Title

Presentation

The Shyft Group, Inc. beats earnings expectations. Reported EPS is $0.07, expectations were $-0.1.

Operator: Good morning, and welcome to The Shyft Group First Quarter 2025 Conference Call and Webcast. [Operator Instructions] As a reminder, this call is being recorded. I would now like to introduce Randy Wilson, Vice President of Investor Relations and Treasury for The Shyft Group. Please go ahead.

Randy Wilson: Good morning, and thank you for joining us. Today, you will hear from John Dunn, President and Chief Executive Officer; and Scott Ocholik, Interim Chief Financial Officer. Their prepared remarks will be followed by a question-and-answer session. Before we begin, please turn to Slide 2 and 3 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. Primary risks that management believes could materially affect our results are identified in our Forms 10-K and 10-Q filed with the SEC. We will be discussing non-GAAP information and performance measures, which we believe are useful in evaluating the company’s operating performance.

Reconciliations for these non-GAAP measures can be found in the conference call materials. We will begin with a business overview from John, followed by Scott’s review of first quarter financial results and our 2025 outlook. John will then provide an update on our proposed merger with Aebi Schmidt. We’ll then open the line for Q&A. Please turn to Slide 4, and I’ll turn it over to John, who will begin today’s prepared remarks.

John Dunn: Thank you, Randy, and good morning. Welcome to our Q1 2025 earnings call. We appreciate your interest in The Shyft Group and this opportunity to share our progress and outlook with you today. We had a strong start to the year, delivering improved financial performance while continuing to execute our strategy and growth initiatives. We delivered meaningful adjusted EBITDA growth for the company with margins of 6%, which doubled year-over-year. I would like to personally thank Shyft’s team members for these results, which exceeded expectations. We are very excited to update you on Blue Arc, where we have completed a majority of our first contract for FedEx in the quarter, and feedback has been positive, with trucks actively deployed on the road.

We are working to secure several opportunities for Blue Arc trucks across end markets and geographies. Blue Arc is an important part of our product portfolio as customers continue to adopt EVs. Fleet Vehicles and Services expanded margins, up 290 basis points year-over-year, by improving operational efficiency. The FVS team’s dedication to quality, product innovation and customer centricity positions us well to gain market share as demand increases. We have seen increased walk-in van quoting activity, which is consistent with our expectations for recovery in the second half of the year. Specialty Vehicles continued to perform well with another solid quarter that resulted in high teens margin. Service truck order intake in the quarter was robust, and the sales team is aggressively pursuing new leads to solidify our leading industry position.

At the recent NTEA Work Truck Show, our service truck portfolio displayed the full range of offerings and capabilities across our leading brands. Our sales team demonstrated our bodybuilding capabilities from DuraMag and Royal to our upfit capabilities, with ITU highlighting our position as a vertically integrated partner capable of meeting diverse and evolving industry needs. We are excited about our future growth opportunities with the service truck business as we continue to expand our portfolio of offerings. Finally, we continue to maintain a solid balance sheet, with a net leverage ratio less than 2x, allowing us the flexibility to invest in strategic initiatives that support our growth and drive long-term success. Overall, we remain confident in our team’s ability to execute in these dynamic times, deliver for our customers and achieve our financial targets.

Turning to Slide 5. Our operating framework is designed to drive sustainable financial growth and deliver long-term shareholder value. A key element to that framework is our customer-centric approach, innovating with purpose to solve real-world challenges and help our customers succeed. That approach is brought to life at NTEA Work Truck Week, where we saw increased customer engagement, unveiled new product innovations and marked a major milestone: the 50th anniversary of The Shyft Group. Since 1975, we have evolved alongside our customers, delivering purpose-built solutions that perform in the most demanding environments and reinforcing the trust that drives our business forward. Our booth saw record engagement, and we received strong customer feedback.

At the show, we unveiled 2 new purpose-built vehicles shaped by our work-driven design approach, developed in close partnership with fleet operators. The Utilimaster Trademaster Service Body, a reimagined version of a trusted platform, which delivers enhanced durability, smart storage and integrated safety features. Designed to enhance productivity in the field, it offers reinforced construction for long-term strength, spacious cargo areas and easily accessible exterior compartments for efficient tool and equipment storage. A wide rear door improves material handling while integrated lighting supports visibility across varied working conditions. Production is scheduled to begin later this year, with multiple configurations tailored to meet the needs of today’s diversified fleet operations.

The Marketplace Dry Freight Truck, a brand-new addition to our lineup, was engineered to maximize payload capacity. It weighs 900 pounds less than comparable models, improving efficiency without sacrificing durability or functionality. Features include a seamless roll-up rear door for streamlined loading and unloading, an optimized cargo layout and a heavy-duty lift gate designed for last-mile and logistics applications. There is a strong offering for both ICE and electrified fleets. Both products reinforce our commitment to customer-led innovation, ensuring our solutions are designed to solve real-world challenges across service and delivery applications. These launches, combined with the momentum we saw at NTEA, highlight how we are executing our strategy, strengthening customer relationships, expanding our portfolio and reinforcing our position in the market.

We are building on 50 years of engineering excellence with a clear focus on where our customers are headed, and we are delivering the solutions to help them get there. With that, I’ll turn it over to Scott for a detailed review of our financial results and 2025 outlook.

Scott Ocholik: Thank you, John. Please turn to Slide 7, and I will start with an overview of our first quarter financial results. Overall, we delivered financial results for the quarter that exceeded our prior expectations. We saw sustained operational improvements, benefits from overall cost management and incremental sales that were originally planned for the second quarter. Sales for the quarter were $204.6 million, up 3% from $197.9 million in the prior year. Blue Arc delivered $26.3 million of sales in the quarter as we executed on the FedEx order for 150 vehicles. Our GAAP net loss was $1.4 million or negative $0.04 per share compared to a net loss of $4.7 million or negative $0.14 per share in the previous year. Our Q1 2025 results include $2.2 million of transaction costs related to the proposed merger with Aebi Schmidt.

On an adjusted basis, EBITDA was $12.3 million for the quarter or 6% of sales, up from $6.1 million or 3.1% of sales in the first quarter of 2024. Adjusted net income for the quarter was $2.4 million, and adjusted EPS increased to $0.07 per share compared to a loss of $1.4 million or negative $0.04 per share in the first quarter of 2024. Please turn to Slide 8, and I will walk you through our results by segment. In the first quarter, our Fleet Vehicles and Services segment achieved sales of $96.1 million, down 11% compared to $107.8 million a year ago, reflecting continued softness in parcel end markets, partially offset by growth in our upfit and aftermarket businesses. Adjusted EBITDA for the quarter improved to $3.6 million or 3.8% of sales compared to $900,000 or 0.9% a year ago as sustained higher productivity and favorable mix more than offset the lower sales volume.

FVS backlog was $245.3 million at quarter end, down 31% versus prior year and flat versus year-end 2024. Turning to Specialty Vehicles segment. The business delivered another solid quarter with adjusted EBITDA margins remaining in the high teens. First quarter sales were $82.2 million, a 9% decrease from $90.1 million in the prior year. Our motorhome sales were down year-over-year, while our infrastructure-focused service truck body business continued to deliver solid results. Adjusted EBITDA was $14.3 million or 17.3% of sales compared to $17 million or 18.8% of sales in the same period last year. SV backlog was $90 million at quarter end, up 8% versus the prior year and up 31% versus year-end, driven primarily by high-content service truck bodies.

Please turn to Slide 9 for a discussion on our 2025 outlook. Macroeconomic uncertainty and the ever-changing landscape of tariffs continue to challenge our business. We have been evaluating various scenarios relating to the tariffs that have been put into place and those that have been proposed. We implemented a supply chain strategy over the last couple of years to help mitigate risk, including U.S.-based supply alternatives. We have plans in place to help mitigate the impact through partnerships with our suppliers, and we have and will continue to adjust prices where appropriate. While we will continue to monitor the macroeconomic environment and potential impact to demand, we are affirming our 2025 outlook with sales of $870 million to $970 million and adjusted EBITDA of $62 million to $72 million.

We delivered first quarter profitability ahead of our initial expectations. However, we remain cautious on the timing of the recovery of the parcel and motorhome markets. Consistent with our messaging in February, we continue to expect approximately 70% of our full year adjusted EBITDA to be delivered in the second half of the year. We remain on track to deliver our free cash flow guidance of $25 million to $30 million as we expect improvement as the year progresses. In closing, we are pleased with our start to the year. We remain committed to delivering our financial outlook for the year and making further improvements in our financial performance as our end markets recover. With that, I will turn it back over to John to provide an update on the proposed merger with Aebi Schmidt.

John Dunn: Thanks, Scott. Turning to Slide 11. I would like to reiterate why this proposed merger is such a compelling opportunity for our organization and shareholders. By combining our businesses, we will become a leading global force in the specialty vehicles industry. The strategic move will help us drive outsized growth in high-margin markets like commercial infrastructure. Our customers will benefit from a wider range of new and innovative technologies and a broader geographical footprint for the deployment of products and services. Our highly experienced and talented management team is working together to deliver the strategic vision and create long-term value for our shareholders. Please turn to Slide 12, where I will provide an update on the integration activities underway.

The combined company will be named Aebi Schmidt Group and will trade on the Nasdaq under the new ticker AEBI. We have successfully syndicated a $600 million credit facility with strong support from a global group of banks, which reinforces the strategic rationale of this transaction. On April 4, 2025, Aebi Schmidt Group filed the preliminary S-4 filing with the SEC for review, marking a significant milestone for the proposed merger. We anticipate a special meeting of The Shyft Group shareholders in mid-2025 to approve the merger. In conclusion, we remain confident in the value this combination will deliver by aligning complementary capabilities, expanding our global footprint and bringing together deep expertise across platforms. The Shyft Group and Aebi Schmidt Group are positioned to lead the specialty vehicle market forward.

We are not only building a stronger and more innovative organization. We are becoming stronger together and better equipped than ever to deliver long-term success for our customers, employees and shareholders. We are now ready to take your questions. Operator, please open the line.

Operator: [Operator Instructions] Our first question comes from Matt Koranda from ROTH Capital.

Matt Koranda: Just to start off on the Blue Arc side of things. I guess it was a bit of a surprise to see you guys deliver and book all 150 vehicles in the first quarter. So maybe just talk about the dynamic that’s at play there and what that means for Blue Arc revenue for the remainder of the year. And then just could you clarify, it looks like the gross profit dollars from Blue Arc probably offset some of the corporate expense that you usually have in terms of the elimination. So maybe just put a finer point on that one for us, please.

John Dunn: Sure. Thanks for the question, Matt. This is John Dunn. And to start off with — on the Blue Arc, we’re not completely done with that order. We’re in process of building those 150. So as you can see from the revenue there, we’re well on our way to deliver all of them, but there will be some carryover in the second quarter of revenue coming in.

Scott Ocholik: Yes, Matt, this is Scott. From the profitability perspective on that question, yes, we incurred $5.5 million in expenses in Q1 of 2024, and we have completely offset that. And Blue Arc is contributing here in the first quarter.

Matt Koranda: Okay. Got it. And then maybe just wanted to get a better understanding if you could unpack the guide and how any incremental tariffs have been incorporated into the guidance for this year. I noticed really there’s no change to the outlook for you guys, but maybe just could you talk about how you thought about any incremental tariffs that might be impacting the year and how those have been incorporated into the guidance? And then on top of that, maybe just if you could take a crack at what are the implications when you’re combined with Aebi Schmidt. Are there any incremental tariffs that we should be kind of taking into account here?

Scott Ocholik: Matt, this is Scott. Yes. So from a tariff perspective, so obviously, this is ever changing. Every day, something new is coming up. So we’re monitoring it very closely. For what has been put into place, we have taken some action already from a pricing perspective, and we continue to have and see flexibility as we move forward. But certainly, we’re also working very closely with our supply base, partnering with them, looking for opportunities. And certainly, like I said, over the past couple of years, we’ve been identifying suppliers in the U.S. that will additionally help us. So when you think about our guidance and why really we haven’t come off from a tariff perspective, it’s really twofold. One, we are taking actions to help mitigate it. And two, we’re still just monitoring and watching where things will fall out here.

Matt Koranda: Okay. And if I could ask one on the Aebi Schmidt merger and maybe specifically on Aebi Schmidt. Any update on the trends in their business year-to-date? Especially interested in the first quarter, how they tracked relative to your expectations. Any update on sort of some of the pro forma metrics that were given out around the merger in terms of Aebi Schmidt 2025 revenues and EBITDA? Any incremental data points there would be appreciated.

Scott Ocholik: Yes, Matt. The S-4 was just recently filed with the Aebi Schmidt U.S. GAAP financial statements. That’s still with the SEC. So we don’t really want to comment on anything as it relates to Aebi Schmidt within this call given that that’s outstanding.

Operator: The next question comes from Mike Shlisky from D.A. Davidson.

Mike Shlisky: First, I wanted to kind of continue on the tariff theme. Did the concerns on tariffs at the customer level, did they affect anyone’s order or delivery timing in the quarter? In other words, anyone pull forward their plans or their deliveries to try to get ahead of the quarter? Was there any kind of driver of the EBITDA strength here?

John Dunn: Mike, this is John. From an order standpoint or pulling ahead orders, we didn’t see a lot of activity around that, specifically cited around tariffs. We’re in regular discussions. We’re very close with the customers, understanding their needs, but we haven’t seen a strong reaction one way or another in the ordering from the customers primarily due to tariffs that they’ve highlighted to us.

Mike Shlisky: Got it. And then the follow-up question would be on parcel and final-mile vehicles. You had commented that you’re still looking at a potentially better second half year. Could you maybe just share with us some of the details? Is that based on just the fact that comps are so easy given the past couple of years post pandemic? Or are you having contracts with customers that have been very promising that do suggest some of the deliveries happening in the back half of the year?

John Dunn: From that standpoint, we are seeing a pickup in general quoting activity from the parcel customers over the last couple of months. So that’s giving us an indication that the second half of the year could come in much better.

Mike Shlisky: And the quotes include timing from the customers, too, not just price, but you’re asking about when do you want them.

John Dunn: They are including the timing as well.

Operator: Your next question comes from Tyler DiMatteo from BTIG.

Tyler DiMatteo: I wanted to follow up on Blue Arc here. I guess, John, do you expect the incremental orders here? Do you — for the 150, do you expect that to be fully realized by 2Q? And then beyond that, I guess, how do you think about the pipeline of potential customer orders here and kind of getting incremental orders through the remainder of the year?

John Dunn: So we will finish up — thanks, Tyler, for the question. We will finish up in Q2 that 150-unit order for FedEx and then wrap that up. We have a number of additional orders in the pipeline that we’re working to close. In addition to that, we have trials with a number of key customers where they’re using the vehicles, giving us some positive feedback. Often, that leads into orders as well. So we’re still optimistic but cautious on additional orders.

Tyler DiMatteo: Okay. And then my follow-up here, I wanted to ask about maybe battery supply and kind of just get a general update in terms of how you guys are thinking about the battery supply chain. I know we had the agreement with Our Next Energy before. Just kind of any broad updates on battery supply, how you’re thinking about it, capacity, et cetera.

John Dunn: We continue to be very pleased with the performance of the ONE battery. We’re having regular meetings with their leadership to stay very close because that is a dynamic field. But right now, we’re feeling very confident on the continued delivery of those batteries. So we don’t foresee an issue there. And again, the performance is meeting all expectations. We’re not having issues in the field.

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

Randy Wilson: Thank you, operator. I’d like to thank everyone for joining today’s call and your interest in The Shyft Group. And as always, please reach out to me if you have any follow-up questions. With that, operator, please disconnect the call.

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