The Shyft Group Reports Second Quarter 2023 Results

• Second quarter results in line with management expectations
• Solid operating cash flow performance in the quarter
• Revised full-year 2023 outlook primarily driven by softness in last-mile delivery and motorhome end markets
  

NOVI, Mich., July 27, 2023 (GLOBE NEWSWIRE) -- The Shyft Group, Inc. (NASDAQ: SHYF) (“Shyft” or the “Company”), the North American leader in specialty vehicle manufacturing, assembly and upfit for the commercial, retail and service specialty vehicle markets, today reports operating results for the second quarter ending June 30, 2023.

Second Quarter 2023 Highlights        
For the second quarter of 2023 compared to the second quarter of 2022:

• Sales of $225.1 million, a decrease of $7.1 million, or 3.1%, from $232.2 million
• Net income of $4.7 million, or $0.13 per share, compared to $5.3 million, or $0.15 per share
• Adjusted EBITDA of $15.9 million, or 7.0% of sales, an increase of $2.2 million, from $13.7 million, or 5.9% of sales; results include $7.4 million of EV program costs versus $7.3 million in the prior year
• Adjusted net income of $8.7 million, or $0.25 per share, compared to $7.5 million, or $0.21 per share in the prior year
• Consolidated backlog of $510.2 million as of June 30, 2023, down 55.1%, compared to $1.1 billion as of June 30, 2022
• Operating cash flow of $29.7 million, up $38.6 million, compared to an outflow of $8.9 million in the prior year

“We delivered second quarter results in line with our expectations led by strong Specialty Vehicles performance while also driving robust cash generation,” said Daryl Adams, President and Chief Executive Officer. “We experienced challenges in the Fleet Vehicles and Services business as market conditions deteriorated and operational inefficiencies remain. We continue to flex our operations while implementing additional cost reductions to reflect lower short-term demand.”

Second Quarter 2023 Business Segment Highlights
For the second quarter of 2023 compared to the second quarter of 2022:

Fleet Vehicles and Services (FVS)

• Sales of $139.0 million, an increase of $2.1 million, or up 1.5%, from $136.9 million
• Adjusted EBITDA of $12.5 million, or 9.0% of sales, a decrease of $2.0 million, from $14.5 million, or 10.6% of sales
• Segment quarter-end backlog of $437.8 million, down 56.2% compared to $1.0 billion in the prior year
  

Specialty Vehicles (SV)

• Sales of $87.6 million, a decrease of $7.7 million, or 8.1%, from $95.3 million
• Adjusted EBITDA of $17.4 million, or 19.8% of sales, an increase of $4.5 million, from $12.9 million, or 13.5% of sales
• Segment quarter-end backlog of $72.4 million as of June 30, 2023, down 46.4% compared to $135.2 million as of June 30, 2022
• Achieved significant milestone with the 100,000^th Isuzu N-Series gas-powered truck produced at Builtmore

Disciplined Capital Allocation
“Our balance sheet continues to be a strength and differentiator for the Company. We are confident in our long-term growth story and ability to generate cash, giving us the flexibility to efficiently deploy capital to maximize shareholder value,” said Jon Douyard, Chief Financial Officer.

The Company deployed $8.3 million of capital in the quarter with the following actions:

• Funded $6.5 million of capital expenditures, including investment in Blue Arc
• Paid regular dividends of $1.8 million reflecting a dividend of $0.05 per share
• $233 million remaining under our existing share repurchase authorization
  

2023 Financial Outlook
Douyard continued, “Our prior concerns surrounding a tougher demand environment materialized late in the quarter. As softness in the parcel market continued and dealer inventories remained high, last-mile customers deferred and cancelled orders leading to lower OEM chassis production. In addition, consistent with broader recreational vehicle markets, we are experiencing incremental weakness in our motorhome chassis business. These headwinds have negatively impacted our full-year outlook.”

Our revised full-year 2023 outlook, notwithstanding further changes in the operating environment, is as follows:

• Sales to be in the range of $850 million to $950 million compared to the previous outlook of $1.0 to $1.2 billion
• Adjusted EBITDA of $40 to $60 million compared to the previous outlook of $70 to $100 million
• Net Income of $1 to $16 million compared to the previous outlook of $28 to $50 million
• Earnings per share of $0.03 to $0.46 compared to the previous outlook of $0.77 to $1.39
• Adjusted earnings per share of $0.33 to $0.76 compared to the previous outlook of $0.98 to $1.60
• Blue Arc EV second half production remains on track; expect approximately 50 vehicles to be delivered in the fourth quarter

Adams concluded, “We remain confident in the long-term growth profile of the Company. Despite market and economic uncertainty, we expect earnings growth in 2024 as we drive operational improvements and ramp Blue Arc production.”

Conference Call and Webcast
The Shyft Group will host a conference call and webcast at 8:30 a.m. ET today.

The U.S. toll-free dial-in for the conference call is 1-844-868-8845, and the international dial-in number is 412-317-6591. The conference passcode is 10176862.

A live webcast of the conference will also be available on the investor relations page of the company’s website at www.the shyftgroup.com/webcasts.

About The Shyft Group

The Shyft Group is the North American leader in specialty vehicle manufacturing, assembly, and upfit for the commercial, retail, and service specialty vehicle markets. Our customers include first-to-last mile delivery companies across vocations, federal, state, and local government entities; the trades; and utility and infrastructure segments. The Shyft Group is organized into two core business units: Shyft Fleet Vehicles and Services™ and Shyft Specialty Vehicles™. Today, its family of brands include Utilimaster®, Blue Arc™ EV Solutions, Royal® Truck Body, DuraMag® and Magnum®, Strobes-R-Us, Spartan® RV Chassis, Red Diamond™ Aftermarket Solutions, and Builtmore Contract Manufacturing™. The Shyft Group and its go-to-market brands are well known in their respective industries for quality, durability, and first-to-market innovation. The Company employs approximately 4,200 employees and contractors across campuses, and operates facilities in Arizona, California, Florida, Indiana, Maine, Michigan, Missouri, Pennsylvania, Tennessee, Texas, and Saltillo, Mexico. The Company reported sales of $1.0 billion in 2022. Learn more at TheShyftGroup.com.

Forward Looking Statement

This release contains information, including our sales and earnings guidance, all other information provided with respect to our outlook for 2023 and future periods, and other statements concerning our business, strategic position, financial projections, financial strength, future plans, objectives, and the performance of our products and operations that may constitute “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. We intend the forward-looking statements to be covered by the safe harbor provisions for forward-looking statements in those sections. Generally, we have identified such forward-looking statements by using words such as “believe,” “expect,” “intend,” “potential,” “future,” “may,” “will,” “should,” and similar expressions or by using future dates in connection with any discussion of, among other things, the construction or operation of new or existing facilities, operating performance, trends, events or developments that we expect or anticipate will occur in the future, statements relating to volume changes, share of sales and earnings per share changes, anticipated cost savings, potential capital and operational cash improvements, anticipated disruptions to our operations and industry due to the COVID-19 pandemic, changes in supply and demand conditions and prices for our products, trade duties and other aspects of trade policy, statements regarding our future strategies, products and innovations, and statements expressing general views about future operating results. However, the absence of these words or similar expressions does not mean that a statement is not forward-looking. Forward-looking statements are not historical facts, but instead represent only the Company’s beliefs regarding future events, many of which, by their nature, are inherently uncertain and outside of the Company’s control. It is possible that the Company’s actual results and financial condition may differ, possibly materially, from the anticipated results and financial condition indicated in these forward-looking statements. Management believes that these forward-looking statements are reasonable as of the time made. However, caution should be taken not to place undue reliance on any such forward-looking statements because such statements speak only as of the date when made. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law. In addition, forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from the Company’s historical experience and our present expectations or projections. In addition, forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from the Company’s historical experience and our present expectations or projections. These risks and uncertainties include, but are not limited to the risks and uncertainties described in “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2022, and those described from time to time in our future reports filed with the Securities and Exchange Commission (SEC), which are available at www.sec.gov or our website. All forward-looking statements in this release are qualified by this paragraph. Investors should not place undue reliance on forward-looking statements as a prediction of actual results. We undertake no obligation to publicly update or revise any forward-looking statements in this release, whether as a result of new information, future events, or otherwise.

Contact
Randy Wilson
Vice President, Investor Relations and Treasury
Randy.Wilson@theshyftgroup.com
248.727.3755

The Shyft Group, Inc. and Subsidiaries
Consolidated Balance Sheets
(In thousands)
(Unaudited)
		June 30,				December 31,
		2023				2022
ASSETS
Current assets:
Cash and cash equivalents		$	7,808			$	11,548
Accounts receivable, less allowance of $270 and $246			93,442				115,742
Contract assets			41,230				86,993
Inventories			101,303				100,161
Other receivables – chassis pool agreements			9,312				19,544
Other current assets			7,078				11,779
Total current assets			260,173				345,767
Property, plant and equipment, net			77,393				70,753
Right of use assets–operating leases			49,132				53,386
Goodwill			48,880				48,880
Intangible assets, net			47,173				49,078
Net deferred tax assets			10,390				10,390
Other assets			2,705				2,227
TOTAL ASSETS		$	495,846			$	580,481
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable		$	85,733			$	124,309
Accrued warranty			6,018				7,161
Accrued compensation and related taxes			14,770				14,434
Contract liabilities			4,198				5,255
Operating lease liability			11,378				10,888
Other current liabilities and accrued expenses			8,549				19,452
Short-term debt – chassis pool agreements			9,312				19,544
Current portion of long-term debt			179				189
Total current liabilities			140,137				201,232
Other non-current liabilities			9,826				10,033
Long-term operating lease liability			39,501				44,256
Long-term debt, less current portion			45,184				56,266
Total liabilities			234,648				311,787
Commitments and contingent liabilities
Shareholders' equity:
Preferred stock, no par value: 2,000 shares authorized (none issued)			-				-
Common stock, no par value: 80,000 shares authorized; 34,956 and 35,066 outstanding			90,606				92,982
Retained earnings			170,523				175,611
Total Shyft Group, Inc. shareholders’equity			261,129				268,593
Non-controlling interest			69				101
Total shareholders' equity			261,198				268,694
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY		$	495,846			$	580,481

The Shyft Group, Inc. and Subsidiaries
Consolidated Statements of Operations
(In thousands, except per share data)
(Unaudited)
		Three Months Ended June 30,								Six Months Ended June 30,
		2023				2022				2023				2022
Sales		$	225,101			$	232,195			$	468,540			$	439,078
Cost of products sold			182,347				190,077				382,862				371,029
Gross profit			42,754				42,118				85,678				68,049
Operating expenses:
Research and development			5,890				7,563				12,839				12,490
Selling, general and administrative			30,270				26,860				62,559				53,412
Total operating expenses			36,160				34,423				75,398				65,902
Operating income			6,594				7,695				10,280				2,147
Other income (expense)
Interest expense			(1,477	)			(463	)			(3,125	)			(617	)
Other income (expense)			124				(488	)			194				(523	)
Total other expense			(1,353	)			(951	)			(2,931	)			(1,140	)
Income before income taxes			5,241				6,744				7,349				1,007
Income tax expense (benefit)			556				1,461				986				(424	)
Net income			4,685				5,283				6,363				1,431
Less: net loss attributable to non-controlling interest			-				-				32				-
Net income attributable to The Shyft Group Inc.		$	4,685			$	5,283			$	6,395			$	1,431
Basic earnings per share		$	0.13			$	0.15			$	0.18			$	0.04
Diluted earnings per share		$	0.13			$	0.15			$	0.18			$	0.04
Basic weighted average common shares outstanding			34,935				35,049				34,995				35,078
Diluted weighted average common shares outstanding			34,991				35,243				35,161				35,437

The Shyft Group, Inc. and Subsidiaries Consolidated Statements of Cash Flows (In thousands, except par value) (Unaudited)
		Six Months Ended June 30,
			2023			2022
Cash flows from operating activities:
Net income		$	6,363		$	1,431
Adjustments to reconcile net income to net cash provided by (used in) operating activities
Depreciation and amortization			8,050			6,696
Non-cash stock based compensation expense			3,090			3,708
Deferred income taxes			-			(432	)
Loss on disposal of assets			128			481
Changes in accounts receivable and contract assets			68,064			(12,863	)
Changes in inventories			(1,142	)		(34,826	)
Changes in accounts payable			(38,567	)		7,333
Changes in accrued compensation and related taxes			303			(6,146	)
Changes in accrued warranty			(1,143	)		(379	)
Changes in other assets and liabilities			(9,525	)		(1,672	)
Net cash provided by (used in) operating activities			35,621			(36,669	)
Cash flows from investing activities:
Purchases of property, plant and equipment			(10,963	)		(10,010	)
Proceeds from sale of property, plant and equipment			82			148
Acquisition of business, net of cash acquired			(500	)		-
Net cash used in investing activities			(11,381	)		(9,862	)
Cash flows from financing activities:
Proceeds from long-term debt			70,000			85,000
Payments on long-term debt			(81,000	)		(30,000	)
Payments of dividends			(3,653	)		(3,640	)
Purchase and retirement of common stock			(8,786	)		(26,789	)
Exercise and vesting of stock incentive awards			(4,541	)		(8,591	)
Net cash provided by (used in) financing activities			(27,980	)		15,980
Net decrease in cash and cash equivalents			(3,740	)		(30,551	)
Cash and cash equivalents at beginning of period			11,548			37,158
Cash and cash equivalents at end of period		$	7,808		$	6,607

The Shyft Group, Inc. and Subsidiaries
Sales and Other Financial Information by Business Segment
(Unaudited)

Quarter Ended June 30, 2023 (in thousands of dollars)

		Business Segments
			Fleet Vehicles			Specialty			Eliminations &
			& Services			Vehicles			Other				Consolidated
	Fleet vehicle sales	$	125,291		$	-		$	-			$	125,291
	Motorhome chassis sales		-			30,099			-				30,099
	Other specialty vehicles sales		-			51,652			(1,443	)			50,209
	Aftermarket parts and accessories sales		13,692			5,810			-				19,502
	Total Sales	$	138,983		$	87,561		$	(1,443	)		$	225,101
	Adjusted EBITDA	$	12,468		$	17,367		$	(13,968		)	$	15,867

The Shyft Group, Inc. and Subsidiaries
Sales and Other Financial Information by Business Segment
(Unaudited)

Quarter Ended June 30, 2022 (in thousands of dollars)

			Business Segments
			Fleet Vehicles			Specialty			Eliminations &
			& Services			Vehicles			Other				Consolidated
	Fleet vehicle sales	$	126,181		$	-		$	-			$	126,181
	Motorhome chassis sales		-			42,710			-				42,710
	Other specialty vehicles sales		-			47,044			-				47,044
	Aftermarket parts and accessories sales		10,716			5,544			-				16,260
	Total Sales	$	136,897		$	95,298		$	-			$	232,195
	Adjusted EBITDA	$	14,525		$	12,859		$	(13,695		)	$	13,689

The Shyft Group, Inc. and Subsidiaries
Sales and Other Financial Information by Business Segment
(Unaudited)

Period End Backlog (amounts in thousands of dollars)

		Jun. 30, 2023			Mar. 31, 2023			Dec. 31, 2022			Sept. 30, 2022		Jun. 30, 2022
Fleet Vehicles and Services	$	437,802		$	584,933		$	736,690		$	915,135		$	1,000,021
Total Specialty Vehicles		72,402			82,478			96,023			128,769			135,162
Motorhome Chassis		25,123			28,180			35,471			49,769			62,811
Other Specialty Vehicles		47,279			54,298			60,552			79,000			72,351
Total Backlog	$	510,204		$	667,411		$	832,713		$	1,043,904		$	1,135,183

Reconciliation of Non-GAAP Financial Measures

This release presents Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization), adjusted net income, and adjusted earnings per share, each of which is a non-GAAP financial measure. These non-GAAP measures are calculated by excluding items that we believe to be infrequent or not indicative of our underlying operating performance, as well as certain non-cash expenses. We define Adjusted EBITDA as income from continuing operations before interest, income taxes, depreciation and amortization, as adjusted to eliminate the impact of restructuring charges, acquisition related expenses and adjustments, non-cash stock-based compensation expenses, and other gains and losses not reflective of our ongoing operations.

We present the non-GAAP measure Adjusted EBITDA because we consider it to be an important supplemental measure of our performance. The presentation of Adjusted EBITDA enables investors to better understand our operations by removing items that we believe are not representative of our continuing operations and may distort our longer-term operating trends. We believe this measure to be useful to improve the comparability of our results from period to period and with our competitors, as well as to show ongoing results from operations distinct from items that are infrequent or not indicative of our continuing operating performance. We believe that presenting this non-GAAP measure is useful to investors because it permits investors to view performance using the same tools that management uses to budget, make operating and strategic decisions, and evaluate our historical performance. We believe that the presentation of this non-GAAP measure, when considered together with the corresponding GAAP financial measures and the reconciliations to that measure, provides investors with additional understanding of the factors and trends affecting our business than could be obtained in the absence of this disclosure.

Our management uses Adjusted EBITDA to evaluate the performance of and allocate resources to our segments. Adjusted EBITDA is also used, along with other financial and non-financial measures, for purposes of determining annual incentive compensation for our management team and long-term incentive compensation for certain members of our management team.

The Shyft Group, Inc. and Subsidiaries Consolidated Financial Summary (Non-GAAP) (In thousands, except per share data) (Unaudited)
	Three Months Ended June 30,
The Shyft Group, Inc.		2023		% of sales				2022		% of sales
Net income	$	4,685		2.1	%		$	5,283		2.3	%
Add (subtract):
Restructuring and other related charges		1,253						354
Acquisition related expenses and adjustments		-						341
Non-cash stock-based compensation expense		1,263						2,060
CEO transition		2,287						-
Non-recurring professional fees		160						-
Tax effect of adjustments		(981	)					(496	)
Adjusted net income	$	8,667		3.9	%		$	7,542		3.2	%
Net income	$	4,685		2.1	%		$	5,283		2.3	%
Add (subtract):
Depreciation and amortization		4,186						3,727
Income tax expense		556						1,461
Interest expense		1,477						463
EBITDA	$	10,904		4.8	%		$	10,934		4.7	%
Add:
Restructuring and other related charges		1,253						354
Acquisition related expenses and adjustments		-						341
Non-cash stock-based compensation expense		1,263						2,060
CEO transition		2,287						-
Non-recurring professional fees		160						-
Adjusted EBITDA	$	15,867		7.0	%		$	13,689		5.9	%
Diluted net earnings per share	$	0.13					$	0.15
Add (subtract):
Restructuring and other related charges		0.04						0.01
Acquisition related expenses and adjustments		-						0.01
Non-cash stock-based compensation expense		0.04						0.05
CEO transition		0.07						-
Non-recurring professional fees		-						-
Tax effect of adjustments		(0.03	)					(0.01	)
Adjusted diluted net earnings per share	$	0.25					$	0.21

The Shyft Group, Inc. and Subsidiaries Consolidated Financial Summary (Non-GAAP) (In thousands, except per share data) (Unaudited)
			Outlook
			Twelve Months Ended December 31, 2023
The Shyft Group, Inc.			Low				Mid				High
Net income			$	998			$	8,622			$	16,246
Add:
Depreciation and amortization				19,500				20,000				20,500
Interest expense				6,000				6,000				6,000
Taxes				250				2,155				4,061
EBITDA			$	26,748			$	36,777			$	46,807
Add:
Non-cash stock-based compensation and other charges				13,500				13,500				13,500
Adjusted EBITDA			$	40,248			$	50,277			$	60,307
Earnings per share			$	0.03			$	0.24			$	0.46
Add:
Non-cash stock-based compensation and other charges				0.38				0.38				0.38
Less tax effect of adjustments				(0.08	)			(0.08	)			(0.08	)
Adjusted earnings per share			$	0.33			$	0.55			$	0.76

*Table amounts may not add due to rounding