Slide 2. Before we start, please note our safe harbor statement in the material provided for this call. During today's call, forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995 are made based on the company's current assessment of its markets and of other factors that affect its business. However, actual results could differ materially from any implied or actual projections due to one or more of the factors among others described in the company's latest SEC filings.

The Manitowoc Company does not undertake any obligation to update or revise any forward-looking statement, whether as a result of new information, future events or other circumstances.

And with that, I'll now turn the call over to Aaron.

Thank you, Ion, and good morning, everyone.

Please turn to Slide 3. To start, I'd like to express my appreciation to our team for their hard work and never-ending passion for our company and for our customers. With their grit and determination, we delivered solid results in the fourth quarter. 2025 was a hard-fought year. Given the great trade reset in the U.S., the operating environment wasn't exactly as we anticipated. Even so, the Middle East remains strong, and we began to see green shoots in Europe and Asia Pacific. And we also continue to make great progress on our CRANES+50 strategy.

Our non-new machine sales grew 10% to $690 million, reaching another record. We continue to grow our aftermarket footprint, adding territory coverage in North Carolina, South Carolina and Georgia in the United States and several key provinces in France. In addition, we opened or upgraded new locations in Nashville, Phoenix and Baton Rouge in the U.S., Sydney in Australia and two locations in France. Lastly, we grew our field service technician population to over 500.

Equally important to growing our aftermarket presence, new product development is the lifeblood of our company and critical to growing our population of cranes in the field. At the very end of 2024, we launched the MCT 2205, which is the largest topless tower crane that we've ever produced. We sold 19 of these units last year, which was a great result.

During 2025, we launched 11 new cranes, including the GRT550 rough terrain, a 5-axle hybrid all-terrain crane; and the MCR 815, which is the largest luffing tower crane that we've ever sold. In March, we will unveil 2 more special cranes at CONEXPO. We will launch an 80-ton boom truck, which is the largest boom truck that we've ever produced. And we will launch an 8-axle 700-ton all-terrain crane, which is also the largest all-terrain crane we've ever developed.

A big thank you to our engineering teams. It's been a big lift to extend our product portfolio into these higher ranges.

Please turn to Slide 4. Turning our focus to Manitowoc Way. I'm extremely pleased that we achieved an RIR of 0.94. For the first time in our company's history, we reduced our recordable injury rate below 1. We also reduced our first aid incidents by 10% year-over-year. For some perspective, in 2015, we had 91 recordable injuries. In 2025, we had just 42. Our long-term goal remains 0 injuries.

Next, I would like to announce our CEO awards for the Manitowoc Way. Although our teams in the factories continue to do an awesome job, I was pleased that our winners came from the front end of our business. I'm happy to announce our MGX brands in Chesapeake was recognized for their new blast hopper concept, which was built by one of our welders, and increased operational efficiency by 70% and improved safety.

Second, our sales team in Portugal was recognized for their work that they did on a large military contract in Spain. In addition to selling multiple cranes, the team helped the customer with all of their rigging hardware needs, offering a complete suite of lifting products.

Lastly, I want to recognize 3 outstanding team members who received this year's CEO award for their exceptional service to our customers: Stephane Dumont, Vitaly Artemyev and Nick Bird. Congratulations to each of them for their leadership and unwavering commitment to our customers' success. Their entrepreneurial spirit inspires all of us to strive for excellence in serving our customers.

Please move to Slide 5. Turning our attention to the market. We generated orders of $803 million during the fourth quarter, up 56% year-over-year. Backlog ended the year at $794 million, up 22% from a year ago. Regionally, the Americas remains pretty complicated. A year ago, U.S. elections fueled customer sentiment. However, that momentum was reversed by the tariff situation, which still remains fluid. Folks want and need new cranes but they are waiting to the very last minute to place orders.

Our fourth quarter orders were highlighted by 3 large orders in December, which secured build slots for these dealers and customers throughout 2026. Rental rates have remained flat, which is my biggest concern. Regardless of the specific tariff, the cost of new cranes is going up and rental rates need to follow for crane operators to justify the purchase of new cranes or fleet renewals. Overall, dealer inventory is okay. It's not desperately low nor is it concerningly high.

In Europe, we continue to see improvement driven by several new economic programs across the continent. Without a doubt, the tower crane market has improved significantly. New machine orders were up 64% year-over-year during the fourth quarter. I was with a couple of our key dealers in early January, and their sentiment is a lot better than it was a year ago. Similarly, mobile crane orders in the quarter were up 39% year-over-year. Customers are beginning to feel better about the outlook on project work throughout the region.

In the Middle East, I remain fairly optimistic but the ride is definitely getting bumpier. In Saudi, while projects are moving forward, cash continues to tighten, which is making folks nervous. In Dubai, the large residential projects, which are skyscrapers by American standards, remain extremely hot.

The Stargate data center project, however, in Abu Dhabi is moving slower than I anticipated. The tower crane work on Phase 1 has been completed, and surprisingly, Phase 2 has not yet started. Meanwhile, the new Dubai Airport has already ley the first 3 construction packages and the fourth is under review. So the groundwork is underway, and I would expect to see tower crane work sometime this year.

The Asia Pacific market resembles Europe. Momentum and sentiment are improving, and South Korea optimism has grown despite a still weak currency, bolstered primarily by the announcement of large Samsung and SK hynix semiconductor projects. Australia reflects a similar positive trend. We are waiting for the green light on a major power transmission project, which should provide a meaningful boost in sentiment.

With that, I'll pass it on to Brian to walk you through the financials before I close with an update on our strategy.

Thanks, Aaron, and good morning, everyone.

Please turn to Slide 6. Our fourth quarter results were in line with our expectations and prior guidance, demonstrating solid performance and resilience despite ongoing volatility in global markets and the continued headwinds from tariffs.

We delivered strong orders for the quarter and achieved trailing 12-month non-new machine sales of $690 million. In addition, we made meaningful progress in reducing our working capital, generating $78 million of free cash flows during the quarter.

Quarterly orders totaled $803 million driven by whole goods stocking orders in the Americas after 2 quarters of lag in orders and the continued improvement in the European tower crane demand, where we saw a 64% increase in new crane orders year-over-year. Year-end backlog was $794 million, up 22% versus the prior year.

Net sales for the quarter were $677 million, up 14% year-over-year, supported by strong shipments in North America, European tower cranes as well as continued growth from our non-new machine sales strategy, which reached $191 million.

Adjusted EBITDA for the quarter was $40 million, up $5 million year-over-year, representing a margin of 5.8%. Tariffs unfavorably impacted results by $4 million during the quarter. SG&A expenses were $89 million or 13.2% of sales.

Please turn to Slide 7. From a full year perspective, net sales were $2.24 billion. Non-new machine sales were $690 million, a 10% increase year-over-year, reflecting great progress on our CRANES+50 strategy. As a reminder, prior to launching this strategy in 2021, our 2020 non-new machine sales were $376 million. We continue to grow this recurring revenue stream, and our goal remains $1 billion.

Adjusted EBITDA was $122 million for the year, in line with our expectations. Adjusted EBITDA margin declined 50 basis points to 5.4% primarily due to higher SG&A and incremental tariff costs, partially offset by stronger European tower crane results. Tariffs had a gross unfavorable impact of $39 million for the year and, consistent with our expectations, we're able to mitigate approximately 85% of these headwinds through targeted pricing and sourcing actions.

On a GAAP basis, our provision for income taxes was $5 million. GAAP diluted income per share was $0.20, and on an adjusted basis, $0.32, a decrease of $0.09 from the prior year. Net tariffs resulted in $0.13 of unfavorable impact to DEPS on a year-over-year basis. Cash flows from operations for the year were $22 million, which was negatively impacted by payments of approximately $45 million associated with the settlement of the EPA matter.

Capital expenditures were $38 million, including $19 million for rental fleet investment. Free cash flow was a use of $15 million, and we ended the year with a cash balance of $77 million. Excluding the EPA matter, free cash flow was $30 million. Our net leverage ended the year at 3.15x, and total liquidity was a healthy $298 million.

Please turn to Slide 8. We expect improved results in 2026 with net sales in the range of $2.25 billion to $2.35 billion and adjusted EBITDA between $125 million and $150 million. When looking at the midpoint of our guidance, the expected improved results are driven by, one, pricing to offset the incremental tariff headwind; two, the European tower crane market; three, continued growth in our non-new machine business.

Additionally, we implemented a restructuring plan to streamline our organization with projected savings of roughly $10 million in 2026. These projected savings are expected to offset inflation and foreign currency headwinds.

We project free cash flow to be $40 million to $65 million, which includes $45 million to $50 million in capital expenditures. We expect to improve our net leverage to below 3x during the year, improving our liquidity and adding flexibility for strategic investments.

With that, I'll turn the call back to Aaron for closing remarks.

Thank you, Brian. Please turn to Slide 9. Looking back, 2025 was not the year that we expected, but there's plenty of optimism as we move forward. Europe and Asia Pacific are moving in the right direction and the Middle East business remains positive. The American market appears poised for a rebound with interest rates trending down and the tariff environment stabilizing. Fundamentally, fleets continue to age and, at some point, a major refresh will be required.

Strategically, we continue to execute our CRANES+50 strategy. We have new locations planned in Portugal, Mexico, Chile and France, and we continue to hire field service techs. Recently, we also announced a new distribution agreement with Hiab, where MGX will represent their products across 13 states. We're really excited about this opportunity given the synergies between knuckle boom cranes and boom trucks. In line with our CRANES+50, we continue to expand our portfolio of lifting solutions.

In closing, our long-term aspirational goal is simple. We want to achieve a return on invested capital of 15%. While stronger end market demand will certainly help, the key lies in continuing to grow our non-new machine sales, which is far less cyclical and delivers gross margins around 35%.

I am confident that we are making progress and moving in the right direction. As Warren Buffet wisely said, someone is sitting in the shade today because someone planted a tree a long time ago. We continue to grow our orchard at Manitowoc.

And with that, operator, please open the lines for questions.

[Operator Instructions] Our first question today is from Jerry Revich with Wells Fargo.

Sorry, it's not Jerry. It's Kevin Uherek on for Jerry Revich. Yes. So first question that I had was about the 2026 outlook. How should we think about the sales growth by region? Which regions are expected to show the highest growth? And what products are contributing?

Yes. I think from a regional standpoint, our tower crane business continues to do strong, and the expectation will -- it will continue into 2026 to be a tailwind for us. And that's the tower cranes. U.S. is a bit of a mixed bag. While we did see some good orders and we got a good backlog, I think the tariffs still creates some headwind for us, hence, why we're doing the restructuring action.

Got you, got you. And then for the CRANES+50 strategy, could we talk about how to think about it through '26 and the cadence?

Yes. So in terms of our cadence, I'd say it's pretty flat across. The only that goes up and down is the used. So when we look at non-new machine sales heading into the year, I think we're in a good position relative to the number of techs we've added, number of locations we've added.

That being said, we do have some headwinds because we've had some good used sales the last couple of years, and tariffs have thrown a little bit of a wrench in there in terms of moving units from Europe to the United States. But yes, I think it's probably safe in terms of a modeling standpoint to just assume that it's roughly the same every quarter. Don't you think, Brian?

Yes. I think, like you said, I think the used -- in Q4, we had a good used quarter. So we saw a good revenue number. From a margin standpoint, the used is a little bit less than the normal margin in our non-new machine sales. So with expected lower revenue on the used next year, I think the margin should be a little bit better.

Yes.

[Operator Instructions] Showing no further questions. This concludes our question-and-answer session.

Gary, there are a couple of e-mails that have come my way with questions. So I'll just ask the question and have management answer.

The first question that came in was, what are your orders in January?

I'll take that one. So in terms of our orders in January, very, I would say, good month. Approximately $225 million when I look at it in terms of where the good news came from. We've entered our winter campaign for tower cranes. That was a good program for us. So that's the first time in a few years we've had a good winter campaign. So that was good.

In North America, of course, we had some large stocking orders during the fourth quarter. So it was down a little bit. But overall, I would say it was still a pretty good number. Demand for large RTs and crawlers has been really good. So pleased to see the continued progress in January. So yes, good month.

We received another question by e-mail, and I'll read it. Can you give us an update on the Manitowoc Way and your implementation of lean at the company?

Yes. So these days, I sort of look at the Manitowoc Way in three buckets. First, on the shop floor, I'm really, really proud of the things that we're doing. A good example, I was in France a couple of weeks ago. And the team is really, I'd say, honed in on the details now where it's not just sort of talking about 5S, but really diving into how do we apply SMED, changing out machine tools, how we're programming robots.

So I feel like we're well along our way, and the team doesn't need much help, can be more of a cheerleader on that side of the business.

In terms of the office, I'm still super excited to see what we can do with AI. I think that's going to give us a lot of tools to crunch data that we really couldn't attack in the past. We've had a couple of smaller wins so far but nothing to brag about, I would say, just yet.

And then lastly, when I look at the company, the more we continue to invest in the MGX and the aftermarket, non-new machine sales and all these new locations, we've got a lot of work to do on that. And in terms of sharing lessons learned, I find lots of creative solutions when I go visit the locations. But we're not sharing them the way, I would say, that we do at the factory level.

So I'd say that's really our focus in the next couple of years, is how do we get better and really focus on the customer experience. So it's nice to see that what we're doing with lean is starting to fly in. Lots of different applications than just the shop floor.

I got another one about the seasonality, how you see the first quarter looking.

I'll take that one. While we don't give quarterly guidance, I think we do expect 2026 to be similar in that Q2 and Q4 are generally our strongest quarters.

Specifically related to Q1, I think we've got a few headwinds where Q1 will be impacted by, one, being tariffs. The big tariff hit came really in the second part of the year. So we have that headwind. Also, FX will impact us negatively in the first quarter. And the restructuring actions that we took are going to be a positive impact later on in the year.

So I think Q1 will be unfortunately a little bit low relative to the rest of the year.

Anything else, Ion?

No. Those are the inbound questions that I got by e-mail. Thank you.

With no further questions, I would like to turn the conference back over to Ion Warner for any closing remarks.

Thanks, Gary. Please note, a replay of our earnings call will be available later this morning by accessing the Investor Relations section of our website at www.manitowoc.com.

Thank you, everyone, for joining us today and for your continued interest in The Manitowoc Company. We look forward to speaking with you next quarter.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

Good morning, and welcome to the Manitowoc Company Third Quarter 2025 Earnings Conference Call. [Operator Instructions] Please note this event is being recorded.

I would now like to turn the conference over to Ion Warner, Senior Vice President of Marketing and Investor Relations. Please go ahead.

Good morning, everyone, and welcome to our earnings call to review the company's third quarter 2025 financial performance and business update as outlined in last evening's press release. Joining me this morning with prepared remarks are Aaron Ravenscroft, our President and Chief Executive Officer; and Brian Regan, our Executive Vice President and Chief Financial Officer.

Earlier this morning, we posted our slide presentation on the Investor Relations section of our website, manitowoc.com, which you can use to follow along with our prepared remarks. Please turn to Slide 2. Before we start, please note our safe harbor statement in the material provided for this call. During today's call, forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995 are made based on the company's current assessment of its markets and other factors that affect its business.

However, actual results could differ materially from any implied or actual projections due to one or more of the factors, among others, described in the company's latest SEC filings. The Manitowoc Company does not undertake any obligation to update or revise any forward-looking statement, whether the result of new information, future events or other circumstances.

And with that, I'll turn the call over to Aaron.

Thank you, Ion, and good morning, everyone. Please turn to Slide 3. To start, I'd like to thank the Manitowoc team for their hard work and persistence through a very complicated period. The great trade reset continues to unfold, presenting new challenges every day. Nevertheless, our team continues to fight to the process, service our customers and execute our CRANES+50 strategy to grow our aftermarket.

Overall, I was pleased with the quarter, especially considering the tariff headwinds. Sequentially, the third quarter is usually much softer than the second quarter, but we were able to recover some lost ground. And compared to last year, the numbers look good, too. During the third quarter, we generated $553 million in revenue and adjusted EBITDA of $34 million, which was up 30% year-over-year. Orders were $491 million versus $425 million last year, and backlog ended the period at $667 million. Our non-new machine sales were $177 million, up 5% versus last year, reaching a record $667 million on a trailing 12-month basis.

Please turn to Slide 4. Moving to the Manitowoc Way. I recently visited our Zhangjiagang factory in China, where we produce tower cranes for the Belt and Road markets. As we've mentioned on previous calls, we recently developed several new large capacity cranes and upgraded the factory to support their production. While it was great to see the value stream running in full swing, the biggest surprise to me was the improvements in the smaller crane value stream.

The team has done an amazing job with kitting and point-of-use materials, significantly improving our flow and throughput in roughly half the space. Overall, the team increased its earned hours by 30% compared to last year with flat headcount, a great increase in productivity. A huge thanks to [indiscernible] Gary Wong and the rest of the team for a job well done.

Next, on safety, I want to recognize our team's ongoing efforts to improve our work environment. In the third quarter, we achieved a recordable injury rate or RIR of 0.83, which is a 36% drop from the same period last year. October was safety month here at Manitowoc, and we went all in.

Adding to our already strong safety culture, it's an initiative we kicked off last year focused on preventing unsafe practices and encouraging the kind of positive safety behaviors that really make a difference. While 0 injuries remains the ultimate goal, I'm proud of the momentum we continue to build toward it.

Please move to Slide 5 for my market update. Starting with Europe, I'm cautiously optimistic. Overall, I feel better about the macroeconomic environment. While the French government's woes continue, both Germany and France shows positive signs. Housing permits in both countries are up compared to last year, which is good news for our tower crane business. Additionally, the big 3 French construction companies have a good backlog heading into 2026.

In Southern Europe, we see a lot of activity in Italy. And believe it or not, Spain is now dealing with a housing shortage, something few would have imagined 15 years ago. I'd like to add more color on Germany, where we see promising developments. The country has enacted an accelerated depreciation program, formed a EUR 500 billion infrastructure fund and most recently passed the bio turbo law aimed at significantly reducing building regulations and fast-tracking construction approvals.

There are plenty of needs to invest in the local infrastructure. The once famously precise Deutsche Bahn railway system has turned infamous for delays and need serious investments. There are 4,000 bridges in need of replacement or repair, serious housing shortages persist and electrical power remains an ongoing challenge.

Turning to our products, tower crane orders for new machines grew 34% year-over-year, marking the fifth consecutive quarter. Sentiment is definitely improving and dealer inventory for self-erecting cranes is at all-time lows in Germany. We see a recovery underway. On mobiles, I would say that all of the above applies and it was reflected in our orders this quarter, increasing 28% versus last year.

Turning to the Middle East. The market remains strong. Although Saudi Arabia has eased off a bit from its previous breakneck pace, the UAE has definitely picked up steam. The country has already started Phase 2 of the massive data center outside of Abu Dhabi, requiring another 20 big cranes, and we are hearing that the next major announcement could be the new Dubai Airport, which will require 150 tower cranes.

And we're proud to share that the construction machinery Middle East publication recently honored Manitowoc with 2 awards. the best new tower crane Award for the Potain MCT 2205, which is operating on the big data center project and the best new altering crane for the Grove GMK6450-1.

Turning to Asia. I recently visited China and South Korea. In China, the market is still pretty quiet. However, in South Korea, there is growing optimism. And as mentioned on the last call, Vietnam and Australia are also showing signs of a turnaround. In addition, we recently received some solid orders in Singapore and Hong Kong. Lastly, the T50 Summit Asian Forum recently named the new Potain MCT 220, one of the top 5 new products for the year. These recent awards underscore the value of the Manitowoc Way and the power of listening to the voice of the customer. A big congratulations to our engineering team in China.

Finally, in North America, total orders were up 20% during the third quarter, but the volatility surrounding the great trade rate that is continuing to create a lot of uncertainty. On top of the price elasticity impact of the tariffs, we faced 2 other major tariff-related obstacles. First, the Supreme Court is expected to decide on the reciprocal tariffs by the end of the year. If the court moves against the Trump administration, everyone expects a new tariff strategy will be implemented, but what that looks like is anybody's guess.

The second issue involves the impact of steel derivative tariffs on specific products. In August, HTS codes covering all-terrain cranes, tower cranes and truck-mounted cranes were added to the initial list of products subject to the 50% tariff on steel components. Submissions for another round of HTS codes were made in September, and there will be another round of submissions next year.

Although the situation is creating plenty of noise in the industry, we continue to push forward. Deal inventory is a bit mixed. It's definitely trending on the low end for rough terrain and all-terrain cranes, while boom trucks and crawlers are slightly elevated. Looking to the fourth quarter, given that most crane rental houses have had a good year, I expect that some customers will take advantage of the new accelerated depreciation scheme and do a little last-minute Christmas shopping.

Lastly, our antidumping claim in the U.S. against Japanese crawler crane manufacturers continues. However, we expect it to be delayed due to the government shutdown. The bottom line is that we believe in fair trade and will strongly defend it. With that, I'll pass it on to Brian to walk you through the financials before I close with our strategy update.

Thanks, Aaron, and good morning, everyone. Please move to Slide 6. During the quarter, we had orders of $491 million, an increase of 16% compared to a year ago. The year-over-year increase was largely attributable to higher orders in the Americas and European tower crane businesses, where comps were fairly easy. In the U.S., the prior year was significantly impacted by uncertainty from the election and Europe was experiencing a downturn.

As Aaron mentioned, our European tower crane business continues to show signs of improvement with a 34% increase in new machine orders compared to last year, the fifth consecutive quarter of year-over-year improvement. As it relates to backlog, we ended the quarter at $667 million and expect approximately 60% of it to ship by the end of the year.

Net sales in the third quarter were $553 million, up 5% versus the prior year. Non-new and new machine sales at both our European tower crane business and MGX drove the year-over-year revenue improvement. From a trailing 12-month perspective, non-new machine sales reached $667 million, reflecting another great quarter by the team in progressing our CRANES+50 strategy and another record.

On an adjusted basis, SG&A expenses as a percentage of sales were flat year-over-year. Our adjusted EBITDA for the quarter was $34 million, an increase of 30% year-over-year. Adjusted EBITDA margin was 6%, an increase of 120 basis points over the prior year, reflecting a better mix of revenue.

Please move to Slide 7. Net working capital ended the quarter at $622 million. The majority of our net working capital increase from the prior year was driven by inventory, which was impacted by unfavorable foreign currency exchange rates, tariffs as well as a few missed units we had planned to ship during the quarter.

Similar to last year, we expect our inventory to decrease substantially as our build plans continue to rightsize and we execute on Q4. With that said, we expect working capital to only modestly decrease by the end of the year with AR increasing and AP decreasing, offsetting the inventory change.

Moving to cash flows. We used $14 million of cash from operating activities in the quarter. Capital expenditures were $8 million, of which $3 million was for the rental fleet. At September 30, our cash balance was $40 million and total liquidity was $213 million. Our net leverage ratio was 3.9x. Touching on tariffs, additional HTS codes were added in August to the steel derivatives listing. This is a 50% tariff on the steel components of imported product.

Our truck-mounted cranes are manufactured domestically. Therefore, there is no impact from these new steel derivative tariffs. Similar to our competitors, we import all-terrain and tower cranes. As such, this tariff doesn't necessarily change the competitive landscape for these products. However, overall demand for the product is expected to decline.

As the only U.S. crane manufacturer, any additional steel derivative tariffs on other crane products imported into the U.S. could be beneficial to our domestic business. From an overall perspective, we continue to assess direct tariff impacts. Based on current demand levels and tariffs, we're estimating 2025 gross tariff cost of approximately $44 million of which we expect to mitigate 80% to 90%.

Year-to-date, tariffs had a $2 million unfavorable impact to our results. Given our relatively strong performance in the third quarter, we expect full-year results to come in at the low end of our adjusted EBITDA guidance. As mentioned earlier, we don't expect our working capital to improve significantly during the quarter, which is delaying cash generation. We would need approximately $100 million of free cash flow to hit the low end of our guidance, which will be a tall task given the timing of shipments and the collecting of those receivables.

With that, I will turn the call back to Aaron.

Thank you, Brian. Please turn to Slide 8. To close, I'd like to focus on our CRANES+50 strategy, which provides higher margins and more consistent revenue streams. Over the last 12 months, our non-new machine sales grew 8% to $667 million. Given that this revenue generates roughly 35% in gross margins, every sale is crucial to offsetting the softness in the U.S. OE market.

I'd like to share a few highlights from my recent visits to our service branches in Denver, Langenfeld, Germany and Meru, France. Starting with Denver, we opened this greenfield location in 2023 to replace a low-performing dealer. Today, we have 13 team members and the branch has almost doubled sales into the territory by focusing on the customer. In addition to selling Manitowoc equipment, the team has done a great job of also selling extreme telehandlers in this region. These machines are perfect for managing a crane yard, and this is a great example of the entrepreneurial spirit within MGX.

One of the coolest things that I saw at the branch was that the local service manager used his personal 3D printer to manufacture a homemade tool to help technicians perform wheel alignments. It's a significant safety improvement and saves 4 hours of work on the job.

In Langenfeld, Germany, we expanded our legacy aftermarket location to start our tower crane rental fleet initiative. I'm pleased to say that 67 cranes of our 75-unit rental fleet were in service during my visit, while the remaining 8 units were reserved for upcoming projects. Back to my earlier comments on the German tower crane market, this is a great indicator of the improving market.

With the mobile business, Langenfeld also plays a critical role in our trade-ins and used sales. This is where we homologate used cranes that are headed for the U.S. among other locations. Using The Manitowoc Way, the team recently freed up an entire bay for repair work, which is excellent news considering the facility was full during my visit.

Lastly, Meru, France, is one of our newest facilities opened in 2024. Historically, we had a tiny warehouse location in the region with a couple of offices, but we never really had a true service shop to support the Parisian market. The team impressed me with their creative service ideas. For example, we provide both mobile and tower services for a local construction company in the area.

During my visit, the team was repairing the same customer's genset unit. It's a classic example of our broad skill set and our team's focus on servicing customers. In addition, the Meru team is trialing a battery system and a flywheel power generation unit to help manage electricity at job sites. Typically, it takes months to connect to the French grid. But with these solutions, customers can be up and running in just a day. Both are promising concepts for helping our tower crane customers manage on-site power efficiently, and I look forward to seeing how this project unfolds.

On Slide 9, you can see a variety of different products our aftermarket team in France has started to sell. The crane industry is a niche business, and our customers have a tough job. We want to provide as many solutions as possible to help make their work a little easier. Thanks to all 3 aftermarket teams for their time, passion and commitment to Manitowoc. It was an absolute pleasure to spend time with them.

In closing, we are managing the things we can control. The tower crane teams in Europe and Asia have done a fantastic job developing new products during the downturn, which are now paying great dividends. Likewise, among other new products we plan to introduce in 2026, we are on track and excited to launch our new Grove 8-axle all-terrain crane at CONEXPO in March.

It has the potential to be a $100 million product line when it goes into serial production in 2027. And while we are managing the tariff situation in the United States in every corner of the company, the Manitowoc team is continuing to find ways to better serve our customers and grow our non-new machine sales. With that, we'll open up for questions.

[Operator Instructions] There are no questions in the queue. I'd like to hand the call over back to Ion Warner -- we have a question from Tyler Russell from Barclays.

So great quarter. Margins were up year-on-year, quarter-on-quarter. So you mentioned positive mix, but yes, I wanted to ask about the drivers of the margin improvement.

Yes, it was really -- you saw the growth in our non-new machine sales, and we talked about the tower crane business as well. So those 2 businesses are really -- starting to operate a lot better, in particular, the tower crane business and both have good margins.

Got it. Got it. So the non-new machine sales have been consistent, but yes, I noticed that the total sales were up more, 5.4% versus 4.9%. Is that mainly driven by the tower cranes up 34% as well?

Sorry, Tyler, I think the phone cut out...

Can you repeat your question, please?

Sorry. Yes, I just was mentioning the non-new machine sales have been consistent, but the total sales were up more, 5.4% versus the 4.9%. So was that driven by the tower cranes as well? Or where are you seeing the improvement?

Some of that was the misses that we had in the second quarter that would have pulled in the third.

There are no more questions in the queue. I would like to turn the conference back over to Ion Warner for any closing remarks.

Thank you. Please note that a replay of our third quarter 2025 earnings call will be available later this morning by accessing the Investor Relations section of our website at manitowoc.com. Thank you, everyone, for joining us today and your continued interest in -- the Manitowoc Company. We look forward to speaking with you again next quarter.

Conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

Good day, and welcome to The Manitowoc Company Second Quarter of 2025 Earnings Conference Call. [Operator Instructions] Please note that today's event is being recorded.

I would now like to turn the call over to Ion Warner, Vice President, Marketing and Investor Relations. Please go ahead.

Good morning, everyone, and welcome to our earnings call to review the company's second quarter 2025 financial performance and business update as outlined in last evening's press release. Joining me this morning with prepared remarks are Aaron Ravenscroft, our President and Chief Executive Officer; and Brian Regan, our Executive Vice President and Chief Financial Officer.

Earlier this morning, we posted our slide presentation on the Investor Relations section on our website, manitowoc.com, which you can use to follow along with our prepared remarks.

Please turn to Slide 2. Before we start, please note our safe harbor statement in the material provided for this call.

During today's call, forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995 are made based on the company's current assessment of its markets and other factors that affect its business. However, actual results could differ materially from any implied or actual projections due to one or more of the factors, among others, described in the company's latest SEC filings. The Manitowoc Company does not undertake any obligation to update or revise any forward-looking statement, whether the result of new information, future events or other circumstances.

And with that, I will now turn the call over to Aaron.

Thank you, Ion, and good morning, everyone. Please turn to Slide 3. To start, I'd like to express my deep appreciation for the hard work of the Manitowoc team. While the great trade reset continues, I'm really proud of how our teams continuously reacts to the ever-changing tariff landscape and focuses on finding solutions to service our customers. During the second quarter, we generated $540 million in revenue and $26 million in adjusted EBITDA. Orders were $454 million and backlog ended the period at $729 million. Our non-new machine sales were $162 million, up 10% year-over-year.

In terms of tariffs, during our first quarter call, we were modeling $60 million in incremental tariffs for the year with plans to mitigate 80% to 90% of these costs. Today, we believe the full year gross impact of tariffs is $35 million. The change in our assumption is due to a combination of lower purchases and a different mix of various tariffs. We expect to mitigate 90% of these costs. Given the fluid nature of the situation and the price elasticity of cranes in the short term, we see a drag on demand in the United States.

Moving to the Manitowoc Way. We recently held our annual corporate kaizen at Niella, Italy. For this kaizen, we organized 4 dedicated teams to focus on enhancing the information and material flow essential to building rough terrain cranes. As always, a good kaizen is a humbling experience. It reminds us that running a production line smoothly is only possible if all of the necessary parts are available exactly when needed. And sometimes that's a big if.

Team walked away with a year's worth of action items, but what stood out most was the continued growth in collaboration and teamwork across the organization. It's inspiring to see how we keep getting better together. Also, I'd like to thank Ransom Research and Front Street Capital Management for their valuable participation in the event.

Quickly touching on safety, I'd like to recognize our team's steadfast efforts to improve our working environment. For the first half of the year, we achieved recordable injury rate, or RIR of 0.67, which is another newer safety record. Our goal is 0, but I'm proud that we continue to make progress towards it.

Please move to Slide 4 for my market update. Starting with Europe, we're seeing 2 distinct market dynamics depending on the country. In the U.K., Netherlands and France, demand has been slow. In contrast, customers in Spain, Italy and Germany are showing signs of optimism, and we sense that business is starting to rebound. Across Europe, we've recently seen 3 encouraging data points. Number one, the U.K. launched a GBP 39 billion housing program for the next 10 years with a goal of building 300,000 homes.

Number two, last month in Germany, the government passed a new accelerated depreciation scheme, which complements the EUR 500 billion infrastructure fund that was recently created.

And number three, in France, we saw May housing permits turn favorable, up 20% year-over-year. On a product line basis, despite great excitement following the April Bauma trade show, momentum in the mobile crane market moderated during the quarter. At this point, we need to wait until after the summer holiday to get a clear picture on demand.

Conversely, however, the tower crane market has continued to be positive. While the market hasn't fully recovered, we still have easy comparisons, which is always the birth of a rebound. During the quarter, our new tower crane orders were up 104% versus the same period a year ago. This is the fourth quarter in a row that we have seen orders improve on a year-over-year basis.

Turning to the Middle East. The market continues its dynamic growth with especially strong activity in Saudi Arabia and UAE. During my recent visit to the Middle East, I was struck by the remarkable pace at which infrastructure projects move in this region. Major luxury residential developers like Soba and Binghatti are reshaping the skylines of Dubai.

In addition, the Stargate UAE data center project was kicked off outside of Abu Dhabi, starting with a 200-megawatt data center where we won an order for 16 large capacity tower cranes. Upon completion, the campus will span 10 square miles and is expected to host 5 gigawatts of capacity. Likewise, Saudi remains highly active with our local partner playing a key role in several major stadium projects. The overall pipeline remains very strong.

Shifting our focus to Asia. China continues to face economic headwinds, and we don't anticipate a meaningful rebound in the near term. Elsewhere, however, sentiment is improving. During my recent visit to Korea, coinciding with the national election, a common view prevailed. Regardless of political preference, the new President is seen as pragmatic and supportive of pro-business initiatives. In addition, renewed interest in the Samsung Fab 5 semiconductor project has boosted confidence. We anticipate the Korean market could regain traction within the next 6 months. In Vietnam, we secured crane orders for multiple projects this quarter, an encouraging signal of the market reawakening.

Meanwhile, in Australia, conditions remain mixed. The Australian dollar has been hovering at 0.56 to the euro, which has hindered the market, but crane activity has been strong with early signs of activity emerging in preparation for the 2032 Brisbane Olympics.

Finally, in North America, the market remains in a hold pattern with significant uncertainty around how various tariffs may unfold, both dealers and crane rental houses are delaying purchasing decisions until there is more stability around tariffs and pricing. Overall, crane rental houses remain busy, and we've seen success at some of the bigger players to reduce the age of their fleets. This is encouraging for the health of the overall industry, and I remain cautiously optimistic about long-term demand in the region.

Looking at the next 12 months, however, I have 2 views around U.S. demand depending on the time horizon. For the next 6 months, it's hard to see a scenario where demand accelerates. Crane buyers can afford to wait. And at the moment, they prefer to buy units that are sitting on the ground at pre-tariff prices. If I consider the European reciprocal tariffs, lots of buyers have been hoping that the tariff would drop below 10%. So we'll have to see how customers react to the 15% tariff. On a $2 million all-terrain crane, that's real money and rental rates would need to increase to financially justify a buying decision. Moreover, dealers are reluctant to place new orders and dealer inventory has been declining.

Looking beyond the next 6 months, dealer inventory in the U.S. could reach all-time lows if current trends continue. As a result, of the One Big Beautiful Bill, 100% accelerated depreciation has been reenacted. The previous program stimulated demand in December, and this could drive dealer inventories even lower. Point being, dealer inventory could be exceptionally low, which is a classic signal for the market to accelerate at the beginning of next year. Unfortunately, we cannot turn our manufacturing on a dime, and we have to align our build schedules with current demand. This adjustment will impact our financial performance in the second half of the year, which is why we are guiding to the low end of our EBITDA range.

With that, I'll pass it on to Brian to walk you through the financials before I close with our strategy update.

Thanks, Aaron, and good morning, everyone. Please move to Slide 5. During the period, we had orders of $454 million, an increase of 6% from a year ago, resulting in Q2 ending backlog of $729 million. The higher order intake was driven primarily by our European tower crane business, where new machine orders were up 104% year-over-year. In addition, we saw an increase in our non-new machine orders.

As Aaron mentioned, our third-party dealers in the U.S. are reluctant to commit to orders at this time due to the uncertainty around tariffs. For the quarter, this slowdown in demand was more than offset by higher orders in MGX, our wholly owned distribution business as end customers place orders to lock in pricing on in-stock units.

Net sales in the quarter were $540 million, a decrease of 4% from a year ago. We missed several deliveries due to supply chain constraints and last-minute commercial delays. Our non-new machine sales were $162 million during the quarter, up 10% year-over-year demonstrating the momentum we continue to build around our Cranes+50 strategy.

On a trailing 12-month basis, non-new machine sales were $659 million, another record. SG&A was $87 million in the quarter, up $4 million year-over-year. On an adjusted basis, SG&A was up $9 million year-over-year. Foreign currency accounted for $2 million with the balance driven by the Bauma trade show and other employee-related costs.

Our adjusted EBITDA was $26 million, down $10 million year-over-year. This was primarily driven by the lower sales and the higher SG&A. The net headwinds from tariffs in the quarter was approximately $1 million.

Our GAAP diluted income per share in the quarter was $0.04. On an adjusted basis, diluted income per share was $0.08, a decrease of $0.17 year-over-year.

Please turn to Slide 6. Net working capital ended the quarter at $580 million, up $63 million year-over-year, of which $43 million was due to the payment of the EPA matter in April. Additionally, foreign currency accounted for $14 million of the increase.

Moving to cash flows. We used $68 million of cash in operating activities during the quarter, which includes the $43 million payment to resolve the EPA matter. Capital expenditures were $6 million, of which $3 million was for our rental fleet. Our cash balance was $33 million, and total liquidity was $238 million at the end of the quarter.

As anticipated, our net leverage ratio increased to approximately 4x. We are focused on bringing our leverage back below our targeted 3x by year-end. Looking to the full year, between the tariffs and the build plan reductions mentioned by Aaron, we have line of sight to achieving the low end of our previously issued adjusted EBITDA guidance of $120 million to $145 million.

With that, I'll now turn the call back to Aaron.

Thank you, Brian. Please turn to Slide 7. While we anxiously wait to see how the global trade reset plays out, we remain steadfast in our Cranes+50 strategy. During the quarter, we continued executing our strategy to strengthen our aftermarket business. We opened a new service branch near Warsaw, Poland, and we expanded locations in Sydney, Australia; Nance, France and Nashville. Our culture continues to evolve from being product-focused to customer-oriented. A good example of this is in Australia, where we started to offer aftermarket tires, outrigger pads and rigging hardware to our customers, providing more of a one-stop shop. Every day, we get better at servicing our customers.

In terms of improving our effectiveness as an aftermarket organization, we recently went live with ServiceMax. This system replaces over a dozen different legacy systems. It enhances technician productivity, significantly upgrades our ability to manage service contracts and reduces administrative overhead. My favorite part of the tool is that it provides us global asset management so we can track every machine we manufacture from cradle to grave. It's a great repository for all of the maintenance and service work on any crane we sell, and it will keep us more closely connected to the iron when it gets traded or sold into the secondary market. Needless to say, ServiceMax is a big leap forward from the legacy ad hoc Excel-based systems our teams previously used.

Our CRANES+50 strategy is driving growth in higher-margin recurring revenue streams and creating long-term value for our business. While the turbulent second quarter was hard on the ROE business, our MGX business in the U.S. posted great results. This is proof that our strategy is working.

In closing, while the global political and economic situation remains unpredictable, our focus stays squarely on servicing our customers. The better we serve them, the stronger our partnerships become. When conditions improve, we'll be ready. In the meantime, we remain committed to executing our CRANES+50 strategy and creating long-term shareholder value.

With that, we'll open the line for questions.

[Operator Instructions] our first question here will come from Steven Fisher with UBS.

It sounds like a very challenging overall backdrop. But just wanted to ask you about the backlog and the cadence of EBITDA for the next couple of quarters. Within the context of that $730 million roughly of backlog, what's the duration of that? Is that all expected to be shipped kind of within this year? Just curious how much coverage you have on your plan for Q3 and then Q4? And then if there's a cadence of the roughly $70 million of EBITDA that you still expect for Q3 versus for Q4?

Yes. Steve, it's Brian. We always have seasonality with Q3 and Q4 with Q4 being the better of the 2 quarters. From a backlog standpoint, I'd say most of that backlog is expected to ship this year. That's pretty normal when you look at our backlog with the vast majority of it being for Q3, and then we've got some good coverage in Q4 as well.

Okay. That's helpful. And then just want to understand maybe a little bit more about the regional dynamics on the orders. It sounds like, obviously, pretty strong orders in Europe. Just kind of curious how to think about the book-to-bill here in the various regions within your kind of overall 0.8-ish, 0.9x. Like was U.S. like an under 0.5x and Europe was kind of north of 1x. How do we think about sort of that regional dynamics on orders?

Yes. So with respect to the orders, to me, the main area to focus on right now is the Americas, and we sort of live in 2 worlds because we have the MGX distribution business, which, of course, they had inventory sitting on the ground that's pre-tariffs. So demand there was really good and business was good. On the other side, the I'll call it, legacy Americas portion of the business, which is much more dealer-oriented, that's where we're closely tracking what our orders are and what the challenges is.

Okay. And then just on the tariffs, it sounds like a lower overall impact, but I guess, lower units. I guess can you talk a little bit about the sort of the per unit tariff impact and kind of price versus cost dynamics you're expecting for both Q3 and Q4?

Yes. So it's -- we can't speak -- we're not going to speak about every single model, but every -- literally every single model varies depending on where the crane is coming from and where the parts are coming from. So that's quite the mix. And likewise, most of our competitors are either in Japan or Germany. So there's a lot to shake out in terms of the way that the tariffs flow through and then actually hit the customer.

Okay. And then just lastly for me on the U.S. market. Can you just talk about some of the puts and takes? I mean it seems like general message from the broad value chain we're hearing, public sector is still pretty good in terms of demand on the private side, still lots of structural investment in terms of data centers and various other projects. Are you seeing those areas of strength? And is that what's sort of just causing people to buy the units that are pre-tariff, but there's just not enough confidence in that demand going forward to kind of put new orders in without knowing really what kind of the pricing dynamics are going to be? Is that how to think about it?

The other element you have to consider is people managing their fleets. And so they can choose to wait and see where pricing ends up. And that's what we're really seeing is folks managing their day-to-day. In terms of actual activity, crane rental houses are busy and positive, and that all looks good. It's just there's so much uncertainty around what the price of a crane is going to be. And as I said on the call, if you got a machine, it's $2 million or $3 million and all of a sudden, it's 15%, and you were hoping it's going to be 5%. That's a pretty dramatic change in terms of expectations. So and then likewise in order to financially justify, you're going to have rental rates go up. So the market needs to play out in the next 6 months before we really get a good feel for where we land.

Our next question will come from Mig Dobre with Baird.

So just to pick up where Steve sort of left it here with his questions. So what's interesting to me is that in the U.S. market, right, I mean, if you're talking about this uncertainty around pricing that is impacting customers, wouldn't that create an incentive for customers to actually order ahead of these price increases and try to be a little more proactive at securing whatever units they have at pre-tariff levels. To me, it would have seemed like Q2 would have been a quarter in which a bunch of that activity could have occurred so that people can actually lock in prices before you really kind of start making your adjustments as the year progresses?

Well, if you're shipping from Germany, I mean and instance like all-terrain cranes, everyone is -- from my point of view, I think customers were hoping that we would end up with even the 10% tariff, and now it's turned out to be 15%. So people were holding off there. And any time you're shipping something from that far away, that creates more reluctance and concern because you didn't really lock yourself into a price whenever you cut the deal.

Yes. And for the vast majority of our orders, they're going to include the price adjustment because we knew during the quarter that there was going to be some level of tariff.

Okay. So now we have 15% tariffs. What does that do for demand? Is that -- because your commentary is obviously more cautious than it was 3 months ago. Are these tariffs -- and within the framework that you provided, you're saying $35 million as opposed to something that was much larger previously. In terms of these offsets, first, I guess, how are you offsetting the tariffs? And then second, as the customers now know that there's a 15% tariff, does that imply that demand here is going to be curtailed for a prolonged period of time? Or do you think this is just a function of we need a near-term adjustment and eventually, they're going to digest that and we're back to the races in '26?

Yes. Well, I think there's 2 dynamics here. One is relative to dealer inventory and then one is relative to what the crane rental house is going to buy. So in terms of our dealers, I mean, they've hit the pause button and at a certain point, they're not going to have any inventory, and they're going to have to make some decisions. So from my point of view, this is probably -- I mean, I think it's 6 months to sort of sort out. I mean, even if I look at July, July was roughly the same as the previous 3 months.

So folks are making the purchases that they need to make or have to make. And if they have any more flexibility in terms of timing, which most crane rental houses do, given the nature of cranes, they're being a little more cautious. But don't forget from a pricing standpoint, when you got the end at [ 150 ], there's room for folks to eat potentially their tariffs. We don't know exactly how that's going to play out in the long run.

But how are you offsetting these tariffs, the $35 million? You say you're going to mitigate it at 90%. How are you doing that?

Price increases.

You're doing that with price increases. Just mathematically, if I'm looking at your Americas revenue and I'm looking at the, call it, $30 million of incremental tariff headwind, that does not appear to be very significant. We're only talking like 2.5%. So I recognize that I'm basically spreading it across the entire business while only certain products are impacted here. But my question to you would be, does it make sense to spread the tariff impact across all your products and try to sort of like minimize the drag on demand? Or are you being sort of very targeted in saying, "Hey, this model is coming from Europe. We're going to put the full boat tariff pricing on this one as opposed to something that's manufactured domestically.

We're very targeted. You have to remember, we have to go through piles of HTS codes for every component that goes on to the local unit. So -- and we have to go unit by unit.

And remember, there's different tariffs. We talked about in Q1, you've got the reciprocal tariffs that are coming from whole goods that we produce in Europe that we're bringing to customers in the U.S. So there's that aspect of it. But then there's also tariffs like the steel tariffs that we're getting that is in our product. So how we're addressing it and the percentage of impact, obviously, the ones that are -- the reciprocal tariff is on -- it's going to be that 15% on those products. So the other stuff, we're it's less of a direct offset of the tariff. It's a price increase.

Okay. Yes, I guess lastly for me, and I don't know if this is a question, maybe it's a comment and you can comment back. When I'm looking at your updated tariff view, it's less bad than it was 3 months ago, yet your commentary is more cautious. There's a divergence here that I think is at least to me personally, a little bit surprising. So I guess I'll leave it at that.

I said on the last call that I was -- I'm always nervous about price elasticity in the crane business. And that's what we're seeing right now is folks are hitting the brakes because the tariffs are 15% on the reciprocal. But of course, we have all the 232 and 301s that are impacting our locally produced stuff. So from my point of view, it's -- yes, we're in the middle of the -- we're in the eye of the storm, and we're seeing exactly how folks are behaving. And on the last call, it was more of a sort of guess at that point because we didn't have enough data to know exactly how they would respond.

And when we gave the information last quarter, we said, hey, this is our expectation based on current demand. We don't know what it's going to do to demand. And we've seen impact on demand during Q2, which is going to impact our full year.

And our next question will come from Cliff Ransom with Ransom Research.

Thank you again for the opportunity to work with your folks in Italy. It was very instructive. Look, after 50 years around the damned lift business, the recovery from cycles and going into downstrokes is very difficult. Let me ask a 35,000-foot question. If you look back, say, 3 to 5 years at Manitowoc and the institution of the Manitowoc Way, what about lean thinking has enhanced your ability to respond to rapidly changing exterior events? What do you think has happened to your culture?

Yes. I think a big part of what we've done, if you look back historically, we were very, very vertically integrated. And so we didn't have the flexibility to go up or go down, quite frankly, very easily or fast. So we've done a lot of work on our supply chain in order to have more access to more parts to continue to move. So if we go up 10% or 20%, we can react way faster than we could have, say, 5 years ago or 10 years ago.

I was really thinking more about what happens internally. Maybe I'm asking a mindset question, which is too hard to answer. One of the things about Lean thinking is that the whole what's the right word? The whole review process is so disciplined. You tend to discover trends faster than companies that don't exercise that methodology. Am I barking up the wrong tree here? Or is that something real?

No, I think it's 100% real. And what we talk about a lot of times is the feedback from our customers is almost instant. We're in a lot of industry because we talk to the owners of the people that own the crane rental houses or the CEOs because everyone is so involved in their big purchases. So in terms of how we build our build schedules and start tack times and how they run the lines, I think getting that input, we get it pretty instantly. I mean, even this morning, I was getting feedback from customers. So I think that makes a big difference in terms of how we look out the next 6 months and how we see the dynamics play out.

Got it. And you talked about making adjustments in the second half of the year to, let's call it, protect cash flow. What specific things will you be doing?

Yes. So we took down our build schedules at a couple of different locations. So at Shady Grove and Wilhelmshaven specifically. And it's just dependent on the product line relative. So what we do is we track our backlog, we track the orders, we track the trends and how much dealer inventory is out there, try to guess where we think demand will be 6 months from now. So based on where current rates are, we need to start to adjust our build schedules now to make sure that our supply chain doesn't get overwhelmed or overheated as we get into the back end of the year.

And I got cut off the call twice, but I got reconnected. When you talk about getting your net leverage down, did you, at some point, give us an estimate of free cash flow for the year?

Yes. Our free cash flow for the year is expected to be on the low end of our original range. So we're thinking in that $10 million to $15 million for the full year.

Okay. And what was your best expectation in the year for free cash flow?

When we gave our plan, I think it was $45 million.

Okay. I got it. That's fine. I remember that number. I have one last question, if I may. I just have to find it. No. That'll do it.

And this concludes our question-and-answer session. I'd like to turn the conference back over to Ion Warner for any closing remarks.

Thank you. Please note that a replay of our second quarter 2025 earnings call will be available later this morning by accessing the Investor Relations section of our website at manitowoc.com. Thank you, everyone, for joining us today and for your continued interest in The Manitowoc Company. We look forward to speaking with you again next quarter.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect your lines.