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Operator: Good morning, and welcome to the Shyft Group’s Fourth Quarter and Full Year 2022 Conference Call and Webcast. All participants will be in a listen-only mode until the question and answer session of the conference call. As a reminder, this call is being recorded at the request of the Shyft Group. And if anyone has any objections, you may disconnect at this time. I would now like to introduce Randy Wilson, Vice President of Investor Relations and Treasury for the Shyft Group. Mr. Wilson, you may proceed.

Randy Wilson: Good morning, and welcome to the Shyft Group’s fourth quarter and full year 2022 earnings conference call. Joining me on the call today are Daryl Adams, President and Chief Executive Officer; John Douyard, Chief Financial Officer. Their prepared remarks will be followed by a question and answer session. For today’s call, we’ve included a presentation deck that’s been filed with the SEC and is also available on our website. Before we start, please turn to Slide two of the presentation for our Safe Harbor statement. Today’s conference call contains forward looking statements, which are subject to risks that could cause actual results to be materially different from those expressed or implied. All known risks that management believes could materially affect our results are identified in our Forms 10-K and 10-Q, which are filed with the SEC.

We will be discussing non-GAAP information and performance measures we believe are useful in evaluating the company’s operating performance. In addition, the results discussed today will refer to continuing operations unless otherwise noted. During today’s call, we will provide a business update before moving on to a more detailed review of the results and our 2023 outlook. We will then open the line for Q&A. Please turn to slide three, and I’ll turn it over to Daryl Adams.

Daryl Adams: Thank you, Randy. Good morning and thank you for joining us to review our fourth quarter and full year 2022 results. This past year presented numerous challenges in our supply chain that impacted our operations, but I’m proud of the team’s ability to execute and close out the year on a high note with solid year-over-year growth in both sales and adjusted EBITDA in the fourth quarter. We built agility and nimbleness in our approach to operations. Last year, we saw the benefit of this approach as our team effectively navigated in rapidly evolving operating environment to deliver value to our customers. Turning to Slide four, I’ll update you on our financial summary. The team generated a record $1 billion of sales in the year, up 4% led by growth across our Specialty Vehicle portfolio.

After a challenging first half, chassis supply stabilized and we saw significant sequential improvement in profitability as our teams were able to improved output. For the full year, profits declined as we made strategic investments in Blue Arc EV and managed through supply chain shortages that impacted operational efficiency. Overall, we achieved adjusted EBITDA of $71 million, which included $27 million of EV related expenses. Turning to Slide five. I’m excited about our Blue Arc EV program. The team continues to make good progress and remains on-track to our original development timeline. We continue to receive favorable customer feedback and positive results from our developmental testing, which gives us confidence that Blue Arc will help lead the evolution of commercial fleets towards zero emission vehicles in the coming years.

Let me update you on recent results of the Blue Arc team’s efforts as we prepare to commence production in the second half of 2023. In January, we completed the acquisition of XL Fleet, which enhances our capabilities to accelerate further innovation at Blue Arc with the addition of a highly talented group of engineers and technical experts. We recently announced the selection of Charlotte, Michigan with the initial Blue Arc production site, which includes a planned investment of $12 million for Blue Arc production and $4 million for other campus enhancements to support future growth. We have received EPA certifications and completed Air Resource Board or ARB testing with positive results and awaiting final approval. We expect the final test results will demonstrate vehicle performance that exceeds requirements of our customers and differentiates us from our competition.

In the coming months, we expect to formally receive ARB certification, qualifying Blue Arc for zero emission vehicle incentives. Continued demonstrations of the Blue Arc Vehicle with key customers and deliver field testing vehicles to validate performance. Expand our national dealer and service network as we continue to have meaningful discussions with key partners as we look to support our fleet customers and begin initial pilot and production builds. While the initial development efforts have focused on Class III, due to the enthusiasm on our vehicle, we’ve accelerated our product roadmap. As a result, we have made significant progress on developing a Class V cab chassis with flexible body options. The Class 5 cab chassis will be on display at the NTEA Work Truck Week in March and the Blue Arc team looks forward to showcasing this important product with you.

Please turn to Slide six. We remain confident in how we have strategically positioned the company in terms of the end markets that we serve. Given the dynamic operating environment, I want to provide additional perspective on how we are viewing these markets for each of our business segments. Starting with fleet vehicle and services business, long term favorable demand trends for North America parcel remain intact as a secular shift to e-commerce continues. According to industry estimates, domestic parcel volumes will continue to drive demand for our delivery vans. As we sit here today, we are cautious in the near term outlook as customer feedback and external announcements have been mixed given macroeconomic conditions, which may create uncertainty with fleet operators and influence the near-term capital spending plans.

Over time, our expectations are aligned with broader industry reports that there is an increased level of long-term demand for last mile delivery of vehicles and we like how we are positioned. Entering 2023, our backlog provides good near term visibility. We are working through orders to reduce lead times toward more sustainable levels and we will continue to flex our operations as appropriate. Turning to our Specialty Vehicle business. Our strategy to invest in infrastructure related businesses continues to pay off as service body and contract manufacturing are performing well. As new construction projects get underway, contractors and service providers invest in their fleets to meet the demand of these projects. The success of our infrastructure strategy is evidenced by their strong 2022 performance and improved backlog position entering 2023.

Turning to our Motorhome chassis business, the retail demand in Class A luxury motor coach space that we serve remains more stable than the broader RV market. But unfortunately, after years of robust retail growth, the broader RV industry slowed in 2022. This softening has resulted in elevated dealer inventory levels of smaller motorized and towable units, which has limited the ability of dealers to stock more expensive, Class A luxury motor coaches. As a result, our Motorhome chassis backlog has declined year-over-year. We remain excited about our competitive position as our market share increased again in 2022 to 33% in the greater than 400 horsepower diesel class, up 2 points year-over-year. This progress has been driven by continued investment in innovation and aftermarket parts and services and has helped offset the slower industry market conditions.

Overall, we have industry leading brands that are positioned to win in the markets we serve. We remain confident in our team’s ability to manage through uncertainty, but continue to remain cautious about the dynamic macro environment. With that, I’ll turn it over to John to discuss our financial results beginning on Slide seven.

John Douyard: Thank you, Daryl, and good morning, everyone. Please turn to Slide eight, and I’ll provide an overview of our financial results for the fourth quarter of 2022. Overall, we are pleased with the improvement we experienced in the second half as well as the performance to close out the year. Our team delivered strong results in the fourth quarter by the continuation of supply chain delays, inflation pressures and labor challenges that impacted us in our industry throughout the year. Sales for the fourth quarter were $302 million, up 9% from the year ago quarter. Net income from continuing operations decreased 13% $17.8 million or $0.50 per share. The year-over-year comparison was impacted by increased EV spending, operational inefficiency driven by supply chain issues and a favorable one-time tax item in 2021.

Turning to our adjusted financial results on Slide nine. In the fourth quarter, we improved adjusted EBITDA to $30.7 million or 10.2% of sales, up from $26.6 million or 9.6% of sales in the fourth quarter of 2021. These results include EV spend of $7.6 million, up $3.6 million from the prior year. Excluding Blue Arc EV spend, adjusted EBITDA was 12. 7%, up over 1. 5% year-over-year. Adjusted net income improved to $20.5 million compared to $20.2 million in the year ago quarter, while adjusted EPS rose to $0.58 per share from $0.56 per share last year. I’ll now walk through our fourth quarter results by operating segment, beginning with Fleet Vehicles and Services on Slide 10. The FVS team delivered strong growth of 17% and adjusted EBITDA of 6% as more consistent chassis supply enabled improvements in production output.

While overall chassis supply was stable in the second half, we continued to face component shortages which impacted our schedule, drove inefficiencies and rework in our operations and pressured working capital. FVS achieved sales of $212.9 million, up 17% compared to $182.6 million a year ago marking solid sequential and year-over-year growth. FVS adjusted EBITDA for the quarter was $27.7 million versus $26.2 million a year ago. Adjusted EBITDA margin was 13% of sales compared to 14. 4% in the fourth quarter last year. Please turn to Slide 11 for the Specialty Vehicles segment overview. SV capped off the year with another fantastic quarter. Our service body and contract manufacturing businesses remained strong and continued to perform well.

But overall SV sales were impacted by a softening of demand for luxury motorhome chassis. Fourth quarter sales were $93.2 million, a 2% decrease versus the prior year. Adjusted EBITDA was $15.9 million or 17.1% of sales compared to $10.3 million or 10.8% of sales in the same period last year, reflecting strong operational performance and the impact of pricing actions implemented earlier in the year to recover inflationary costs. Please turn to Slide 12 for our 2023 outlook. As we look forward into 2023, we remain positive on the company’s ability to perform, but want to be cautious given the potential impact of near-term macroeconomic headwinds across industries. That said, on the top line, we expect to exceed 2022’s record year with continued growth in delivery and service body offsetting softness in luxury motorhome.

We expect to see strategic growth initiatives pay off with an exciting SV geographic expansion announcement in the coming weeks, as well as the first revenue from Blue Arc later in the year as we go into production. From a profitability perspective, we expect strong near-term — we expect strong year-over-year growth despite incurring remaining Class 3 R&D investments and initial startup costs to support the production launch of our Blue Arc Vehicle, as well as the incremental expenses driven by the XL fleet acquisition. Given these underlying drivers, our outlook for 2023 is as follows, sales to be in the range of $1 billion to $1.2 billion, representing 7% year-over-year growth at the midpoint, adjusted EBITDA of $70 million to $100 million, representing 20% growth at the midpoint, adjusted EPS of $0.97 per share to $1.59 per share, which includes an effective tax rate of approximately 25% and shares outstanding of approximately $30 million.

Capital expenditures are expected to be approximately $35 million and free cash flow conversion as a percentage of net income is expected to be greater than 100% as we work down working capital. Please turn to the capital allocation update on Slide 13. We remain disciplined in our approach to capital allocation with a focus on utilizing internally generated cash to fund our operations and growth initiatives. In the fourth quarter, we generated $19 million in free cash flow. We maintain a robust capital structure with net leverage ratio of just 0.93 times adjusted EBITDA at the end of the year. We also maintain a line of credit $400 million giving us strong access to capital to invest in growth. As we have previously noted, our recent investment focus has been on attractive organic growth opportunities, including Blue Arc EV solutions.

In addition, we continue to evaluate M&A opportunities and maintain an active funnel in a disciplined M&A evaluation process. We remain focused on pursuing efficient capital — return of capital to our shareholders including a consistent dividend payment and assessing share repurchases as appropriate. In conclusion, we are committed to maintaining a strong balance sheet as a foundation to support strategic investments in our future, while taking a disciplined approach to efficiently return cash to our shareholders. Now, I’ll turn the call back to Daryl for closing remarks.

Daryl Adams: Thank you, John. Please turn to Slide 14. At the Shyft Group, we have created a compelling industrial growth company. Our priorities start with a culture of customer focused innovation. We win by delivering market leading solutions that address our customers’ needs. Operational excellence drives efficiency in our operations, quality in our products, and differentiates us from our competition. Lastly, our financial strength provides us with the flexibility to invest in long-term growth, and strive to deliver returns ahead of our peers. Looking ahead, we are excited about our growth prospects, especially with the beginning of the Blue Arc production later this year with the right people and the right processes in place to execute on our strategy and deliver for our customers and shareholders. With that, operator, we are now ready for the Q&A portion of the call.

Q – Greg Lewis: Yes. Hi. Thank you. And good morning everybody, and thanks for taking my questions. My first question was around kind of margin progression and congratulations on the nice sequential gross margin increased in Q4. Kind of as we look at — as we kind of think about your adjusted EBITDA range guidance for this year. How should we be maybe thinking about gross margins sequentially going forward? And is there any kind of impact as I guess we start delivering Blue Arc later this year?

John Douyard: Yes, Greg. Thanks for the question. I think as we look at it — as we look at the overall operating environment, we’re expecting something that resembles the second half of next year. And so, we’re not expecting any of the operational challenges, some of the inflation and inefficiencies that exist to perfectly right themselves as we begin the year here. And so, we are expecting to see gross margin improvement. You’ll see year-over-year we do have some margin expansion from an EBITDA perspective. But I think the operating environment is going to continue to remain challenging as we work through the first half of the year. I think that said that is where our teams are focused in terms of driving and fixing those inefficiencies and getting better flow through the supply base, and so we will see progression throughout the year, but it’s — we’re not taking sort of an aggressive position here in the guidance on margin expansion.

Greg Lewis: Okay, great. Thank you for that. And then, yes, I mean, I guess rolling out a classified Blue Arc was always part of the plan since you embarked on the move into EVs. I guess as we think about that and I guess the rollout of that, given the existing footprint in Michigan where that’s where I believe we’re building the Blue Arc over the next few years. How should we think about that now that we have the classified vehicle that I guess keep playing on rolling out over the next couple of year-on-year?

Daryl Adams: Greg, you broke up a little bit. This is Darryl. The vehicle that will be shown at NTEA was not part of the original plan. Part of the original plan was a Class 3 and Class 5 walk-in van. This is something different. It’s a cab chassis. So we haven’t announced any type of production timing on that. It’s still early in a development phase, but we’re thinking it’s going to – I don’t want to say, steal the show, but be pretty exciting down to NTEA. Once people see it and the opportunities that it would have for municipalities and other, I would say, city type trucks that might need it, because it does have flexible options on the back, whether it’s a flatbed or box truck or even some type of a dump for landscaping. So This part wasn’t in the original plan, but we’re excited about the enthusiasm we’re receiving from customers about it.

Greg Lewis: Okay, great. Thank you very much for the time.

Daryl Adams: Thank you.

Operator: The next question comes from Felix Boeschen of Raymond James. Please go ahead.

Felix Boeschen: Hey, good morning, everybody.

Daryl Adams: Good morning, Felix.

Felix Boeschen: Hey, I just want to clear up a couple of things. So you reiterated a 2H production start for Blue Arc. And I just want to be crystal clear and maybe I missed this. But is the associated EV revenue included in the guidance and is it included in the backlog today?

John Douyard: Just in terms of the backlog, it is not included in the backlog today. I think in terms of the guidance, we’re expecting 200, 250 units, which is consistent with what we previously talked about and that is in the sales number.

Felix Boeschen: Okay. And then, what I’m trying to, I guess, better understand, John, is sort of the implied R&D cost for 2023. Can you maybe just walk us through how you’re thinking about that bucket between the XL fleet, between the Class 3. And now it sounds like there might be some incremental R&D associated with the Class 5? Just trying to understand the buckets here, John?

John Douyard: Yes. And so I think if you go back in what we previously talked about was $30 million of spending last year, something in the 10% to 15% range this year. I would say we’re trending towards the higher end of that, 15%, as well as having some carryover from 2022 just based on the fact that we ended up spending about $27 million, and so that puts you in the $18 million range. And then as we noted in the deck, you’ve got $8 million of incremental spending from the XL fleet acquisition. That is really cost that we contemplated adding throughout 2023 and into 2024. And so, it’s more of an acceleration of cost, but we saw that as a great opportunity for us to bring in a talented group of people to really stabilize that business as we like the opportunity, as we’ve talked about, we view that as a very transformational project for us.

So, I think, as you look at the overall impact of EV on us this year, it’s in that $25 million to $26 million range. But the biggest through variance being the additional backhaul fleet versus what we previously talked about.

Felix Boeschen: Okay. And then, I think in the prepared remarks, you mentioned some startup costs associated with the ramp of the production. And I know at the EV Day last year, we had talked about being sort of around breakeven all in. Can you update us on that? Would it be safe to assume the $8 million XL is an incremental hit to the breakeven? I’m just trying to kind of understand how you’re thinking about that earnings potential relative to what was originally stated last year?

Daryl Adams: Yes. I mean, I think when you look at that approximately breakeven number, I think again, we’re probably at the higher end of that R&D range versus what we had originally contemplated. You’ve got some carryover investment again, the $3 million, which isn’t incremental to the program, but is incremental to 2023. And then you have the XL fleet cost on top of that. And so, that’s how I would bridge that. I think to — we had always contemplated startup costs probably coming in a little bit higher than we expected as well as there is some, call it, incremental R&D costs associated with some of the Class 5 activity that Daryl talked about. But the big drivers are XL fleet and then just the development being closer to the higher end of the range.

Felix Boeschen: Okay, got it. And then, can you just talk about the strategic rationale behind the XL fleet. I’m just trying to understand sort of how it fits in? It sounds like a bit of an acceleration, but I’m curious if there’s any capabilities that you brought in-house that you didn’t have before just kind of trying to understand that, that’d be a little bit better?

John Douyard: Yes. Maybe I’ll start, Felix. Daryl can jump in. Again, I think we looked at this as a talented group of engineers both on the electrical side, on the battery side, on the telematics and software side that we were building internally and also using some third parties to support. And so this was really an opportunistic play for us to accelerate talent into the organization that will help us not only get through sort of the last development phase here, but also again provide that stable information for us as we move forward.

Daryl Adams: Yes. Felix, good question. The only thing I would add to what John mentioned is bringing in engineers that aren’t familiar with EV, which they’re hard to find, right, because there’s a — it’s new technology that everybody is bringing on to grab people, engineers that have that talent already is going to help us leapfrog others in the market in our opinion and we thought it was a great opportunity. And I’d tell you what, so far it’s absolutely amazing the progress they’ve made and how they’ve helped. So we’re really excited about where it’s going to take us throughout the year. And like John said, it’s accelerated, but we thought the cost benefit was worth it and instead of trying to bring in new people. So it’s, in our opinion is paying off right now and we’re excited about it.

Felix Boeschen: Okay. Got it. And then just my last one if I could. And maybe this is better for John, but I appreciate the capital allocation update. I think you noted that you’re free cash flow conversion as a percent of net income should be higher than 100% this year. I imagine working capital plays into that. But I’m just curious in the guide, it doesn’t seem like you’re accounting for necessarily any decreases in share count. Or even interest expense for that matter. So I’m just curious, is there anything baked in from a capital allocation perspective in the guide? And then how would you think about deploying that incremental free cash flow?

John Douyard: Yes. No, I think it’s a good question. I think, certainly, we have not contemplated any repurchase activity in the share count that we put forward. But given the flexibility we have, we’ve got $242 million under authorization at this point, which we’ll continue to remain flexible on that. I think from an interest expense standpoint or from a debt standpoint in general, we are levered under return. We’re obviously very comfortable with being in that range. And so we’ll balance sort of debt pay down with other deployment options. I think interest expense in general I think is a bit elevated versus where we ended 2022 just based on really interest rate changes. So — but again, we’ve got flexibility and we’ve got strong balance sheet to be able to deploy it appropriately.

Felix Boeschen: Got it. I’ll pass it on. Thanks for the time.

Daryl Adams: Thanks, Felix.

Operator: The next question comes from Steve Dyer of Craig Hallum. Please go ahead.

Steve Dyer: Thanks. Good morning, everybody. You had talked as it relates to the backlog, you sort of talked about how you anticipated that sort of coming back down to more normalized levels, maybe a couple of quarters versus a year plus. Sort of near-term, are you seeing any change? Are you seeing any sort of move outs later into the backlog or cancellations or would you say, sort of the burn down right now is just less order intake for 4 or 5 quarters from now?

John Douyard: Yes. I think, I mean, the biggest impact I would say is the less order intake with also when chassis supply freed up in the second half of the year, obviously allowing us to produce at an accelerated rate. And so, I’d say those are the two main drivers. I think Daryl noted in his comments, there is a ton of uncertainty out there in the environment. We definitely having this — I would say, we’re having favorable discussions with customers about opportunities from an ordering perspective and there’s some really attractive through fleet buys out there and then we’re having conversations with dealers and customers as well about potentially delaying or moving on orders just given some of the either floor plan or interest rate dynamics that are out there in the marketplace.

And so, as we look at that collectively, we do remain optimistic. Certainly to the upside of where we are from a midpoint perspective, but we do want to be cautious just because there is so much uncertainty out there in the environment.

Steve Dyer: Yes. So I guess, even looking when you normalize this year for XL fleet, those costs and sort of the incremental Blue Arc costs. The guidance to my math sort of implies that the core business is maybe even a little softer in 2023 than it was in the second half of 2022. So I mean, is that just sort of conservatism on your part given all the moving parts? Or are you seeing something in specific sort of customer conversations recently that gives you pause?

John Douyard: I would say the one piece that is softer than we would have expected in the fourth quarter is on the Motorhome side of the business. And then I would say on the rest of the portfolio, we remain — particularly on the fleet side, we remain sort of balanced as we monitor the market. Like we talked about in the prepared remarks, the service body business as well as contract manufacturing continues to be fantastic growth for us. And so, we do feel like we’re balanced, but again cautious as we look at all the — then call it noise that’s out there in the system right now.

Steve Dyer: Got it. I guess, along those lines, we’ve been talking about supply chain disruption for so long. Are we coming to the point where, I guess, near-term maybe demand uncertainty is a little bit more of the challenge right now or is supply chain still less than ideal?

John Douyard: I mean, I think it’s a little bit of both, but I think 12 months ago, I don’t think we would have been talking about sort of demand problems. So I think some of it just might be some of the headlines and those types of things that are out there that people are — and customers and industries reacting to in general. But I’d say demand is maybe a little bit more prevalent than it was a year ago. But again, we’ve always said that we’d like being — we like the markets that we’re playing in. We know growth is in a straight line. But we think over the long-term we’re positioned very well for — to meet the needs of our customers.

Steve Dyer: Okay. I’ll pass it on. Thanks, guys.

Daryl Adams: Thanks, Steve.

Operator: The next question comes from Mike Shlisky of D.A. Davidson. Please go ahead.

Mike Shlisky: Good morning and thanks for taking my questions. Hey, guys. I wanted to open up for the question on FVS. Maybe I wanted to hone it on two details of some of your comments and outlook there. I guess first is on the pricing. You anticipate having a positive price year-over-year in 2023. And then secondly, I mean, it feels to me like FVS was already behind on its replacement and growth schedule before the pandemic even started and of course only got more and more dire during the pandemic itself, and given what happened in 2022, I don’t think we’ve caught up on what fleets are looking to put on the road. So I’m curious if this is not the strongest year here in 2023, is it just because the fleets are kind of pushing out the inevitable and there will be all these new trucks on the road eventually, if not this year than probably 2024? Thanks.

John Douyard: Yes, Mike. I think you answered your question, and I think we had it in prepared remarks, right. We’re still like where we’re at positioned. We just think it’s the macroeconomic issues. To your point, we have not caught up on the vehicles, but I think it’s just maybe, I don’t want to say a pause, but there’s a slip out. We still see the demands We see parcel packages moving in the right direction. I think it’s just being cautious on the macroeconomic issues that everyone was talking about. FedEx EPS, they all had their earnings out and we’re reading those and talking with them. So unless something changes, I think you’re right. It’s going to be pushed out a little bit, but it’s still a great business to be in.

Daryl Adams: And I think just on the price comment. Mike, I think. Sorry, go ahead.

Mike Shlisky: Yes, on the price question please.

Daryl Adams: Yes, just on price. I mean our expectation right now is we’ve taken solid pricing over the last 18 months as inflation came through, our expectations will be positive from a pricing standpoint in 2023.

Mike Shlisky: Okay, great. Moving on to the other kinds of EVs, we saw some analysis that there’s going to be trend or is sprinter coming out at some point in 2023. That’s a Class 2, actually nothing to do with the Blue Arc main products there. But curious whether you’re ready from an outfit perspective. When that comes to your facilities, do you have the design and people in place to start bringing the eSprinter going forward?

John Douyard: Yes. Mike, I think like any EV vehicle, we’re always working with our customers whether it’s in this case Mercedes, whether it’s Stellantis or Ford. We’re working with all of them on packages. We like the outfit business. And if our customers, whether it’s direct to them or through a fleet management company, we are prepared to build the vehicles and obviously, quote those orders and try to win the business. So yes, we’re like the transit, e-transit and like the Stellantis to access to just another opportunity to gain some more outfit business.

Mike Shlisky: Okay, got it. Maybe just maybe touch on some more detail on the guidance here, John, on the cadence. Do you feel well supplied in chassis for the first quarter? And I just had it to mention some challenges in the first quarter on margins. Just in the cadence and how things might play out just at the very start of the year here would be appreciated?

Daryl Adams: Yes, I think as you know, Q1 is typically seasonally low for us just given some of the model year changes from a chassis supply perspective, we would expect Q1 is probably in the low-to-mid single digit range from a margin perspective before ramping up in midyear like we typically do. So obviously, we’re not guiding quarters here, but it’s probably something like 30% in the first half as you look at the full year guide.

Mike Shlisky: Got it. Guys, thanks so much. I appreciate the color.

Daryl Adams: Thanks Mike.

Operator: The next question comes from Matt Koranda of Roth MKM. Please go ahead.

Matt Koranda: Hey, guys. So just want to make sure I understand the EBITDA bridge embedded in the guidance versus last year. So take the $71 million from 2022, roughly $15 million unwinds from Blue Arc spend. But then you got $8 million of incremental spend from XL, the $78 million would be embedded in the guidance excluding any benefit from the segment growth. So maybe $7 million of sort of segment growth contribution embedded in the guidance. Just curious, is SV adding to growth or is that a headwind? Just want to understand the moving pieces in the segment underneath the overall guide?

John Douyard: I think as you look at the SV business, we do expect to see positive growth in that business year-over-year. I think you obviously do have some Motorhome headwinds that we talked about that need to be offset. but the opportunities that we have from a service body and contract manufacturing perspective will offset those. So, probably growing at a slower pace operationally, but still growth year-over-year.

Matt Koranda: Okay. All right. That makes sense. And then, just digging into the FVS backlog a bit more. So obviously, you guys have talked about sort of reticence among fleet customers, maybe a little bit of caution around the macro. But 1 thing that we found in speaking with some dealers is that chassis order books seem like they’re closed this year. And so, how much is the implied order flow, the weakness there is just given that fleets can’t really get chassis for the rest of this year and then they just essentially be indicating for new vehicles kind of early to middle of next year if they’re going to put an order in, so that longer lead time just throttles back their ordering behavior versus like macro reticence. So I’m just curious if you guys have any sense for that?

John Douyard: Yes. I mean, I think, I’m not sure, we’re specifically hearing the same thing. I think as you look at some of the Class 2 vehicles, I think they — as the OEMs allocate those vehicles historically, the commercial capacity has been absorbed pretty quickly. And so, there’s certainly that aspect. I’m not sure we’re hearing anything.

Daryl Adams: Yes, I would agree with John. Matt. I think it’s more in a Class 2, because what we’ve heard is, Ford is now allocating quarterly. So that might be some of the adjustment that people are trying to understand and make. In the past, they would let you book for the whole year and now they’re forcing you to book quarterly. So it has shortened up some of the view in the Class 2 space. But I’m with John, we’re not hearing any of that in the Class 3 and above.

Matt Koranda: Okay. Got it. That’s helpful. Rest of might have been asked and answered. So thanks guys.

John Douyard: Thank you.

Daryl Adams: Thanks Matt.

Operator: This concludes our question and answer session. I would like to turn the conference back over to Randy Wilson for any closing remarks.

Randy Wilson: Like to thank you for participating in today’s conference call. As Daryl and John mentioned in their prepared remarks, we look forward to hosting investors at the NTEA Work Truck Week taking place in Indianapolis on March 7 through 9. In addition, we will be hosting one-on-one investor meetings in fireside chats in March at the Raymond James Institutional Investor Conference on March 6 and the 35th Annual ROTH Capital Conference on March 13th and 14th. We thank you for your interest in the Shyft Group. And with that, operator, please disconnect the call.

Operator: Conference is now concluded. Thank you for attending today’s presentation, and you may now disconnect.