Good morning, and welcome to The Shyft Group's Fourth Quarter and Full Year 2024 Conference Call and webcast. All participants will be in listen-only mode until the question-and-answer session of the conference call. As a reminder, this call is being recorded.

I would now like to introduce Randy Wilson, Vice President of Investor Relations and Treasury for The Shyft Group. Please go ahead..

Good morning, and thank you for joining us. Today, you will hear from John Dunn, President and Chief Executive Officer; and Scott Ocholik, Interim Chief Financial Officer. Their prepared remarks will be followed by a question-and-answer session. Before we begin, please turn to Slides 2 and 3 of the presentation for our safe harbor statement.

Today's conference call contains forward-looking statements, which are subject to risks that could cause actual results to be materially different from those expressed or implied. Primary risks that management believes could materially affect our results are identified in our Forms 10-K and 10-Q filed with the SEC.

We will be discussing non-GAAP information and performance measures, which we believe are useful in evaluating the company's operating performance. Reconciliations for these non-GAAP measures can be found in the conference call materials.

We will begin with a business overview from John, followed by Scott's review of fourth quarter financial results and our 2025 outlook. John will finish up our presentation with an update on our pending merger with Aebi Schmidt. We will then open the line for Q&A.

Please turn to Slide 4, and I'll turn it over to John, who will begin today's prepared remarks..

Thank you, Randy, and good morning. Welcome to our earnings call, and we appreciate your interest in The Shyft Group. 2024 was an incredible year for our company. We made significant strides in advancing our strategy, delivered operational improvements and achieved solid financial performance.

In December, we announced a powerful next step in Shyft's journey, our proposed merger with Aebi Schmidt, a leading global specialty vehicles company. Together, we will create a highly competitive specialty vehicles leader with enhanced scale, capabilities and expertise and deeper customer relationships as we combine the strengths of both companies.

Let's kick off this morning with some highlights from the past year at The Shyft Group. The talented Shyft team has been highly engaged in implementing operational and commercial improvements throughout 2024, and we are seeing improved results.

We consistently improved our financial performance, driven by our intense focus on increasing operational and organizational efficiencies across our company. By leveraging a one Shyft mindset, we are streamlining our corporate structure and managing costs to deliver margin improvement.

These efforts resulted in meaningful adjusted EBITDA growth for the company with margins of 6.2%, up 160 basis points year-over-year. Despite a soft parcel market, our fleet vehicles and services business expanded margins to 7.2%, up 160 basis points year-over-year by driving operational performance.

This is a testament to our team's strategic approach to controlling what they can control. Specialty Vehicles continued strong EBITDA margins were supported by focused execution and steady demand for infrastructure truck bodies.

Our balance sheet remains solid with net leverage less than 2x, allowing us the flexibility to invest in strategic initiatives that support our growth going forward. This financial strength enables us to capture new opportunities and drive long-term success.

Finally, we are pleased to bring Blue Arc to production as we successfully shift EV trucks to FedEx, which is an exciting milestone for our entire Shyft team. This achievement underscores our commitment to meeting the complex needs of our fleet partners and serving as their partner of choice as they transition to more sustainable fleet operations.

Turning to Slide 5. We outline our operating framework, which has guided Shyft in 2024 as we drove improvements across our business. Strengthening talent, improving leadership training and ensuring safety with our Mission Zero initiative, we reduced workplace injuries by 40% in 2024.

Lean manufacturing and efficiency initiatives lowered costs and improved competitiveness in the market. In summary, we are proud of the work we have done this year, and I would like to thank our team. Without their dedication and skill sets, our accomplishments would not be possible.

I would now like to welcome Scott Ocholik to his first Shyft earnings call, and he will provide a detailed review of our financial results and 2025 outlook..

we expect sales to be in the range of $870 million to $970 million. This includes approximately $50 million related to Blue Arc. Full year adjusted EBITDA in the range of $62 million to $72 million.

Consistent with historical patterns and seasonality, we expect a slow start to the year and anticipate the first quarter adjusted EBITDA to be in the low single digits. As we see a second half recovery in our markets, we expect around 70% of full year adjusted EBITDA to be delivered in the second half of the year.

We expect adjusted EPS in the range of $0.69 to $0.92 per share. And free cash flow of $25 million to $30 million, up meaningfully on a year-over-year basis. This includes approximately $20 million of transaction-related cash expected to be paid during the year.

We remain committed to driving further improvements in our financial performance as our end markets recover and we finalize the proposed merger with Aebi Schmidt. With that, I will turn it back over to John to provide an update on the merger..

Thanks, Scott, and please turn to Slide 11. This proposed merger with Aebi Schmidt presents a compelling opportunity for our shareholders, customers, and employees.

By bringing our businesses together, we are creating a differentiated leader in the specialty vehicles space with a robust presence in the North American market, where approximately 75% of our revenues will be generated. This strategic move positions us to capture growth opportunities in high margin end markets, including commercial infrastructure.

For our customers, the merger will provide a highly complementary and expanded suite of products and services, driven by our unwavering focus on customer-centric innovation and deep customer relationships.

For shareholders, the combined company will have a stronger financial profile and will drive value by capitalizing on synergies, expanding our product offerings and leveraging our team's expertise. Our people share a common commitment to operational excellence, customer focus and innovation, making us confident in our collective success.

We believe that this merger is in the best interest of our shareholders, customers and team members. Now turn to Slide 12, and I will discuss the integration work, which is well underway. Since announcing the transaction, we have made solid progress towards completing the actions needed to close.

In January, we provided data reinforcing the merger's value creation potential, including additional information on Aebi Schmidt's strong financial projections and market leadership. We achieved HSR antitrust approval and are making progress in other regulatory and closing conditions.

We are leveraging both Shyft and Aebi Schmidt strong track records of successfully integrating businesses and have established a joint integration team. Overall, the steps we are taking are preparing our two companies to integrate seamlessly, and I look forward to providing more updates as we progress towards closing, which we expect by mid-2025.

We are diligently working on integrating our businesses to capture the full potential of the combined company and deliver enhanced value for our shareholders on day one. We are now ready to take your questions. Operator, please open the line..

We will open up the lines for questions in a moment. Please bear with me. [Technical Difficulty]..

Matt you're live. Operator, if you can please have Matt go live, please..

Hey, I can hear you.

Can you hear me, okay?.

Great. Thank you. You're good Matt. Thank you. Technical difficulty this morning, but I appreciate your patience..

Yes, sorry, I didn't hear my queue there. That's okay. Also wanted to talk about the 2025 outlook with respect to Blue Arc. It sounds like you guys, I think I heard correctly in the prepared remarks, $50 million in sales embedded in the guide, and you should approach breakeven on EBITDA this year.

Just wanted to hear you talk about do you have all orders in hand to deliver on the $50 million? Maybe just talk about the cadence of delivery this year. Any progress update on sort of the vehicles in the field with FedEx or other customers? I would love to hear a little bit more color on the program there..

Great, Matt. This is John. I can give you an update on that. So we are in the production phase running vehicles a couple of day are coming off the line to fulfill our contract with FedEx. That was for 150 orders. So we're working through that order right now. The vehicles in the field continue to perform well and meet expectations.

In addition to FedEx, we have demos running with a couple of other key customers, one of them up in Canada, so experiencing the cold climate running, performing well, meeting all our expectations. So we're excited about the performance of the vehicle and getting it to the phase now where we can give it to customers to really use it.

FedEx is deploying, the vehicles we're making and continue to be very positive on it. If you're at LAX, for example, there's a couple out there right now in service. From an order standpoint, it is a dynamic market right now as people are sorting out what to do on the EV. Fortunately, though, we see a lot of commitment from our key partners.

The bigger fleets are still leaning into starting to transition to that more environmentally friendly solution of EVs. And from an order standpoint, we're seeing a lot of activity, confident that, that will continue to materialize. The big enabler here is we get these vehicles out on the road and people really see how well they work.

And so the more vehicles on the road we have, the more positive experiences people have, the expectation is that we'll continue to lead to more orders..

Okay.

But in terms of the orders you have in hand, do you have enough to fulfill the $50 million without incremental orders this year?.

We need additional orders. And that's an area where, as Scott mentioned as well, we're striving to get to that breakeven. To do that, we need to be -- we can do it at under 500 orders, and we're not there yet. We're hoping to have another announcement shortly, but it's short of the full amount needed..

Okay. All right. Understood. Thanks. Okay. And then on the Fleet Vehicle segment, just wanted to hear a little bit more about the -- what's embedded in the outlook for '25. It sounds like you're assuming parcel demand recovery in the back half of this year. I know that's kind of common fits and starts in terms of the prediction of recovery in that market.

Maybe just talk about what gives you confidence that we're going to see a recovery in the parcel fleet demand this year. What are you hearing from customers, fleets in particular? Would love to hear an update on FES there..

We're staying very close with those key parcel customers, making sure we understand exactly their needs and their plans. The good news is they're not changing the concept on how they're delivering parcel packages to homes. So they still want these large vehicles that we make. So it's right in the wheelhouse.

Because these vehicles are so robust, they're able to maintain them and kind of push down some of those purchases or push out some of those purchases slightly. But what we see is they've been pushing that out for about two years now. Eventually, there's going to need to be a replacement cycle that kicks in, and it should be a nice one kicking in.

It's just a matter of when. We're not seeing it yet. So that's why we're guiding and saying we're seeing it in the second half of the year. But we're having good conversations with the customers to understand when is that going to happen, and there's an indication it's going to happen in that second half of this year..

Okay. Got it. And then just on Specialty Vehicle, and then I'll turn it over to someone else. I guess the implied order flow was a little soft in Specialty Vehicle.

Could you just speak to sort of what's driving that? Is that still motorhome that's driving the bulk of the weakness in the implied order flow that you're getting in that segment? What are you seeing on sort of the core work truck piece of the business? Maybe if you could just unpack the order trends at Specialty Vehicle, that would be helpful?.

Yes, Matt, this is Scott. Thanks for the question. You're right. We're continuing to see the weakness in the motorhome market that's really driving the weakness there on that side of things. On the -- work truck side of our business, we're actually starting -- it's been very steady.

We're continuing to see strong orders there and especially here in the first part of 2025, we're continuing to see strong orders. So we're expecting that to continue to be steady into 2025. So that's the main thing. On the motorhome side, the dealers, their inventories are at pre-pandemic levels now, lower than pre-pandemic levels.

So I think they've got their inventories in place. And now they're, I think, just being a little more thoughtful on their planning on their inventory. So, but we do anticipate the orders to pick up here as we move into the second half of the year on motorhome as well..

Okay. Got it. I'll turn it over to someone else..

Thanks, Matt. Operator, next question..

Great. Thank you..

Thanks Matt..

The next question is from Mike Shlisky with D.A. Davidson. Please go ahead..

Yes, hi there. Good morning. Thanks for taking my question..

Good morning..

Good morning..

Good morning guys. Your comments were about one of the drivers of growth for better trends in '25, it sounds like infrastructure.

If you're expecting to see some growth in infrastructure in 2025 at Shyft Group, would it be fair to say that from what you know that Aebi Schmidt will be growing its overall business as fast or faster than Shyft Group given their, greater focus on infrastructure in their mix?.

I think that's -- thanks for the question. And I think that's one of the key aspects of this merger, bringing Aebi Schmidt together with The Shyft Group. We do have that upfit business infrastructure based that we can really coordinate our activities, have a better footprint nationwide and access to a broader range of customers.

So we see that as one of the key points that's going to accelerate our growth. As to the specifics on what they're seeing right now because we're still in the early phase of the merger, we're not really sharing that information. But we know that there -- they have to be seeing similar activity and growth..

Okay. Also, I just wanted to talk about the FVS margin results in the quarter. Pretty good swing there. We're talking 14, 15 points from negative to a positive over the prior year in the fourth quarter. How sustainable is that like 11% EBITDA margin run rate at $110 million of sales.

Is that on the curve of where FVS is currently running?.

Yes. I think we're certainly seeing improvements in the FVS margins. We had some great operational efficiencies that we drove. So that's what you're seeing year-over-year to get to that low double-digit margins. And I think that's also consistent with where we've talked about getting those margins over the last several quarters.

So yes, so we do expect to be able to maintain that low-double digits in that space. And again, there's really high focus on operational efficiencies in that space. It's helped us get there..

Got it. Maybe one last one for me..

Thanks, Mike..

I have one other question..

Go ahead, Mike..

Yes, I wanted to ask you a little bit about what we should be thinking about at this stage as far as tariffs. I know it's still a bit of a fluid situation, but there are some aluminum tariffs out there.

Do you have surcharges planned or any other potential changes to your pricing? And are there still kind of more flexible pricing arrangement as the tariff situation changes here in the first part of '25 that might impact your business?.

Yes. Mike, this is Scott. Let me start off there. So yes, certainly, we've been evaluating the various scenarios relating to the tariffs and of what's been put in place and the multiple other threats that are still out there. We implemented a supply chain strategy over the last couple of years that's really focused on helping us mitigate this risk.

It includes the strategy of North American supply alternatives, right? So we do have plans in place to mitigate the impact, both through our partnerships with our suppliers as well as plans to increase prices where appropriate to help offset these impacts. But it is a very fluid situation.

So we're watching it very closely to be able to understand these impacts, but it is a little early as things are continuing to move quickly day-to-day..

The next question is from Tyler DiMatteo with BTIG. Please go ahead..

Hey guys. Good morning. Thanks for the taking the questions. I appreciate the time. I wanted to follow-up on, outlook for this year..

Very good morning..

I wanted to follow-up real quick on the outlook here. I know the comments surrounding seasonality in the Q1. I guess what's maybe the magnitude of that? I mean is it going to be similar to past? I know you kind of pointed to that, hey, low-single digit EBITDA and then 70% in the back half of the year.

I guess I'm just curious the degree of the seasonality. And then I have a follow-up..

Sure. Yes, I think it's going to be consistent with prior years. So if you look at 2024, we had a similar slow start to ramping up and a much stronger second half of the year. We're expecting that similar type of progression here this year. We do expect the benefit of our ITU acquisition as well as just the continued strength of the work truck space.

We have talked about the fact that Blue Arc has moved into production now, which is going to help us from an overall cost spend perspective. But in this first quarter, specifically, we are still seeing the weakness in the walk-in van and the motorhome space, which is going to be a challenge for us this quarter.

And I think why you're seeing that comment on the single-digit low-single digits in Q1..

Got it. Thank you. And then my follow-up here really surrounding maybe the service work and the upfitting piece of the business versus the core product, if you will.

I guess in terms of the service piece and the infrastructure, I guess, has that -- I guess, how has the approach to kind of service work from you guys and maybe going to customers, how has that strategy evolved as you go to win orders? I know, obviously, from a profitability perspective, you guys have done a really nice job of keeping that margin profile.

But I guess from a -- as you think about your strategy and kind of how has that evolved over time? And I guess maybe how much is it the same? How do you kind of think about that in terms of 2025?.

Specifically around those service bodies, our strategy continues to be to get that nationwide coverage. And so as the Royal is much more on the West Coast, DuraMag and aluminum is on the East Coast, we're bringing that together. You see that in our new Nashville area facility where we sell both products there.

And so it's getting that nationwide coverage. And then through our new partners, ITU, for example, they now use either a Royal or DuraMag service body. So we're more vertically integrated there.

And as we roll into the merger with Aebi Schmidt, there's just more opportunities there to get that vertical integration, really drive the overall sales of the service body business. So that's one of the key pieces that makes us excited about it. And in that merger, we've identified synergies.

A lot of that synergies and opportunities is coming together in that space for the upfit business supporting infrastructure..

Awesome. Thanks guys. Appreciate the time. I'll turn back in queue..

Thanks, Tyler..

This concludes the question-and-answer session. Mr. Wilson, I would like to turn the floor back over to you for closing comments..

Thank you, operator. I'd like to thank everyone for joining today's call. Management looks forward to connecting with the investment community at the NTEA Work Truck Week on March 5th and 6th in Indianapolis and at the ROTH Conference in Dana Point, California on March 16th and 17th.

As always, thank you for your interest in The Shyft Group, and please reach out to me if you have any follow-up questions. With that, operator, please disconnect the call..

The conference has been concluded. Thank you for attending today's presentation. You may now disconnect..