Q4 2023 The Shyft Group Inc Earnings Call

[music].

Operator: Good morning, and welcome to the Shyft Group's fourth quarter and full year 2023 conference call and webcast. All participants will be in listen-only mode until the question and answer session of the conference call.

Good morning, and welcome to the shift group's fourth quarter and full year of 2023 conference call and webcast.

All participants will be in listen only mode until the question and answer session of the conference call.

Operator: As a reminder, this call is being recorded. And now, I'd like to introduce Randy Wilson, Vice President of Venture Relations and Treasury of The Shyft Group. Please go ahead.

As a reminder, this call is being recorded.

I can produce Randy Wilson, Vice President of Investor Relations and Treasury or the shift group. Please go ahead.

Randy Wilson: Good morning, and thank you for joining us. I'm joined by John Dunn, President and Chief Executive Officer, and John Douillard, Chief Financial Officer. Their prepared remarks will be followed by a question and answer session. But before we begin, please turn to slide two of the presentation for our Safe Harbor Statement. Today's conference call contains forward-looking statements that 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.

Good morning, and thank you for joining us I'm joined by John Dunn, President and Chief Executive Officer, and John <unk>, Chief Financial Officer. Their prepared remarks, followed by a question and answer session.

Before we begin 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.

Primary risks that management believes could materially affect our results are identified in our forms 10-K, and 10-Q filed with the SEC.

Randy Wilson: We'll 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 posted on our website. We'll start with opening comments from our CEO, John Dunn, before turning the call over to John Duyard for our view of 2023 performance, as well as our 2024 outlook. We'll then open the line for Q&A. Please turn to slide three, and John Dunn will begin today's prepared remarks. Thank you, Randy. And good morning to everyone.

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 posted on our website.

We will start with opening comments from our CEO, Jon done before turning the call over to John to yard for argue with 2023 performance as well as our 2020 for outlook.

We will then open the line for Q&A. Please.

Please turn to slide three and John Dunn will begin todays prepared remarks.

Thank you Randy and good morning to everyone and as I noted on our call back in October I'm excited to be leading this fantastic company over.

John Dunn: As I noted on our call back in October, I'm excited to be leading this fantastic company. Over the last 50 years, Shyft has grown to be a national leader in many specialty vehicle markets while consistently demonstrating the ability to innovate, partner with customers, and maintain financial stability. In past roles, I've delivered ambitious growth by focusing on building solid teams and driving commercial and operational excellence. I spent my career in the automotive sector, with experience launching vehicles for General Motors and having senior leadership roles for Tier 1 auto suppliers, one of which grew annual sales from $50 million to $1.5 billion in North America.

Over the last 50 years shift has grown to a national leader in many specialty vehicle markets, while consistently demonstrating the ability to innovate partnering with customers and maintain financial stability.

In past roles I delivered ambitious growth by focusing on building solid teams in.

And driving commercial and operational excellence I spent my career in the automotive sector with experience launching vehicles for general Motors, and having senior leadership roles for tier one auto suppliers.

One of which grew annual sales from 50 million to $1.5 billion in North America.

John Dunn: I look forward to building on Shyft's great legacy and leveraging my experience to deliver a higher level of performance. Having just completed my first full year at Shyft, including the last four months as CEO, I continue to be impressed by the industry-leading products and the team's capabilities. Together with the leadership team, we have defined an operating framework that will serve as the foundation to drive sustainable financial growth and deliver value for our shareholders going forward. Our approach includes a relentless focus on building high-performance teams to foster collaboration and drive results. Delivering operational excellence, improving efficiency in all aspects of the business while bringing innovative and high-quality products to our customers. And keeping customers at the center of everything we do, from sales to design to delivery, we are here to enable our customers' success.

I look forward to building on shifts great legacy and leveraging my experience to deliver a higher level of performance.

Having just completed my first full year at shift, including the last four months as CEO I continue to be impressed by the industry, leading products and the team's capabilities.

Together with the leadership team, we have defined an operating framework, which will serve as the foundation to drive sustainable financial growth and deliver value for our shareholders going forward.

Our approach includes a relentless focus on building high performing teams to foster collaboration and drive results.

Levering operational excellence improving efficiency in all aspects of the business, while bringing innovative and high quality products to our customers.

And keeping customers at the center of everything we do from sales to design to delivery. We are here to enable our customers' success.

John Dunn: Shyft's recent performance has been impacted by end market demand softness, and we are acting with urgency to return the business to historical profitability. As we transition to slide four, I will walk you through the actions we have taken over the past four months, which reflect this operating framework. But it all starts with a team.

Just recent performance has been impacted by end market demand softness and we are acting with urgency to return the business to historical profitability.

As we transition to slide four I will walk.

Walk you through the actions we have taken over the past four months, which reflect this operating framework.

It all starts with the team.

John Dunn: And our immediate focus was on team alignment to drive operational rigor and financial growth. We regraded key roles, including production and sales leadership, to improve immediate performance and build bench strength. We promoted Jacob Farmer into our FES president role.

Our immediate focus was on team alignment to drive operational rigor and financial growth.

We top graded key roles, including production and sales leadership to improve immediate performance and build bench strength.

We promoted Jacob farmer into our F. B S. President role. He previously led our S C business.

John Dunn: He previously led our SV business. Jacob is a proven leader, and we are confident that he will continue to drive the necessary improvements already underway in FDS and use his experience within SV to strengthen coordination across the company. We look for better ways to enable our businesses to ensure that they have the appropriate tools and support needed to be successful. We have simplified our internal reporting rhythm and identified opportunities to push down functional support into the businesses where it is needed most. An example of this is our marketing function, which now reports directly to our segment.

Jacob is a proven leader and we are confident that he will continue to drive the necessary improvements already underway in FCS and utilize his experience within as lead to strengthen coordination across the company.

We look for better ways to enable our businesses.

To ensure that they had the appropriate tools and support needed to be successful.

We have simplified our internal reporting rhythms and identified opportunities to push down functional support into the business is where it is needed most.

An example of this is in our marketing function, which now reports directly into our segments.

John Dunn: Transitioning to Operational Excellence. We understand the importance of product quality and process efficiency as well as Salesforce effectiveness and overall customer satisfaction. We are focused on improvements in all of these areas. In December, for the first time, we pulled together our sales team from across the company.

Transitioning to operational excellence, we understand the importance of product quality and process efficiency as well as sales force effectiveness and overall customer satisfaction.

We are focused on improvements in all of these areas.

In December for the first time, we pulled together our sales team from across the company we.

John Dunn: We held product training and identified cross-selling opportunities. Coming out of the sales summit, we adjusted our sales compensation structure to incentivize business with new customers and to establish targets for our sales team to sell all Shyft brands. We have a portfolio of industry-leading products and need to make sure we are selling them broadly in the market.

We help product training and identified cross selling opportunities.

Coming out of the sales summit, we adjusted our sales compensation structure to incentivize business with new customers.

And to establish targets for our sales team to sell all shift brands.

We have a portfolio of industry, leading products and need to make sure we are selling them broadly to the market.

John Dunn: By taking a more comprehensive approach, we will expand our reach and diversify our customer base. Operationally, we've identified opportunities, including deeper cross-company synergies in procurement and ways to optimize our footprint. I look forward to updating you on the output of these initiatives on our upcoming calls. Another area of focus, given its strategic importance to Shyft and our customers, has been the Blue Arc EV program. I've spent time with the team, validating the overall market opportunity, reviewing the project plan in depth, and assessing our manufacturing capability. I'm impressed by the quality of the product, the robustness of the design, and what the team has been able to accomplish.

Taking a more comprehensive approach, we will expand our reach and diversify our customer base.

Operationally, we've identified opportunities, including deeper cross company synergies in procurement and ways to optimize our footprint.

I look forward to updating you on the output of these initiatives on our upcoming calls.

Another area of focus given its strategic importance to shift and our customers has been the blue arc EV program.

I've spent time with the team.

Validating the overall market opportunity reviewing the project plan and depth and assessing our manufacturing capability.

Impressed by the quality of the product the robustness of the design and what the team has been able to accomplish.

John Dunn: I had direct conversations with our key customers who communicated their excitement for our Blue Arc vehicle and its role in their fleet strategy. After assessing progress and interest, we prioritized the Class 3-4 Walk and Van as the most efficient path to getting Blue Arc to market. While we discussed other class sizes and vocations historically, we have refined our focus in 2024, which will drive lower spending versus 2023.

I had direct conversations with our key customers, who communicated their excitement for our blue arc vehicle and its role in their fleet strategy.

After assessing progress and interest we prioritize the class three to four walk in van as the most efficient path to getting blue arc to market.

While we discussed other class sizes and vocations historically.

We have refined our focus in 'twenty, 'twenty, four which will drive lower spending versus 2023.

John Dunn: Let's turn to slide five, and I'll give you more detail on the status of our Blue Arc program. Our team continues to make solid progress on overall vehicle development, including battery performance. We previously discussed battery quality issues impacting our ability to go into production. We worked with our supplier, Proterra, to solve the issues until the recent purchase of Proterra by Volvo. Currently, we are exploring a new commercial agreement with Vogel. In parallel, we have accelerated the battery integration in our Class 3-4 vehicle with battery supplier, Our Next Energy. We recently completed performance testing and are pleased to confirm the vehicle range is over 200 miles.

Now, let's turn to slide five and I'll give you more detail around the status of our Blue arc program.

Our team continues to make solid progress on overall vehicle development, including the battery performance.

Previously discussed battery quality issues impacting our ability to go into production.

We worked with our supplier pro Tara to solve the issues until the recent purchase of <unk> by Volvo.

Currently we are exploring a new commercial agreement with Volvo.

In parallel we accelerated the battery integration and our class III to four vehicle with battery supplier our next energy.

We recently completed performance testing and are pleased to confirm the vehicle range is over 200 miles.

John Dunn: These results meet customer requirements and are consistent with our prior vehicle tests. From a vehicle standpoint, we have finalized the design, and the first production intent units have been manufactured in our Charlotte, Michigan facility. With the revised program timeline, we expect final testing in the coming months to complete and start production in late 2024. In conclusion, our team has built an outstanding vehicle. While there is more work to do, I am confident this will be a growth driver for Shyft. We will provide additional detail around Blue Arc as John Duyard discusses our outlook later in the presentation. With that, I'll turn it over to him to discuss our financial results. Thanks, John.

These results meet customer requirements and are consistent with our prior vehicle testing.

From a vehicle standpoint, we have finalized the design and the first production in tank units have been manufactured in our Charlotte, Michigan facility.

With the revised program timeline, we expect final testing in the coming months to complete and start production in late 2024.

In conclusion, our team has built an outstanding vehicle, while there's more work to do I am confident this will be a growth driver for shift.

We will provide additional detail around blue arc as John do yard discusses our outlook later in the presentation.

With that I'll turn it over to him to discuss our financial results.

Thanks, John.

Steve Dyer: Please turn to slide 7 and I'll start with our full year 2023 financial results and highlights. Overall, 2023 was a challenging year for Shyft as deterioration in the parcel and motorhome markets impacted overall performance. In the year, we delivered $872 million of revenue and $40 million of adjusted EBITDA, which was in line with our recent expectations. Excluding the impact of EV expenses, our core business delivered adjusted EBITDA of $73 million, or 8.3% of sales. We delivered tremendous performance in our specialty vehicles business with a 20% adjusted EBITDA margin for the full year, and we drove solid cash generation, allowing us to fund key growth initiatives, including Blue Arc. Throughout the year, we flexed our operations, moving production between sites and adjusting headcount as needed in response to the decreased sales volume. Overall, we have reduced our head count by approximately 30% from the beginning of the year.

Please turn to slide seven and I'll start with our full year 2023 financial results and highlights.

Overall 2023 was a challenging year for shift as deterioration in the parcel in motor home markets impacted overall performance.

In the year, we delivered $872 million of revenue and $40 million of adjusted EBITDA, which was in line with our recent expectations.

Excluding the impact of EV expenses, our core business delivered adjusted EBITDA of $73 million or eight 3% of sales.

We delivered tremendous performance in our specialty vehicles business with 20% adjusted EBITDA margin for the full year, and we drove solid cash generation, allowing us to fund key growth initiatives, including Blue arc.

Throughout the year reflects their operations moving production between sites and adjusting head count as needed in response to the decreased sales volume.

Overall, we reduced head count by approximately 30% from the beginning of the year.

Steve Dyer: Despite the sales volume pressure, our team focused on driving cash flow and reducing working capital, resulting in free cash flow of $36 million, up $75 million versus the prior year. Turning to slide 8, I will now provide an overview of our fourth quarter financial results. Sales were $202.3 million, down 33% from $302 million in the prior year.

Despite the sales volume pressure, our team focused on driving cash flow and reducing working capital.

Elting in free cash flow of $36 million up $75 million versus the prior year.

Turning to slide eight I will now provide an overview of our fourth quarter financial results.

Sales were $202 $3 million down 33% from $302 million in the prior year.

Steve Dyer: The net loss of $4.4 million or a loss of $0.13 per share compared to net income of $17.8 million or $0.50 per share in the previous year. However, fourth quarter 2023 results included a tax benefit of $4.8 million. In the fourth quarter, adjusted EBITDA was $2.3 million, or 1.1 percent of sales, down from $30.7 million, or 10.2 percent of sales in the fourth quarter of 2022. These results include EV program spend of $9.3 million, up from $7.6 million in the prior year. Including these expenses, adjusted EBITDA was 5.7% of sales. Adjusted net loss for the quarter was $0.9 million, while adjusted EPS decreased to a loss of $0.03 per share.

Net loss of $4 $4 million or a loss of <unk> 13 per share compared to net income of $17 $8 million or <unk> 50 per share in the previous year.

Fourth quarter 2023 results included a tax benefit of $4 $8 million.

In the fourth quarter, adjusted EBITDA was $2 $3 million or one 1% of sales down from $30 $7 million or 10, 2% of sales in the fourth quarter of 'twenty two.

These results include EV program spend of $9 $3 million up from $7 $6 million in the prior year.

Excluding these expenses adjusted EBITDA was five 7% of sales.

Adjusted net loss for the quarter was zero point $9 million, while adjusted EPS decreased to a loss of <unk> <unk> per share.

Steve Dyer: I'll now walk you through our Results by Operating segment on slide 9. In the quarter, fleet vehicles and services achieved sales of $119 million, down 44.1% compared to $212.9 million a year ago, reflecting softness in the last mile delivery end market. These results include $15 million of pass-through chassis revenue related to the USPS truck body program. Justin Iveda for the quarter was a loss of $2.6 million versus income of $27.7 million a year ago, with lower profitability driven by sales volume and negative product mix, which includes the impact of the USPS pass-through sale.

I'll now walk you through our results by operating segment on slide nine.

In the quarter fleet vehicles, and services achieved sales of $119 million down 44, 1% compared to $212 $9 million, a year ago, reflecting softness in the last mile delivery and markets.

These results include $15 million of pass through chassis revenue related to the USPS truck body program.

Adjusted EBITDA for the quarter was a loss of $2 $6 million versus income of $27 $7 million a year ago.

Lower profitability, driven by sales volume and negative product mix, which includes the impact of the USPS pass through sales.

Steve Dyer: Adjusted EBITDA margin was negative 2.2% of sales compared to 13% in the fourth quarter last year. FDS backlog was $325 million at the end of the year, down 15% versus the prior quarter, and Specialty Vehicles, our team, closed out a strong year with another quarter of record profitability. As our infrastructure-focused vocational truck businesses continue to deliver solid growth and operational improvement, offsetting ongoing market weakness in motorhome chaff. Fourth quarter sales were $83.4 million, a 10.6% decrease from $93.2 million in the prior year.

Adjusted EBITDA margin was negative two 2% of sales compared to 13% in the fourth quarter last year.

<unk> backlog was $325 million at the end of the year down 15% versus the prior quarter.

Specialty vehicles, our team closed out a strong year with another quarter of record profitability as.

As our infrastructure focused vocational truck businesses continued to deliver solid growth and operational improvements offsetting ongoing market weakness in motor home chassis.

Fourth quarter sales were $83 $4 million or 10, 6% decrease from $93 $2 million in the prior year.

Steve Dyer: Adjusted EBITDA was $19 million, or 22.8% of sales, compared to $15.9 million, or 17.1% of sales in the same period last year. SV's backlog was $84.3 million at the end of the year, up 4% versus the prior quarter. Please turn to slide 10 for the 2024 Outlook. We continue to be excited about the long-term growth prospects of the company. Our focus and investment into infrastructure-related businesses is paying off as reflected in the strength of SB's performance. The last mile parcel delivery business has been stopped recently.

Adjusted EBITDA was $19 million or 22, 8% of sales compared to $15 $9 million or 17, 1% of sales in the same period last year.

S. B backlog was $84 $3 million at the end of the year up 4% versus prior quarter.

Please turn to slide 10 for 2020 for outlook.

We continue to be excited about the long term growth prospects of the company.

Our focus and investment into infrastructure related businesses is paying off as reflected in the strength of Sp's performance.

Oh, the last mile parcel delivery business has been soft recently.

Steve Dyer: We continue to maintain a leading position, and the long-term growth projections remain intact for the industry. As we enter 2024, we continue to take a cautious view on near-term demand for both parcel and motorhome volumes, and we expect the softness we experienced in the second half of 2023 to persist, likely through mid-year. In response, as John Dunn discussed earlier, our team is taking urgent actions, both commercially by identifying cross-selling synergies and diversifying our customer base, and on spending, including a focused approach to BlueArk. Given these factors and notwithstanding further changes in the operating environment, we are introducing our 2024 outlook as follows, to be in the range of $850 to $900 million. While we plan for Blue Arc to be in production later this year, we have not included any revenue estimate in our forecast at this time. Just an EBITDA of $40 to $50 million, including $20 to $25 million of BlueArk spending. Given the expected slow start to the year, we anticipate that first quarter adjusted EBITDA will be approximately break-even. Adjusted EPS is expected to be in the range of $0.28 to $0.51 per share, and free cash flow of $25 to $35 million.

We continue to maintain our leading position in the long term growth projections remain intact for the industry.

As we entered 2024, we continue to take a cautious view on near term demand for both parcel and motor home volume and.

And we expect the softness we experienced in the second half of 2023 to persist.

Through mid year.

In response as John discussed earlier, our team is taking urgent actions both commercially by identifying cross selling synergies and diversifying our customer base and on spending including a focused approach to blue arc.

Given these factors and notwithstanding further changes in the operating environment, we are introducing our 2024 outlook as follows.

Sales to be in the range of $850 million to $900 million.

We planned for Blue arc to be in production later this year, we've not included any revenue estimate or forecast at this time.

Adjusted EBITDA of $40 million to $50 million, including $20 million to $25 million of Blue arc spending.

Given the expected slow start to the year, we anticipate that first quarter adjusted EBITDA will be approximately breakeven.

Adjusted EPS is expected to be in the range of 28 to 51 per share.

And free cash flow of 25% to $35 million.

Steve Dyer: Before I close out this section, I would like to reinforce our core business's ability to generate cash. Over the last four years, through a challenging cycle, we have generated approximately $100 million of free cash flow while self-funding a transformational EV initiative in return capital shareholding. Going forward, as our end markets recover and with continued focus on working capital, we believe we are well positioned to generate cash flow and continue to confidently invest in our future. With that, I will turn it back over to John Dunn for closing remarks. Thank you, John. Turning to slide 11.

Before I close out this section I would like to reinforce our core businesses ability to generate cash over the last four years through a challenging cycle, we have generated approximately.

John Dunn: We have excellent core businesses with leading market positions, well-recognized brands, and our customers rely on us every day. We are preparing for the future with our BlueArk EV truck and will continue to offer innovative solutions to our customers. The team is acting with utmost urgency to deliver improved 2024 results. We are laser focused on execution, efficiency, and leveraging our internal strength. As John Deweyard discussed earlier, our core businesses are excellent at generating cash through the cycle.

Clear our core businesses are excellent at generating cash through the cycle looking.

John Dunn: Looking ahead, we've established a framework to drive improved performance at Shyft. Our experienced and highly engaged team is committed to creating value for our customers and shareholders. I'm very excited about Shyft's future and look forward to the years to come.

Looking ahead, we've establish a framework to drive improved performance at shift our experienced and highly engaged team is committed to creating value for our customers and shareholders I'm.

I'm very excited about shifts future and look forward to the years to come.

Operator: Thank you. And with that, operator, we are now ready for the Q&A portion of the call. Yes, thank you. We will now begin the question and answer session. To ask a question, you may press star, then 1 on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the key.

Thank you.

And would that operator, we are now ready for the Q&A portion of the call.

Yes. Thank you we will now begin the question and answer session.

Cautionary press Star then one on your telephone keypad.

Speaker phone please pick up your handset before pressing the keys if anytime of your question has been addressed and you would like to withdraw. Please press Star then too.

Mike Zabrinon: If at any time your question has been addressed and you would like to withdraw it, please press star then 2. At this time, we will pause momentarily to assemble the roster. And the first question comes from Matt Koranda with Roth MKI. Hey, guys. Good morning. It's Mike Zabrinon from Matt.

This time, we will pause momentarily to assemble the roster.

And the first question comes from Matt Koranda with Roth M Kam.

Hey, guys. Good morning, it's my <unk>.

John Dunn: Thank you all! Thank you, everyone. Perfect. So, I just wanted to say thank you all for coming. Thank you. Thank you, Mike. Thanks so much.

Mike.

Maybe just starting out in the guide it sounds like we're signalling a second half way to do here, maybe just speak to some of the <unk> ability we have them to that.

John Dunn: Thank you. Please be correct. I think the microphone should be on Mike.

Steve Dyer: Please, Morning, maybe we just started on the guide. Sounds like we're signaling a second half waited year. Maybe just speak to some of the visibility we have into that. Yeah, I think, you know, as we talked about the demand softness that we saw in the second half of the year, particularly as we got into Q4, we expect that to continue through the first half of the year, which is consistent with what we've talked about previously. I think when you look at the order activity in the business, particularly on the FBS side of the business, I think we did see improvement in the second half of the year, 23 versus the first half, but it still remains relatively soft. We did see a strong order month in January, which is positive, but we're not at a point yet where we're saying that the market is opening up or turning at this point.

Yeah, I think you know as we talked about the.

The demand softness that we saw in the second half of the year, particularly as we got into the queue for we expect that to continue with which is through the first half of the year, which is consistent with what we.

We've talked about previously I think when you look at the order activity in the business, particularly on the Fbi's side of the business I think we did see improvement.

In the second half of the year of twenty-three versus the first half, but but still remains relatively soft we did see.

You know so.

Strong orders month in January, which which is a positive but we're not at a point, yet where where we're saying that the market is opening up returning at this point and so we wanted to be cautious as we continue here through the first half of the year on on how quickly this market opens up and I think.

Steve Dyer: And so we want to be cautious as we continue through the first half of the year on how quickly this market opens up. And I think with that, we'll be cautious from a cost perspective as well. But I think as you look at the year, Q1, as I indicated, will be roughly break even. We'll see a step up in Q2 and would expect to see improved performance in the second half. Got it. It makes sense. Maybe I will move into bookings.

With that will be cautious from a cost perspective, as well, but I think as you look at the year Q1 indicated will be roughly breakeven will see a step up in Q2 and would expect to see improved performance in the second half.

Got it it makes sense.

Maybe moving the bookings.

<unk> looks a bit better year over year, those still relatively tepid compared to prior years, maybe just speak to what are we hearing from F. B S fleets in terms of refresh and expansion demand this year.

Steve Dyer: So bookings look a bit better year-over-year, though still relatively tepid compared to prior years. Maybe just speak to what we're hearing from FES fleets in terms of refresh and expansion demand this year? Yeah, I think I mean, some of the dynamics that we've talked about previously with some of our major customers, I think, are still in play. You've got the reorganization going on with FedEx.

Yeah, I think I mean, some of the dynamics that we've talked about previously with with some of our major customers. I think are still in play you've got the reorganization going on with Fedex.

We've got.

Steve Dyer: You know, we've got an EV transition from an Amazon perspective, and so we continue to have, I'd say, healthy dialogues across our customer base, but those are impacting short-term ordering patterns. I think that the nice part as we look at some of the recent orders is that there isn't as much parcel in there as there has been historically. And so when we talk about diversifying the business, I think there is an opportunity there. But, you know, we expect, based on the dialogue and interactions we're having with our customers, that there will be diversification. Thank you, an increase in parcel activity here in the coming months. It's just hard to pinpoint exactly when that will be. Okay, that makes sense.

<unk> transition from an Amazon perspective [noise].

We continue to have I'd say, a healthy dialogues across our customer base, but those those are impacting short term ordering patterns I think that's the nice part is we look at some of the recent orders is that there isn't as much parcel in there.

There has been historically and so we talk about diversifying the business I think there is an opportunity there.

You know, we expect based on the dialogue and interactions were having with our customers that there will will be.

An increase in parcel activity here in the coming months, it's just hard to pinpoint exactly when that will be.

Okay makes sense it any way to think about.

Steve Dyer: Any way to think about how much we need in new bookings this next year in FES and SV to hit the guide. I think when you look at it overall, ending the year at $400 million of backlog, we've got an $875 million guide. Let's say the FDS business. Backlog has been, you know, sequentially down for a couple of quarters, orders in a row. Some of that is also extending a bit, so that that FDS backlog will likely, some of that will likely push into 25. And so there is an element of conversion there, but we've got $400 to $500 million if you just take that backlog number in our sales by the numbers. Makes sense. That's helpful, John. Thank you. Maybe the last one for me. For John Dunn, maybe.

How much we need a new bookings. This next year, an F b S and S b to hit the guide.

I think when you look at it at an overall ending the year at $400 million a backlog, we've got an 875 million dollar guide.

We'll say the F D S business.

Backlog has been <unk>.

A bunch of the down for a coupla quarter or or.

Quarters in a row.

Some of that is also extending a bit so that that fts backlog will likely somebody that will likely pushing to 25.

And so there is an element of conversion there, but we've got.

$4 million to $500 million, if you just take that that backlog number in our in our sales got it.

Makes sense that's helpful. Thank you maybe last one for me.

For John Donne, maybe.

John Dunn: John, maybe if you could discuss some of the strengths and weaknesses you see in the SHIFT platform and then just hone in on maybe what changes you plan to make relative to prior leadership and where there might be continuity. So we started with the, thank you, Mike, first slide saying that our mission hasn't changed, the core business, and where we're taking the company. It's stable, we believe in that model, and we're going forward. Some of the strengths that we have are great products, great relationships with our customers, where we saw opportunities as I went around and interacted with different people, is to do more as a one-shift organization and leverage our strength, bring expertise from one area into other areas. A clear example we mentioned in the discussion was Jerry Kierman, bringing together our total spend and really leverage that spend in the market to get better prices. That makes sense.

John maybe if you could discuss some of the strengths and weaknesses you see on the shift platform and then just hone in on maybe what changes do you plan to make relative the prior leadership and where my therapy continuity.

Oh.

So we started with the thank you Mike up with the first slide saying that our mission hasn't changed the core business and we're we're taking the company.

It's stable, we believe in that model and we're going forward some of the strengths that we have as great products.

Relationships with our customers.

We saw there's opportunities as I went around and interacted with different locations is to do more as one shift organization.

Leverage our strengths spring <unk>.

Expertise from one area into other areas Clear example, we mentioned and.

The discussion was <unk>, bringing together are total spend it really leverage that's been in the market to get better pricing.

That makes sense that's all for me. Thank you.

Mike Zabrinon: That's all from me, guys. Thank you. Thanks, Mike. Operator, next, please. Yes, thank you. And the next question comes from Mike Shlisky with D.A. Davis.

Thanks, Mike Operator next please.

And then last question comes from like Suski with a D. Davidson.

Michael Shlisky: Hey, good morning; thanks for taking my questions. Following up on that last question and your last answer there, John, do you think that there should be a need to make kind of a cost restructuring or changes to the footprint or the headcount going forward, or is it kind of... Well, you feel you've got enough volume to meet the current capacity of the company, and there's enough work to go around for all the folks who work at Shyft Group. What we're seeing is that we're really making sure our plants are agile, so they can run different products, and we better leverage that footprint. In the past, we were very singularly focused, so one brand would be built at one facility.

Hey, good morning, taking my question.

What are you talking from the last question or your and your and your last answer their job.

You think that.

She doesn't need to be kind of a cost restructuring retreats to the footprint with a head count going forward or is it kind of.

<unk> you feel you've got enough values to.

To meet the current capacity the company and there's no work to go around for all the folks who work at the Christmas through correctly.

What we're seeing is that we're really making sure our plants are agile. So they can run different products and we'd better leverage that footprint in the past we were very singularly focus. So one brand would be built in one facility and as we see the market kind of fluctuate there's an opportunity to flex.

John Dunn: And as we see the market kind of fluctuate, there's an opportunity to flex products into other facilities, really fully utilize our installed capacity, continue to monitor the demand, and we'll make those adjustments as needed. But a great example was in Bristol, which is our traditional walk-in van plant. As we saw demand go down, we flexed truck body production into that plant, and have ramped that up successfully. We're looking to do more of that sharing of the footprint going forward. OK. Thanks for that, and then I'd be curious to talk about chassis supply. It sounds like when you've got walk-in van work, you've got chassis that you can get to put on it.

Products and to other facilities it really fully utilize our installed capacity we continue to monitor.

The demand and we'll make those adjustments as needed, but a great example was.

In Bristol, which is our traditional walk in van plant as we saw walk in van.

Demand go down we flex truck body production into that plant and have wrap that up successfully and we're looking to do more of that sharing of the footprint going forward.

Okay.

Thanks for that.

And then.

I'd be curious to talk about tractor supply.

It sounds like when you've got walking round work, you've got to transfer you to forget to put on it.

John Dunn: I'm more curious about vocational and specialty, do you have at this point a much better feel for your allocations and the timing of deliveries to get those chassis, maybe this time versus maybe this time last year, or any kind of updates you can give us there? We start with the FVS side, we're seeing the chassis coming through, so we don't have that significant issue we had about a year ago, getting the customers. To be very clear, the limiting factor isn't chassis availability, it's really getting the customers to get reengaged. From the other side of the business, we have the SD side, the chassis are flowing and we're, doing our work on them and getting them to do it, is also not an issue right now, which has, at a significant level. Fantastic.

But I'm more curious about.

Vocational specialty do you have at this point I'm much better feel for relocation and the timing of <unk> to get those checked for you you'll.

This time, because maybe this time next year or any kind of off because you can give us will be appreciated.

We start with the F. B S side, we're we're seeing the chassis coming through so we don't have that.

You can issue had about a year ago, it's getting the customers.

Really re engage in as John mentioned, especially on parcel. It's been later than we had hoped and reminded that closely so that.

Be very clear the limiting factor as in chassis availability.

It's really getting the customers to get re engaged.

From the other side of the business, we have a we have seaside the chassis are flowing and we're.

Doing our work on them and get them to dealers.

Also not an issue right now with chassis at a significant level.

Fantastic Uhm, maybe one last one for me given the.

John Dunn: Maybe one last one for me, given the relatively strong free cash that we've got that's going to continue here in 2024 and pretty much no debt. Do you have any feel for, John Dunn, the ability of Shyft or the desire to expand through M&A to get some more scale in some of these businesses or to expand and get some new products from the truck buyer side? Any feel you can get for us on M&A given your relative strength versus some other folks who might be a little bit more subscale would be appreciated. The first step is that we really want to drive the performance of our core business, and that's the real focus right now to get that operating at the highest level. We need to get BlueArk launched, and that's why we narrowed the scope to make sure we get that to market as soon as possible and deliver it to customers. In parallel,

Not really strong pretty casually got.

Can you hear in 24, I pretty much know that.

Do you have any feel for John during the ability of shipped or the desire to expand.

Lemonade to get some more scale <unk>, we're trying to get some new products in the truck my size.

You feel you can get first for a given the relative strength, which is some other folks might be a little bit more so scale.

I appreciate it.

Kinda answered the first step is we really want to drive the performance of our core business and that's the real focus right now to get that operating at the highest level.

You need to get Blue arc launched and that's why we narrowed the scope to make sure we get that the market as soon as possible and deliver that to customers in parallel we do see opportunities where we can.

John Dunn: We do see opportunities where we can do acquisitions, and M&A, and we are looking at a couple opportunities there, but really don't want to lose focus on what we need to do and the urgency around making sure that the core business is running at the right rate. Follow up there, John, when you just work on the Class 3-4 Blue Arc, any feel for how that might affect your 25 projections for Blue Arc, the previous projections back in 2022 had? Found $1 million plus for sales for that for the overall line. What do you think with just the class three, four, and the current objective of the program? Where might that be found?

Two acquisitions M&A and we are looking at a couple of opportunities there, but really don't want to lose focus on what we need to do and the urgency around making sure that core business is running at the right level.

Okay. John when you just work on the class three four blue arc.

You feel for how that might affect your 25 projections were grew up.

The previous previous productions that complaint and 2022 had.

$30 million plus <unk> for the overall line, what do think with just the class three four in the current directory of the program, where my copy and 2025 now.

John Dunn: 2025. What we're seeing is that we want to get this vehicle to market and really gauge the interest. I think there's been a lot of publications out there about the acceptance rate and the speed of the acceptance rate.

What we're seeing is.

We want to get this vehicle to market and really gauge the interests I think there's been a lot of.

Publications out there about the acceptance rate and the speed of the acceptance rate. So we know we're gonna have that strong mad demand eventually will that timing happened in 2025 like we originally thought we're watching that closely but that may be a.

John Dunn: So we know we're going to have that strong demand eventually. But will that timing happen in 2025 like we originally thought? We're watching that closely, but that may be a year or two out beyond that, so we're being cautious. And I think that's why you see us narrowing the focus to get a product out in the market, understand its reception, and not overcommit the company in this EV space. Also, going back to your other question, it does make cash available to make acquisitions and strengthen our core business as well.

A year or two out beyond that so we're we're being cautious and I think that's why you see is narrowing the focus get a product out in the market.

Understand its reception and not over commit the company and the C V space.

Also going back to your other question does make a cash available to do acquisitions and strengthen our core business as well. So we wanted to make sure. We stay balanced as we go to go forward in the coming years, and I think Mike just add to that I think.

Steve Dyer: So we want to make sure we stay balanced as we go forward in the coming years. And I think, Mike, just to add to that, I think... You know, as we look at sort of the production ramp-up in the timeline, we're probably out a year, right?

We can always we look at the production ramp up in the timeline.

Would probably out of year right I mean, it just a year ago, we were talking about second half production 23 battery issues that we're talking about later 24, and so as we look at it. The program is essentially pushed a year from that perspective, our plans to do to a couple of hundred units this year.

Steve Dyer: I mean, just a year ago, we were talking about second half production, battery issues, and now we're talking about later 24. So as we look at it, the program is essentially pushed a year from that perspective. Our plans are to do to a couple hundred units this year, and then we'll start to see that ramp, and I would expect some of the financial milestones that you talked about to push out a year as well, but it gets back to John's point on adoption and acceptance from a customer perspective. We hit on it in the prepared remarks, but there's still a lot of enthusiasm about what this product can do and how it stacks up from a competitive standpoint. And so we feel very good about it, and we want to make sure that we get the right vehicle on the road. Great. Thanks so much.

And then we'll start to see that ramp and I would expect.

Some of the the financial milestones that you talked about to push out a year as well, but it gets back to Jon's point on an adoption and acceptance.

From from a customer perspective.

He hit on it and is prepared remarks, but there's still a lot of enthusiasm about what this product can do and how it stacks up from a competitive standpoint, and so we feel very good about it and we wanted to make sure that we get that.

Right vehicle on the road.

Great. Thanks, so much I appreciate the discussion.

Michael Shlisky: I appreciate the discussion. Thanks, Mike. Operator?

Okay, great. Thanks, Mike.

Operator, yes. Thank you and the next question comes from Steve Dire with Craig Hallum.

Operator: Yes, thank you. And the next question comes from Steve Dyer with Craig Howell. Thanks. Good morning. Most of my questions have been answered at this point.

Oh. Thanks, Good morning, most of might've been answered at this point just as it relates to blue work a little bit more.

Steve Dyer: Just as it relates to Blue Arc a little bit more, uh... how much of the delay do you feel like is attributable just to supply chain and battery issues and things like that, and then how much would you sort of associate with just sort of a little bit softer demand in overall parcel and people sort of moderating their uh... their chatter on that in the last six or nine months? Really, the driver of the delay was That threw us a curve with Proterra being bought by Volvo, and we had technical issues, candidly, with Proterra as well, all related to the battery. The vehicle's fantastic.

How much of the delay do you feel like is attributable just to supply chain and battery issues and things like that and and how much would you sort of associated with just sort of a little bit softer demand and overall parcel and people sort of moderating their their chatter on that and the last six or six or nine months.

Really the the driver of the delay with the battery that threw us a curve with pro Tara <unk>.

<unk> and we had technical issues candidly with pro Tara as well.

All related to the battery the vehicles fantastic when we get the vehicle on the road the customers use it a lot of enthusiasm around the vehicle. So our challenge is really to make sure. We have a battery that meets all the requirements.

John Dunn: When we get the vehicle on the road, the customers use it. There's a lot of enthusiasm around the vehicle, so our challenge is really to make sure we have a battery that meets all the requirements. We have a new partner in one. They were the original intended battery supplier for our class 5, so it wasn't a new supplier to us, just pulling them ahead into this class 3-4 walk-in ban.

We have a new partner and one for they were the original tended battery supplier for our class five so it wasn't a new supplier to us it's just pulling them a head into this class three four walk in band. So there was some work already done which helps us accelerate but we're going through that <unk>.

John Dunn: So there was some work already done, which helps us accelerate, but we're going through that validation process to make sure when we put a vehicle out to market, it is going to be at the right quality level and really deliver the performance long-term that we expect and our customers expect. So, given that it sounds like this year is primarily a testing and validation year again, and you still feel like demand is quite solid there, we do.

Allegation to make sure when we put a vehicle to market.

It's gonna be at the right quality level and really deliver the performance longterm that we expect and our customers expect.

So given that it sounds like this year is primarily a accustomed invalidation, you're again and you still feel like demand is quite solid there.

We do.

John Dunn: Meeting with customers. I met with customers personally, and there's a lot of enthusiasm around the vehicle, excitement to get it in their hands. But we don't want to rush it. We want to make sure that that battery... the final touches, and that performance is at the right level. You get one chance to make sure they're satisfied.

Meeting with customers I met with customers personally and there's a lot of enthusiasm as them around the vehicle excitement to just get it in their hands.

But we don't worry rush, it and want to make sure that that battery.

The final touches and that that performance is that the the right level you get one chance make sure they're satisfied.

John Dunn: Yep, and then can you just kind of refresh our memory on the Randy Marion order, if there was sort of any timelines or parameters around that when you announced it, and sort of when you would expect that to begin shipping? Yeah, I think, I think the Randy Marion order when we announced it was a multi-year order. You know, certainly as we look at the demand side of things and what our production. I lost you there at the end, Jeff, but we can take that off.

Yep and then can you just kind of refresh our memory the Randy Marian order, if there were sort of any timelines or parameters around that when you announced it and sort of when you would expect that to begin shipping.

Yeah I think.

I think the the random Marion order when we announced it was a multi your order you know certainly as we look at the demand side of things and what our production.

The first customer.

Delivered to you in a second.

Okay.

I I lost you there at the John but we can we can pick that okay uhm.

Steve Dyer: Go ahead and say they'll be one of the first customers that we deliver to in the second half of the year. The first group of vehicles, they're blended right in that, and they will give us vehicles; we're ready to give them them. Gotcha, okay. Last question for me, just for housekeeping: you talked about share repurchases. How many repurchase shares did you repurchase, I guess, both in Q4 and then also during the year, if you have that in front of you? Yeah, we did. We didn't repurchase anything in Q4. For the year, we repurchased about a million shares. Okay, and was that pretty front half loaded?

Go ahead.

Oh I was just saying that there'll be one of the first customers that we delivered two in the second half of the year.

The first group of vehicles, they're they're blended right in that and they will give vehicles as soon as we're ready to give it to them.

Gotcha. Okay last question for me just housekeeping you talked about share repurchases, how many repurchase sure did you repurchase I guess, both in Q4 and then also the year. If you have that in front of you.

Yeah, we didn't we didn't repurchase anything in queue for for the year, we repurchased I dunno.

A million dollars, it's about a million chairs.

Okay, and what's up pretty front half loaded I'm, just trying to recall, what you've said previously.

Steve Dyer: I'm just trying to recall what you've said previously. No, it's mixed between Q1, and Q3. Go to www.fema.gov to learn more.

It was mixed between 2123 right.

Gotcha.

Okay. Thanks very much.

Steve Dyer: Okay, thanks very much. Thank you. And the next question comes from Greg Lewis with BTIG. Hey, thank you, and good morning.

Thank you and the next question comes from Greg Lewis with P. T I G.

Okay. Thank you and good morning, and thanks for taking my questions John in the in the prepared remarks, you mentioned immediately ongoing dialogue with Volvo around the battery you know I I guess what went when should we think about this being I mean, I'm a <unk> finalized and then just thinking about some of the challenges we had over the last year. Realizing volvos, all you know a little bit different of a company.

Gregory Robert Lewis: Thanks for taking my questions. John, in your prepared remarks, you mentioned the ongoing dialogue with Volvo around the battery. You know, I guess, when should we think about this being, I mean, finalized, and then just thinking about some of the challenges we had over the last year, realizing Volvo is, you know, a little bit different of a company than, you know, the previous supplier. What are the thoughts around maybe a plan B here, you know, just to avoid potential, I don't know, supply chain issues down the road? Thanks, Greg. What we're looking at, and maybe it didn't come across as clear as it could have, we're all in right now working on one of those new battery sources, who are focused on the validation of, in parallel, we don't want to just walk away from Proterra, which is now Volvo. And so we're still waiting to understand what Volvo's intention is.

Then you know the the previous supply or what are the thoughts around maybe a plan b here just to avoid potential.

Dunno supply chain issues down the road.

Okay.

It's Greg what we're looking at it and maybe they can come across as clear as it could have we're all in right now working with.

One that new battery source there.

Who were focused Sir [noise] the validation I'm in parallel we don't want to just walk away from pro Tara and which is now available and so we're still waiting to understand what Volvo their intention they're going through that reorganization with the pro Terror group and we expect to know more in the next four to six weeks at how we want to pursue.

John Dunn: They're going through that reorganization with the Proterra group, and we expect to know more in the next four to six weeks on how we want to proceed. The key point there is that we'll invest the resources needed to solve some of the challenges and issues we had with the battery. But our goal is to be dual-source, so we would like them to solve the problem and have that be an option as well.

Seat.

The key point, there is will global invest the resources needed to solve some of the challenges issues, we had with the battery.

Our goal is that the dual source. So we would like them to solve the problem and have that be an option as well.

John Dunn: Okay, great. And then just, John, on the EBITDA guidance, you know, for Q1 and full year, obviously, specialty was, you know, degrading in Q4. You know, is there some seasonality why, you know, it looks like those EBITDA margins are going to come under pressure in Q1, I guess, before, you know, looking at, you know, playing with numbers and guidance before kind of rebounding to that kind of Q4 run rate? Is that the right way to be thinking about that?

Okay, Great and then just John on the kind of on the <unk> EBITDA guidance for Q1 in full here.

IV specialty was.

Did degrading Q for.

Is there some seasonality why it looks like those EBITDA margins are gonna come under pressure in Q1, I guess before looking it plain with numbers and guidance before kind of rebounding to that kind of Q4 run rate.

Is that the right way to be thinking about that.

Steve Dyer: in SVA specifically or broadly? No, just specifically around specialties. Yeah, I mean, the SV business had a tremendous year, I think 20% EBITDA margins for the year, which ramped really sequentially throughout the year as well. We've said historically that this business is more of a high-yield business over the long term, so think about it, that that is what we're expecting as we enter 2024. I think when you look at total company volume, it will be a little bit pressured in the first quarter just based on how demand in the backlog is laying out. And so there will be sequential declines as well, which put pressure on the Q1 margins before we see volumes return as we move through the year.

And S b, specifically or to broadly.

No just specifically around specialty.

Yeah, I mean, I think the the <unk>.

The business had a tremendous year I think 20th 20 per cent EBITDA margins for the year, which ramped.

Really sequentially throughout the year as well yeah. We've said historically that business is more of a high times business over the long term.

Think about it until will that that is what we're expecting as we enter 2024 I think when you look at it.

The total company volume will be a little bit pressured in in the first quarter just based on how demand in the backlog it's.

Is is is laying out and so there there will be sequential declines as well would you put pressure on the Q1 margins before we see volumes return as we can.

Move through the year.

Gregory Robert Lewis: Okay, thank you. Thanks, Greg. Thank you. This concludes our question and answer session. I would like to turn the floor back over to Randy Wilson for any closing comments.

Okay. Thank you.

Thanks, Greg.

Thank you. So this concludes our question and answer session I will turn the floor back over to Randy Wilson for any closing comments.

Randy Wilson: Thank you, Operator. I'd like to thank everyone for joining today's call. We look forward to connecting with you over the coming weeks as the Shyft Management team will be hosting investor meetings at the Raymond James Institutional Investor Conference in Orlando on March 4th, the NTA Work Truck Week in Indianapolis on March 6th and 7th, and the 36th Annual Roth Capital Conference in Dana Point on March 18th. Thank you for your interest in the Shyft Group. As always, please reach out if you have any follow-up questions. Have a great day! With that said, operator, please disconnect the call. Thank you. As mentioned, the conference is now concluded. Thank you for attending today's presentation. You may now disconnect your lines. BF-WATCH TV 2021 BF-WATCH TV 2021

Thank you operator, I would like to thank everyone for joining today's call. We look forward to connecting with you over the coming weeks is a shift management team will be hosting investor meetings at the Raymond James Institutional Investor Conference in Orlando on March 4th.

E N T. A work truck week in Indianapolis in March 6th and seventh and a 36 annual Raw capital conference with Dana point on March 18th.

Thank you for your interest in the ship for is always please reach out if you have any follow up questions have a great day without operator, please disconnect the call.

Thank you that was mentioned on the conference's all concluded. Thank you for attending today's presentation, you may not the central lines.

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