Q1 2024 The Shyft Group Inc Earnings Call
Operator: Good morning, and welcome to the Shyft Group's First Quarter 2024 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. And I would now like to introduce Randy Wilson, Vice President of Investor Relations and Treasury for the Shyft Group. Please go ahead.
Good morning, and welcome to this shift group first quarter of 'twenty 'twenty four conference call and webcast.
Speaker Change: All participants.
Speaker Change: Listen only mode until the question and answer session of the conference call.
Speaker Change: As a reminder, this call is being recorded.
Speaker Change: And I would now like to introduce Randy Wilson.
Randy Wilson: <unk> President of Investor Relations and Treasury for the shifts group.
Randy Wilson: 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 John do yard Chief Financial Officer.
Randy Wilson: Good morning, and thank you for joining us. Today you will hear from John Dunn, President and Chief Executive Officer, and John Douyard, Chief Financial Officer. Their prepared remarks will be followed by a question and answer session. Before we begin, please turn the slide to 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.
Speaker Change: Prepared remarks will be followed by a question and answer session.
Speaker Change: Before we begin please turn to slide two of the presentation for our Safe Harbor statement.
Speaker Change: 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.
Randy Wilson: 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'll be discussing non-gap 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'll begin with a business overview from our CEO, John Dunn, followed by John Douyard's review of first quarter performance and our 2024 outlook. We'll then open the line for Q&A. Please turn to slide three, and I'll turn it over to John Dunn, who will begin today's prepared remarks.
Speaker Change: I'm Mary risks that management believes could materially affect our results are identified in our forms 10-K, and 10-Q filed with the SEC.
Speaker Change: We will be discussing non-GAAP information and performance measures, which we believe are useful in evaluating the company's operating performance.
Speaker Change: Reconciliations for these non-GAAP measures can be found in the conference call materials.
Speaker Change: We will begin with a business overview from our CEO, Jon done followed by John Dewey Archer view, our first quarter performance and our 2024 outlook.
Speaker Change: We will then open the line for Q&A.
Speaker Change: Please turn to slide three and I'll turn it over to John Dunn will begin todays prepared remarks.
John A. Dunn: Thank you, Randy, and good morning. I would like to welcome everyone to our earnings call and appreciate your interest in the Shyft Group. Through the first quarter, our team delivered results better than our outlook provided in February. Key financial highlights include our specialty vehicle team continuing to perform well with another solid quarter that resulted in high teens margins. In addition, we saw early signs of commercial progress as the FES team delivered the highest order level in nearly two years, resulting in their first sequential backlog increase since early 2022. However, parcel order activity remains soft, as CAPEX decisions continue to be delayed by fleet operators.
John A. Dunn: You Randy and good morning, I would like to welcome everyone to our earnings call and appreciate your interest and the shift group.
John A. Dunn: The first quarter, our team delivered results better than our outlook provided in February Keith.
John A. Dunn: Key financial highlights include our specialty vehicle team continued to perform well with another solid quarter that resulted in high teens margin.
In addition, we saw early signs of commercial progress as the F. B S team delivered the highest order level in nearly two years, resulting in their first sequential backlog increase.
John A. Dunn: Since early 2022.
John A. Dunn: While parcel order activity remained soft as capex decisions continue to be delayed by fleet operators.
John A. Dunn: Our FES sales team responded by focusing on other opportunities, and Q1 order performance was highlighted by solid activity with utilities and food and beverage customers. As we look at the parcel market, we're confident in our leadership position and remain closely aligned with our customers, although we remain cautious.
John A. Dunn: Our FBS sales team responded by focusing on other vocations and Q1 order performance was highlighted by solid activity with utilities and food and beverage customers.
John A. Dunn: As we look at the parcel market, we're confident in our leadership position and remain closely aligned with our customers.
John A. Dunn: Though we remain cautious about the timing of the parcel market recovery, we believe our business is well positioned to deliver for our customers as it returns.
John A. Dunn: Regarding the timing of the parcel market recovery, we believe our business is well positioned to deliver for our customers as it returns. Overall, I want to emphasize that Shyft team members are acting with urgency to drive improved results and return the company to historical profitability over time. Please turn to slide four, and I'll expand on the operational framework progress. Although we spoke only two months ago, we continue to chart a pathway to realize the full potential of our business. Back in February, I introduced an operating framework that serves as the foundation to drive sustainable financial growth and shareholder value.
John A. Dunn: Overall I want to emphasize that shift team members are acting with urgency to drive improved results and return the company to historical profitability overtime.
John A. Dunn: Please turn to slide four and I'll expand on the operational framework progress.
John A. Dunn: Although we spoke only two months ago, we continue to chart a pathway to realize the full potential of our business back.
John A. Dunn: Back in February I introduced an operating framework that serves as the foundation to drive sustainable financial growth and shareholder value.
John A. Dunn: It includes a relentless focus on building high-performance teams, delivering operational excellence, and keeping our customers at the center of everything we do. The team is driving improved performance by focusing on operational rigor, financial growth, and meeting the needs of our customers. We are equipping our business leaders with the appropriate tools and support for success. Senior management has conducted site visits to key facilities, engaging with local teams to eliminate performance obstacles.
John A. Dunn: It includes a relentless focus on <unk>.
John A. Dunn: Building high performing teams.
John A. Dunn: Delivering operational excellence.
John A. Dunn: And keeping our customers at the center of everything we do.
John A. Dunn: The team is driving improved performance by focusing on operational rigor financial growth and meeting the needs of our customers.
John A. Dunn: We are equipping our business leaders with the appropriate tools and support for our success senior.
John A. Dunn: Senior management has conducted site visits to key facilities engaging with local teams to eliminate performance obstacles.
John A. Dunn: Our one ship mindset is driving us to break down silos and increased coordination across the company.
John A. Dunn: Our one shift mindset is driving us to break down silos and increase coordination across the company. An example of this is in procurement, where we recently completed our first cross-company initiative to leverage total business spend for a product category. Our actions led to consolidation of suppliers, allowing us to strengthen our relationship, while also positioning us to realize cost savings now. Turning to customer centricity. In March, our commercial and senior leadership teams met with key customers at the NTEA workshop.
John A. Dunn: An example of this is in procurement, where we recently completed our first cross company initiatives to leverage total business spend for a product category.
John A. Dunn: Our actions led to.
John A. Dunn: Consolidation of suppliers, allowing us to strengthen our relationships, while also positioning us to realize cost savings.
John A. Dunn: Now.
John A. Dunn: Turning to customer Centricity.
John A. Dunn: In March our commercial and senior leadership teams met with key customers at the MTA works show.
John A. Dunn: We saw excellent customer engagement and elevated interest in all our product offerings, which reinforced that our core businesses have leading positions in their respective end markets. It also highlighted our strong collaborative relationships with customers and industry partners, which positions us to effectively respond to their needs and provide innovative solutions. To emphasize recent examples, we announced the first order for a driver rapid cooling system with a key fleet customer, reflecting our ability to deliver customer-focused innovation.
John A. Dunn: We saw excellent customer engagement and elevated interest in all our product offerings, which reinforced that our core businesses have leading positions in their respective end markets.
John A. Dunn: It also highlighted our strong collaborative relationships with customers and industry partners, which positions us to effectively respond to their needs and provide innovative solutions to.
John A. Dunn: Emphasized recent examples we announced the first order for a driver rapid cooling system with a key fleet customer, reflecting our ability to deliver customer focused innovation.
John A. Dunn: Additionally, we were designated a Ford Pro Upfitter, highlighting our operational capability and leadership in the upfit market, which will present expanded growth opportunities for Shyft. In summary, we are increasing collaboration across the company as we act with a one shift mindset to accelerate decision making, relentlessly focus on our customers, and increase the pace of operational financial improvement. The Shyft team continues to prioritize these efforts to drive long-term performance.
John A. Dunn: Additionally, we were designated a Ford Pro Outfitter.
John A. Dunn: Highlighting our operational capability and leadership and the outfit market, which will present expanded growth opportunities for shift.
John A. Dunn: In summary, we are increasing collaboration across the company as we act with a one shift mindset to accelerate decision, making relentlessly focus on our customers and increase the pace of operational and financial improvement.
John A. Dunn: The shift team continues to prioritize these efforts to drive long term performance.
John A. Dunn: Now, let's turn to slide five and I'll provide an update around the status of the Blue arc EV program.
John A. Dunn: Now, let's turn to slide five, and I will provide an update on the status of the Blue Arc EV program. As discussed on our last call, we are focusing our team's efforts on bringing the Class 3 and 4 Blue Arc EV walk-in van to market later this year. I'm pleased to say that BlueArk's progress remains in line with these expectations. There is ongoing customer interest in the vehicle, and commercial conversations are progressing, evidenced by the high level of customer interest at NTEA.
John A. Dunn: As discussed on our last call, we focus our team's efforts I'm, bringing the class III and for Blue arc EV walk in van to market later this year.
John A. Dunn: I am pleased to say that the blue arcs progress remains in line with these expectations.
John A. Dunn: There are is ongoing customer interest.
John A. Dunn: In the vehicle and commercial conversations are progressing evidenced by the high level of customer interest at N T E.
John A. Dunn: From a development standpoint, the blue arc vehicle validation and testing continues and performance with the battery from our next energy is meeting expectations.
John A. Dunn: From a development standpoint, the Blue Arc vehicle validation and testing continues, and performance with the battery from our next energy is meeting expectations. The Blue Arc team is preparing for production in late 2024, and we will continue to keep you informed of commercial and product development. I will now turn it over to John for a detailed review of our financial results and 2024 Outlets.
John A. Dunn: Blue our team is preparing for production in late 2024, and we will continue to keep you informed of commercial and product developments.
John A. Dunn: I will now turn it over to John for a detailed review of our financial results and 2024 outlet.
John A. Dunn: Thanks, John Please turn to slide seven.
Jonathan C. Douyard: Thanks, John. Please turn to slide seven. Overall, we delivered financial results for the quarter that were above our prior expectations. With a backdrop of softer FVS demand, our team did a nice job focusing on improving performance, and we saw benefits from overall cost management, deferral of BlueArk spending, and delivery of incremental sales volume that was initially planned for the second quarter. Sales for the first quarter were $197.9 million, down 18.7% from $243.4 million in the prior-year quarter.
John: Overall, we delivered financial results for the quarter that were above our prior expectations with.
John: With a backdrop of softer FBS demand our team did a nice job focusing on improving performance and we saw benefits from overall cost management.
John: Merrell, a blue arc spending and delivery of incremental sales volume that was initially planned for the second quarter.
John: Sales for the first quarter were $197 $9 million down 18, 7% from $243 $4 million in the prior year quarter.
John: Net loss was $4 $7 million or <unk> 14 per share compared to net income of $1 $7 million or <unk> <unk> per share in the previous year.
Jonathan C. Douyard: The net loss was $4.7 million, or $0.14 per share, compared to net income of $1.7 million, or $0.05 per share, in the previous year. Please note that these results include a $1.85 million charge for the expected settlement of the EPA vehicle labeling matter, which we initially disclosed in 2020. The settlement is not final, but we believe we are nearing resolution and do not expect the outcome to be materially different from the accrual taken in the quarter.
John: Please note that these results include a $185 million charge for the expected settlement of the E. P. A vehicle labeling matter, which we initially disclosed in 2020.
John: The settlement is not final, but we believe we are nearing resolution and do not expect the outcome to be materially different than the accrual taken in the quarter.
John: In the first quarter, adjusted EBITDA was $6 $1 million or three 1% of sales.
Jonathan C. Douyard: In the first quarter, Adjusted EBITDA was $6.1 million, or 3.1% of sales, down from $10.8 million, or 4.4% of sales in the first quarter of 2023. These results include EV program spend of $5.5 million, down from $8.5 million in the prior year, as we focus our spending on bringing the Class 4 vehicle to market. Excluding these expenses, adjusted EBITDA was 5.9% of sales. Adjusted net loss for the quarter was $1.4 million, while adjusted EPS decreased to a loss of $0.04 per share.
John: Down from $10 $8 million or four 4% of sales in the first quarter of 2023.
John: These results include EV programs spend of $5 $5 million down from $8 $5 million in the prior year as we focus our spending on bringing the class four vehicle to market.
John: Excluding these expenses adjusted EBITDA was five 9% of sales.
John: Adjusted net loss for the quarter was $1 $4 million, while adjusted EPS decreased to a loss of four cents per share.
Jonathan C. Douyard: Please turn to slide eight, and I'll provide an update on our segment performance. In the first quarter, FBS achieved sales of $107.8 million, down 32.4% compared to $159.4 million a year ago, reflecting ongoing softness in the parcel and markets as customers continue to delay capital expenditures. Adjusted EBITDA for the quarter was $0.9 million versus $12.5 million a year ago, with a decline in profitability driven by the impacts of lower sales volume, as well as a negative product mix, adjusted EBITDA margin of 0.9% of sales compared to 7.8% in the first quarter last year. Quarter-end backlog for FES was $356.1 million, up 10% versus the fourth quarter of 2023. Turning to FV,
John: Please turn to slide eight and I'll provide an update on our segment performance.
John: In the first quarter F. B S achieved sales of $107 $8 million down 32, 4% compared to $159 $4 million a year ago, reflecting ongoing softness in the parcel end markets as customers continue to delay capital expenditures.
John: Adjusted EBITDA for the quarter was zero point $9 million versus $12 $5 million a year ago with the decline in profitability driven by the impacts of lower sales volume as well as negative product mix.
John: Adjusted EBITDA margin was <unk>, 9% of sales compared to seven 8% in the first quarter last year.
John: Quarter end backlog for <unk> was $356 $1 million up 10% versus the fourth quarter of 2023.
John: Turning to F N b.
Jonathan C. Douyard: The business delivered another solid quarter with both top line growth and strong margin performance. Sales of $90.1 million were up 3.4% compared to last year, with growth in service bodies and motorhomes. Adjusted EBITDA of $17 million, or 18.8% of sales, compared to $13.9 million, or 15.9% of sales, in the same period last year. SV's backlog of $83.3 million is roughly flat versus the end of the year. Please turn to slide nine for a discussion on the full year.
John: The business delivered another solid quarter with both top line growth and strong margin performance.
John: Sales of $90 $1 million were up three 4% compared to last year with growth in service bodies and motor home.
John: Adjusted EBITDA was $17 million or 18, 8% of sales compared to $13 9 million or 15, 9% of sales in the same period last year.
John: <unk> backlog of $83 $3 million is roughly flat versus the end of the year.
John: Please turn to slide nine for a discussion on the full year.
John: We are affirming our 2024 outlook with sales in the range of $850 million to $900 million and adjusted EBITDA of $40 million to $50 million.
Jonathan C. Douyard: We are affirming our 2024 outlook with sales in the range of $850 to $900 million and adjusted EBITDA of $40 to $50 million. While our team did deliver improved profit performance versus initial expectations to start the year, we remain cautious on near-term parcel order activity. We are confident in the long-term growth of the parcel market, but there continues to be uncertainty on the timing of market recovery given our visibility.
John: While our team did deliver improved profit performance versus initial expectations to start the year, we remain cautious on near term parcel order activity.
John: We are confident in our long term growth of the parcel market, but.
John: There continues to be uncertainty on the timing of market recovery.
John: Given our visibility.
John: We are focused on continuing the commercial momentum from the first quarter and driving efficiency across the organization.
John A. Dunn: We are focused on continuing the commercial momentum from the first quarter and driving efficiency across the organization. As for cash flow, we remain on track to deliver our prior free cash flow guidance of $25 to $35 million and expect improvement as the year progresses. In closing, we are pleased with our start to the year. Our team is focused on commercial and operational execution to deliver our full-year outlook, while we also look to position the company for improved performance in 2025. With that, I will turn it back over to John Dunn. Thank you, John.
John: On cash flow, we remain on track to deliver our prior free cash flow guidance of $25 million to $35 million and expect improvement as the year progresses.
John: In closing we are pleased with our start to the year. Our team is focused on commercial and operational execution to deliver our full year outlook. While we also look to position the company for improved performance in 2025.
John: With that I will turn it back over to Jonathan.
Jonathan: Thank you John turning to slide 10.
John A. Dunn: Turning to slide 10, I want to conclude today's prepared remarks by first extending my appreciation to the Shyft team as we continue our improvement journey. At the start of the call, I highlighted our commitment to enhancing shareholder value and returning Shyft to historic profitability by implementing our operational framework. The team is taking concrete steps to achieve this through operational excellence and a one-shift mindset, all of which is focused on customer satisfaction and long-term growth.
Jonathan: I wanted to conclude todays prepared remarks by first extending my appreciation to the shift team as we continue our improvement journey.
Jonathan: The start of the call I highlighted our commitment to enhancing shareholder value and returning shift to historic profitability by implementing our operational framework. The team is taking concrete steps to achieve this.
Jonathan: Through operational excellence and a one shift mindset.
Jonathan: All of which is focused on customer satisfaction and long term growth.
John A. Dunn: The dedication of our team is clear, and we are making progress. Together, we are acting with urgency to drive enhanced performance. Thank you again for your trust and engagement. I am confident in the direction of the company and look forward to sharing future updates with you.
Jonathan: The dedication of our team is clear.
Jonathan: And we are making progress.
Jonathan: Together, we are acting with urgency to drive the enhanced performance.
Speaker Change: Thank you again for your trust and engagement.
Speaker Change: I'm confident in the direction.
Jonathan: Of the company and look forward to sharing future updates with you.
Speaker Change: We are now ready to take your questions operator.
Speaker Change: Please open the line.
Speaker Change: Thank you very much we will begin the question and answer session to ask a question you May Press Star then one on your Touchtone phone.
Operator: Thank you very much. Now, we will begin the question-and-answer session. To ask a question, you may press star, then 1 on your touchtone phone. And if you are using a speakerphone, please pick up your handset before pressing the key. If at any time your question has been addressed and you would like to withdraw, please press star, then two. Again, press 1 to enter the queue. At this time, we'll start with a question from Matt Koranda from Roth M K M. Matt, please go ahead.
Speaker Change: And if you are using a speakerphone please pick up your handset before pressing the keys.
Speaker Change: If at any time. Your question has been addressed and you would like to withdraw. Please press Star then two.
Speaker Change: Again star one to enter the queue.
Speaker Change: At this time, we will start with a question from Matt Koranda from Roth.
Matthew Butler Koranda: Hey, Matt.
Matthew Butler Koranda: Matt. Please go ahead.
Matthew Butler Koranda: Hey, guys good morning.
Matthew Butler Koranda: Hey guys, good morning.
Matthew Butler Koranda: Good morning, I wanted to start off with the.
Jonathan C. Douyard: I wanted to start off with the backlog and FPS, guys. The sequential increase is encouraging. I guess the implied order flow looks relatively healthy relative to kind of what you've been experiencing for the last several quarters. I guess we've noticed that parcel unit growth does look like it's being projected by some of the major fleets, so what does that mean for order flow from your parcel fleet customers for the rest of this year? If you could sort of expound upon that, that'd be great.
Matthew Butler Koranda: I want to start off with the backlog.
Matthew Butler Koranda: The sequential increase is encouraging I guess, the implied order flow looks relatively healthy relative to kind of what you've been experiencing for the last several quarters.
Speaker Change: Notice you mentioned in at least the release that that doesn't sound like it's necessarily coming from possibly customers. So I just wanted to see if you could talk about where is the strength in order flow coming from prep, Yes, and then what's your expectation for fleet customers for the remainder of this year in terms of just the cadence of order flow.
Speaker Change: I guess, we've noticed that parcel unit growth does look like it's being projected by some of the major fleet. So what does that mean for order flow from your parcel fleet customers for the rest of this year.
Jonathan C. Douyard: Yeah, Matt, thanks for the question. I think, I mean, we're certainly pleased with the performance of the FES commercial teams this quarter. I think we've talked in the past about how we should expand and diversify that customer base. We're seeing some of the fruits of that here in the quarter. And as John mentioned in his prepared remarks, we really saw strength from a utility perspective as well as in food and beverage in the quarter.
Speaker Change: Expound upon that that'd be great.
Speaker Change: Yeah, Matt. Thanks for the question I think I mean, we're certainly pleased with the performance of the FBS commercial teams. This quarter I think we've talked in the past about how do we expand and diversify that customer base, we're seeing some of the fruits of that here in the quarter.
Speaker Change: And as John mentioned in his prepared remarks, we really saw strength from a utility perspective, as well as in food and beverage in the quarter. So if you look at it just maybe for some historical perspective, if you go back a couple of years.
Jonathan C. Douyard: So, if you look at it, just maybe for some historical perspective, if you go back a couple of years, FES was seventy-five percent parcel, twenty-five percent other vocations. What we saw this quarter was the inverse of that from an orders perspective. And so, you know, while there was some parcel activity, certainly not to the levels that we saw historically. As we look at the timing of that, consistent with what we've said in prior discussions, our fleet customers continue to discuss their need for additional vehicles in their fleets.
Jonathan C. Douyard: <unk> was 75% parcel, 25% other vocations what we saw this quarter was an inverse of that from an orders perspective and so.
Jonathan C. Douyard: While there was some parcel activity certainly not.
Speaker Change: Not to the levels that we saw historically.
Jonathan C. Douyard: As we look at the timing of that consistent with what we've said in prior discussions the our fleet customers continued to.
Speaker Change: Discuss about their need for additional vehicles in their fleets.
Jonathan C. Douyard: And so we remain close to them, you know, very engaged, anticipating the timing of their needs. We would expect to see some pickup and activity here in the second quarter, but most likely, you know, closer to mid-year. So some of that may be in the third quarter as well.
John A. Dunn: And so we remain close to them.
Jonathan C. Douyard: They're engaged anticipating the timing of their needs, we would expect to see some pickup in activity here in the second quarter.
Jonathan C. Douyard: But most most likely.
Jonathan C. Douyard: Closer to mid year. So some of that may be in the third quarter as well.
Speaker Change: Okay, Alright, that's helpful. Thanks, John.
Matthew Butler Koranda: Okay, all right, that's helpful. Thanks, John.
Speaker Change: And then just on on the Blue Arc program curious, if we could maybe shift to that and discuss.
Jonathan C. Douyard: And then just on the Blue Arc program, curious if we could maybe shift to that and discuss it. When do we expect it? I guess, well, one.
Speaker Change: When do we expect I guess a little one.
Matthew Butler Koranda: Do we feel like the battery supplier issue is fully sorted at this point? What are the gating items to getting to production? It sounds like we're still targeting production at the end of 2024. So nothing's changed there. When should we expect to see order flow show up for you guys in the firm, or in the form of purchase orders and firm order flow? Maybe you could just kind of help level set expectations around the BlueArk program and the developments there.
Speaker Change: Do we feel like the battery supplier issue is fully sorted at this point what are the gating items to getting to production. It sounds like we're still targeting production at the end of 2024, So nothing's changed there.
Matthew Butler Koranda: When should we expect to see order flow show up for you guys.
Matthew Butler Koranda: The firm are in the form of purchase orders and firm order flow, maybe you could just kind of help level set expectations around the block programming the developments there recently.
Matthew Butler Koranda: There's a couple of pieces, there and if we start off with a battery.
Jonathan C. Douyard: There are a couple pieces to this, and if we start off with a battery, I think what's very important to recognize is the battery we're using from One Energy is meeting all the requirements. We're seeing good performance, and we're not running into any issues through the development process as we continue to validate that. So that's a positive sign as we did shift from another battery supplier several months ago. So we're on track there.
Jonathan C. Douyard: <unk>.
Jonathan C. Douyard: Very important to recognize is the battery we're using for one energy.
Jonathan C. Douyard: Is meeting all the requirements, we're seeing good performance and we're not running into any issues through the development process as we continue to validate that so that's a positive sign as we did shift from.
Jonathan C. Douyard: Another battery supplier several months ago. So we're on track there.
Jonathan C. Douyard: From an order standpoint, we're having good conversations with our customers; we're close to having some clarity on that order and when exactly those are going to start to come in. We already have announced, though, that we have some relationships with some key dealers that are looking to pull vehicles. I think the next step here is to get end users locked in, and that's really the focus of the team.
Jonathan C. Douyard: From an order standpoint, we're having good conversations with our customers.
Jonathan C. Douyard: We're close to having some clarity.
Jonathan C. Douyard: Clarity on that order and when exactly those are going to start to come in we already have announced though that we have some relationships with some key dealers that are looking to pull.
Jonathan C. Douyard: Vehicles.
Jonathan C. Douyard: I think the next step here is to get end user locked in and that's really the focus of the team.
Jonathan C. Douyard: Okay, and then maybe just gating items to production John maybe.
Jonathan C. Douyard: Okay, then maybe just gating items to production, John Dunn, Dunn, if you want to cover sort of, you know, capital that's been put in place for this year to get to production in terms of setup and tooling and whatnot.
Jonathan C. Douyard: John Duffey yard if you want to cover sort of cash.
Jonathan C. Douyard: Capital that's put in place for this year to get to production in terms of set up until I guess and whatnot.
John A. Dunn: Yes, I mean, I think we did from an Opex perspective spent $5 $5 million in the quarter down year over year, we guided.
Jonathan C. Douyard: Yeah, I mean, I think we did, from an OPEX perspective, spend five and a half million dollars in the quarter down year over year. And you're not going to see a huge sort of step up as we progress through the year from that perspective. And so, I think, as you look at the program overall. Final development continues on track, to John's point. Production and setting up the lines have been in the process, and we'll continue to work and refine that over the next couple months, and we expect to be in production later this year.
Jonathan C. Douyard: In our deck, you'll see $20 to $25 million of spending from.
Jonathan C. Douyard: Blue arc, and so where we continue to be on that run rate there will be some incremental capital, but a lot of it is behind us at this point. There is there is some additional tooling, we're putting in the factory.
Jonathan C. Douyard: But.
Jonathan C. Douyard: I wouldn't it.
Jonathan C. Douyard: I'm not going to see a huge sort of step up as we progress through the year from that perspective.
Jonathan C. Douyard: So I think as you look at the program overall.
Jonathan C. Douyard: Final development continues on track to Jon's point.
Jonathan C. Douyard: Production and setting up a lines has been in process and will continue to work and refine that over the next couple of months.
Jonathan C. Douyard: We expect to be in production later this year.
Speaker Change: Okay very helpful guys I'll take the rest of mine offline I appreciate it.
Matthew Butler Koranda: Okay, very helpful guys. I'll take the rest of mine offline. Appreciate it.
Speaker Change: Thanks, Matt Thanks, Matt.
Operator: And just as a reminder, again, if you would like to ask a question, press star 1. Our next question comes from Tyler DeMatteo from BTIG. Tyler, please go ahead.
Tyler DeMatteo: And just as a reminder, again if you would like to ask a question press Star one.
Tyler DeMatteo: Our next question comes from Tyler <unk>.
Tyler DeMatteo: The tail from BP IAG Tyler. Please go ahead.
Tyler DeMatteo: Yeah, hey, good morning everyone. Thanks for taking the time. I wanted to talk a little bit about the infrastructure piece of the business here. You know, clearly, it's been a really solid contributor. I guess, can we just add a little bit of color in terms of how you're thinking about the strategy for that business in the near term and then what it could look like in the medium term? You know, obviously, it's been a nice contributor. Just any other color there for the infrastructure piece?
Speaker Change: Yeah, Hey, good morning, everyone. Thanks for taking the time.
Tyler DeMatteo: I wanted to talk a little bit about the infrastructure piece of the business here you know clearly it's been it's been a really solid contributor I guess can we just add a little color in terms of how you're thinking about the strategy for that business in the near term and then what could that look like in the medium term obviously.
Tyler DeMatteo: It's been a nice contributor to just any other color there for the infrastructure piece.
Tyler DeMatteo: Okay.
John A. Dunn: Sure, what we're seeing is continued demand in that area. And then as we, our next step is to continue expansion throughout create a national footprint. So we recently last year launched a plant in the Nashville area. We're seeing nice success there as that continues to grow and take orders. And we see that as the model as we can continue to grow our business in that area throughout the, let's say, national footprint.
Speaker Change: Sure. What we're seeing is continued demand in that area and then as weak. Our next step is to continue expansion throughout.
John A. Dunn: And create a national footprint. So we recently last year launched the plant in the Nashville area. We're seeing nice success there is that.
John A. Dunn: Continues to grow and take orders and we see that as the model as we can continue.
John A. Dunn: Continue to grow our business in that area throughout the let's say a national footprint.
Speaker Change: Okay, Great and then I guess on that footprint piece, there I mean any other color in terms of your level of comfort with the footprint at large as I look across the different business units you know how youre thinking about maybe new expansion opportunities outside of that infrastructure piece.
Tyler DeMatteo: Okay, great. And then I guess on that footprint piece there, I mean, any other color in terms of, you know, your level of comfort with the footprint at large, as I look across the different business units, you know, how you're thinking about maybe new expansion opportunities outside of that infrastructure piece, you know, any other comments there in terms of, you know, just how you're thinking about it from a strategy perspective?
Tyler DeMatteo: Any other comments there in terms of just how youre thinking about it from a from a strategy perspective.
Tyler DeMatteo: We're taking a look at that as a much more holistic view and we're taking a look at where do we have all of our factories for the different divisions and say, how do we leverage those existing footprint better so.
John A. Dunn: We're taking a look at that as a much more holistic view, and we're taking a look at where we have all of our factories for the different divisions and saying, how do we leverage those existing footprints better? So going forward, we're looking to flex additional products into the footprint we already have. So it really saves on the cost of opening a new plant, establishing a new location. We're well positioned throughout the country where we can do more with what we already have, and that's really the first step.
John A. Dunn: Forward looking to flex additional products into the footprint, we already have so really saves on opening the cost of opening a new plant to establishing a new location.
John A. Dunn: We're well positioned throughout the country.
John A. Dunn: But we can do more with what we already have and that's really the first step. There is also going to be a need for some additional site locations as we continue our expansion plans.
John A. Dunn: There's also going to be a need for some additional site locations as we continue our expansion plan. But as a first step, taking a much harder look to say, how can we share what we already have between the different businesses?
John A. Dunn: It is the first step.
John A. Dunn: Can a much harder look to say how can we share with look we already have between the different.
John A. Dunn: <unk>.
Speaker Change: Okay, great very helpful. Thanks, guys really appreciate the time I'll turn it back to the queue.
Tyler DeMatteo: Okay, great. Very helpful. Thanks, guys. Really appreciate the time. I'll turn it back to the queue.
Speaker Change: Thanks Tyler.
Tyler DeMatteo: Okay.
Tyler DeMatteo: And our next question comes from Mike Smith from D. A Davidson Mike. Please go ahead.
Operator: And our next question comes from Mike Shlisky from D.A. Davidson. Mike, please go ahead.
Operator: Hi, This is Linda on for Mike.
Linda: Hi, this is Linda on the mic. Thank you for letting us ask questions. So my first question is following up on the battery supply supplier situation at Blue Arc. How many additional battery suppliers are you working with? And what is their level of experience delivering batteries to truck makers?
Speaker Change: Thank you for letting us ask questions.
Linda: My first question is following up on the battery supply supplier situation alright, how many additional battery suppliers are you working quits and what this company is the level of experience delivering batteries to truck makers.
Linda: We start with.
John A. Dunn: Starting with our next energy, which is our key focus right now, we continue to have great relationships with them. Their product is meeting all our needs. And we have a high level of confidence in working with them as it goes through the process. We continue to have discussions with the previous battery supplier as well, and that is an option if needed. And then we're out there in the market looking at one to two other battery suppliers just in case there is that need. But as of today, really focused on our next energy, to be the battery that we go into production.
Linda: Our next energy, which is our key focus right now we continue to have great relationships with them their product is meeting all our needs and we have a high level of confidence of working with them.
John A. Dunn: As they go as it goes through the process.
John A. Dunn: We continue to have discussions with the previous battery supplier as well and that is.
John A. Dunn: An option if needed and then we're out there in the market looking at 1% to two other battery suppliers just in case there is that need.
John A. Dunn: But as of today really focused on our next synergy.
John A. Dunn: To be the battery that we go into production with.
John A. Dunn: Okay. Thank you for the color and then my next question is other truck body players have teamed up with third party powertrain providers, such as <unk> for their daily marathons.
Linda: Great, thank you for the color. And then my next question is: other track body players have teamed up with third-party powertrain providers, such as FCCC, for their EV delivery events. Has SHIFT given this area any thought, especially with the OEMs you already know so well?
Linda: Given this area than we thought.
Linda: Should we with the Oems you already know so well.
Jonathan C. Douyard: Yeah, I think, Linda, I think that what I would say there is we do continue to do that. I mean, we've built, if you go back to 2023, we built over a thousand EVs, either bodies or van outfits. We continue to have those running through our factories this year. And so, you know, we continue to stay close with what I'll call the legacy OEM supply base. And we've got the optionality from that perspective.
Speaker Change: Yes, I think Linda I think what I would say there is we do continue to do that.
Jonathan C. Douyard: We've built if you go back to 2023, we built over a thousand EV.
Jonathan C. Douyard: E V either bodies or ban upsets, we continue to have those running through our factories this year and so we.
Jonathan C. Douyard: We continue to stay close with I'll call it the legacy <unk>.
Jonathan C. Douyard: <unk> supply base.
Jonathan C. Douyard: And we've got the Optionality from that perspective.
Jonathan C. Douyard: I think that's one of the strengths of having the utility master is still out there as a unit sale, we can build on any chassis.
John A. Dunn: I think that's one of the strengths of having the Utilmaster is still out there as a unit saying we can build on any chassis, and we've proven that, and as John said, we did over a thousand vehicles last year, and that trend is continuing this year. And then we have the LARC as another alternative, just to give our customers options.
John A. Dunn: We've proven that and as John said, we did over 1000 vehicles.
John A. Dunn: Last year and that trend is continuing this year and then we have blue arc is a another alternative.
John A. Dunn: To give our customers options.
Speaker Change: Okay. Thank you for that.
Linda: Okay, thank you for that. And then my last question would be, what do we have to see from a macro perspective in order to start seeing final mile vehicle demand pick up again?
Linda: Then.
Linda: My last question would be what do we have to see from a macro perspective in order to start seeing a final mile.
Linda: He could demand pickup.
Linda: Yes.
Linda: I think it varies by customer.
John A. Dunn: I think it varies by customer; we're in a situation where they publicly announce what's going on. A couple of them are in different places as they evaluate their situation, and one is heavily impacted in regards to the previous strike on their ability and interest to further bring investment in. Another one is going through a fresh look at how they want to do that last mile delivery and how they want that organization to be.
John A. Dunn: We're in a situation, where they publicly announced that's going on but.
John A. Dunn: Couple of them are in different places as they evaluate their situation and one is heavily impacted and.
John A. Dunn: And regardless of previous strike on their ability and interest to further bring investment and another one is going to have a fresh look and say how do they want to do that last mile delivery and how they want that organization to B and C.
John A. Dunn: And so, as they sort through those pieces, those are two of the big players that are out there that have been in close contact and working through that. So it's really for them to work out some of their internal strategies on what they want to do. What we're comfortable with is there is a certain replacement rate that needs to occur, which is just part of the business, and when that replacement rate kicks back in, we are in the right position.
John A. Dunn: So as they saw it through those pieces those are two of the big players that are out there that we're in close contact as they work through that.
John A. Dunn: So it's really for them to work out some of their internal strategies on what they wanted to do what we're comfortable with is there is a certain replacement rate.
John A. Dunn: That needs to occur.
John A. Dunn: Which is just part of the business.
John A. Dunn: The replacement rate kicks back in we are in the right position.
John A. Dunn: Thank you, Linda.
Linda: Got it thank you Glenda.
John A. Dunn: Thanks.
Randy Wilson: And this concludes our question and answer session. I would like to turn the conference back over to Randy Wilson for some closing remarks. Please go ahead.
Linda: Thank you.
John A. Dunn: Yes.
Randy Wilson: And this concludes our question and answer session.
Randy Wilson: Like to turn the conference back over to Randy Wilson for some closing remarks. Please go ahead.
Randy Wilson: Thank you operator, I'd like to thank everyone for joining today's call. The shifts the ship management team looks forward to connecting with the investment community over the coming months. Thank you for interest in ship group and as always please reach out to US. If you have any follow up questions with that operator. Please disconnect the call.
Randy Wilson: Thank you, Operator. I'd like to thank everyone for joining today's call. The Shyft management team looks forward to connecting with the investment community over the coming months. Thank you for your interest in the Shyft Group, and as always, please reach out to us if you have any follow-up questions. With that, Operator, please disconnect the call.
Randy Wilson: Yes.
Operator: This concludes the call. Thank you for attending today's presentation. You may now disconnect, and have a great rest of your day.
Speaker Change: This concludes the call. Thank you for attending today's presentation. You may now disconnect and have a great rest of your day.
Operator: Yeah.