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The Shyft Group Reports Third Quarter 2023 Results

Shyft generated $9.2 million of cash from operations; repurchased $10.3 million of shares
Specialty Vehicles segment delivered record margin performance

NOVI, Mich., Oct. 26, 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 third quarter ended September 30, 2023.

Third Quarter 2023 Highlights
For the third quarter of 2023 compared to the third quarter of 2022:

  • Sales of $201.3 million, a decrease of $84.8 million, or 29.6%, from $286.1 million
  • Net income of $4.5 million, or $0.13 per share, compared to $17.3 million, or $0.49 per share; third quarter 2023 net income includes a tax benefit of $2.0 million, primarily due to favorable adjustments for R&D tax credits
  • Adjusted EBITDA of $11.0 million, or 5.5% of sales, a decrease of $16.1 million, from $27.1 million, or 9.5% of sales; results include $7.6 million of EV program costs consistent with prior year
  • Adjusted net income of $6.7 million, or $0.19 per share, compared to $18.6 million, or $0.53 per share in the prior year
  • Consolidated backlog of $464.4 million as of September 30, 2023, down 55.5% compared to $1.0 billion as of September 30, 2022
  • Operating cash flow of $9.2 million, up $17.0 million, compared to an outflow of $7.8 million in the prior year
  • Issued the second annual Sustainability Report highlighting our continued progress towards our environmental, social, and governance goals

“We delivered third quarter results in line with our expectations led by our infrastructure and vocational related businesses. The parcel and motorhome end-markets continue to be highly dynamic, and our team is focused on driving operational and commercial actions as we close out the year,” said Jon Douyard, Chief Financial Officer.

Third Quarter 2023 Business Segment Highlights
For the third quarter of 2023 compared to the third quarter of 2022:

Fleet Vehicles and Services (FVS)

  • Sales of $124.3 million, a decrease of $60.2 million, or 32.6%, from $184.5 million
  • Adjusted EBITDA of $8.0 million, or 6.4% of sales, a decrease of $16.4 million, from $24.4 million, or 13.2% of sales
  • Segment quarter-end backlog of $383.4 million, down 58.1% compared to $915.1 million in the prior year

Specialty Vehicles (SV)

  • Sales of $76.6 million, a decrease of $27.3 million, or 26.3%, from $103.9 million
  • Adjusted EBITDA of $16.0 million, or 20.9% of sales, an increase of $0.4 million, from $15.6 million, or 15.0% of sales
  • Segment quarter-end backlog of $81.0 million as of September 30, 2023, down 37.1% compared to $128.8 million in the prior year

Disciplined Capital Allocation
“Our balance sheet is a competitive advantage as the Company executes its long-term strategy. We are focused on cash conversion and efficiently deploying capital to maximize shareholder value, including $19.1 million of share repurchases in 2023,” said Douyard.

The Company deployed $17.2 million of capital in the third quarter with the following actions:

  • Repurchased $10.3 million in shares with $223 million remaining under the existing share repurchase authorization
  • Funded $5.2 million of capital expenditures, including investment in Blue Arc
  • Paid regular dividends of $1.7 million reflecting a dividend of $0.05 per share

2023 Financial Outlook
The Company is narrowing its full-year 2023 outlook to the lower-end of the range as end-market challenges and operational inefficiencies remain.

The outlook, notwithstanding further changes in the operating environment, is as follows:

  • Sales to be in the range of $850 million to $900 million compared to the previous outlook of $850 to $950 million
  • Adjusted EBITDA of $40 to $45 million compared to the previous outlook of $40 to $60 million
  • Net Income of $4 to $9 million compared to the previous outlook of $1 to $16 million; includes favorable adjustments for R&D tax credits
  • Earnings per share of $0.13 to $0.27 compared to the previous outlook of $0.03 to $0.46
  • Adjusted earnings per share of $0.42 to $0.56 compared to the previous outlook of $0.33 to $0.76

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 10179222.

A live webcast of the conference will also be available on the investor relations page of the company’s website at www.theshyftgroup.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)
 
 September 30,
 December 31,
 2023
 2022
ASSETS       
Current assets:       
Cash and cash equivalents$9,876  $11,548 
Accounts receivable, less allowance of $290 and $246 91,536   115,742 
Contract assets 48,469   86,993 
Inventories 115,200   100,161 
Other receivables – chassis pool agreements 29,285   19,544 
Other current assets 5,350   11,779 
Total current assets 299,716   345,767 
Property, plant and equipment, net 79,437   70,753 
Right of use assetsoperating leases 47,669   53,386 
Goodwill 48,880   48,880 
Intangible assets, net 46,221   49,078 
Net deferred tax assets 11,004   10,390 
Other assets 2,534   2,227 
TOTAL ASSETS$535,461  $580,481 
        
LIABILITIES AND SHAREHOLDERS' EQUITY       
Current liabilities:       
Accounts payable$99,299  $124,309 
Accrued warranty 6,317   7,161 
Accrued compensation and related taxes 16,127   14,434 
Contract liabilities 6,233   5,255 
Operating lease liability 10,884   10,888 
Other current liabilities and accrued expenses 7,597   19,452 
Short-term debt – chassis pool agreements 29,285   19,544 
Current portion of long-term debt 203   189 
Total current liabilities 175,945   201,232 
Other non-current liabilities 10,105   10,033 
Long-term operating lease liability 38,491   44,256 
Long-term debt, less current portion 55,181   56,266 
Total liabilities 279,722   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; 34,289 and 35,066 outstanding 91,046   92,982 
Retained earnings 164,624   175,611 
Total Shyft Group, Inc. shareholdersequity 255,670   268,593 
Non-controlling interest 69   101 
Total shareholders' equity 255,739   268,694 
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY$535,461  $580,481 


The Shyft Group, Inc. and Subsidiaries
Consolidated Statements of Operations
(In thousands, except per share data)
(Unaudited)
 
 Three Months Ended
September 30,
  Nine Months Ended
September 30,
 
 2023  2022  2023  2022 
                
Sales$201,325  $286,075  $669,865  $725,153 
Cost of products sold 164,557   231,979   547,419   603,008 
Gross profit 36,768   54,096   122,446   122,145 
                
Operating expenses:               
Research and development 5,225   7,051   18,064   19,541 
Selling, general and administrative 27,419   25,033   89,978   78,445 
Total operating expenses 32,644   32,084   108,042   97,986 
                
Operating income 4,124   22,012   14,404   24,159 
                
Other income (expense)               
Interest expense (1,572)  (1,137)  (4,697)  (1,754)
Other income (expense) 15   181   209   (342)
Total other expense (1,557)  (956)  (4,488)  (2,096)
                
Income before income taxes 2,567   21,056   9,916   22,063 
Income tax expense (benefit) (1,951)  3,770   (965)  3,346 
Net income 4,518   17,286   10,881   18,717 
Less: net loss attributable to non-controlling interest -   -   32   - 
                
Net income attributable to The Shyft Group Inc.$4,518  $17,286  $10,913  $18,717 
                
Basic earnings per share$0.13  $0.49  $0.31  $0.53 
Diluted earnings per share$0.13  $0.49  $0.31  $0.53 
                
Basic weighted average common shares outstanding 34,604   35,056   34,863   35,071 
Diluted weighted average common shares outstanding 34,637   35,365   34,985   35,481 


The Shyft Group, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(In thousands, except par value)
(Unaudited)
  
 Nine Months
Ended September 30,
  2023   2022 
Cash flows from operating activities:       
Net income$10,881  $18,717 
Adjustments to reconcile net income to net cash provided by (used in) operating activities       
Depreciation and amortization 12,360   10,055 
Non-cash stock based compensation expense 5,187   4,922 
Deferred income taxes (614)  64 
Loss on disposal of assets 132   481 
Changes in accounts receivable and contract assets 62,730   (66,026)
Changes in inventories (15,039)  (44,029)
Changes in accounts payable (25,194)  24,708 
Changes in accrued compensation and related taxes 1,693   (3,505)
Changes in accrued warranty (844)  457 
Changes in other assets and liabilities (6,474)  9,663 
Net cash provided by (used in) operating activities 44,818   (44,493)
        
Cash flows from investing activities:       
Purchases of property, plant and equipment (16,143)  (14,228)
Proceeds from sale of property, plant and equipment 100   148 
Acquisition of business, net of cash acquired (500)  - 
Net cash used in investing activities (16,543)  (14,080)
        
Cash flows from financing activities:       
Proceeds from long-term debt 100,000   120,000 
Payments on long-term debt (101,000)  (55,000)
Payments of dividends (5,392)  (5,395)
Purchase and retirement of common stock (19,083)  (26,789)
Exercise and vesting of stock incentive awards (4,472)  (8,539
Net cash provided by (used in) financing activities (29,947)  24,277 
        
Net decrease in cash and cash equivalents (1,672)  (34,296)
Cash and cash equivalents at beginning of period 11,548   37,158 
Cash and cash equivalents at end of period$9,876  $2,862 


The Shyft Group, Inc. and Subsidiaries
Sales and Other Financial Information by Business Segment
(Unaudited)
 
Quarter Ended September 30, 2023 (in thousands of dollars)
 
 Business Segments    
  Fleet Vehicles   Specialty   Eliminations &     
  & Services   Vehicles   Other   Consolidated 
Fleet vehicle sales$108,491  $-  $-  $108,491 
Motorhome chassis sales -   20,519   -   20,519 
Other specialty vehicles sales -   50,557   444   51,001 
Aftermarket parts and accessories sales 15,768   5,546   -   21,314 
Total Sales$124,259  $76,622  $444  $201,325 
                
Adjusted EBITDA$7,977  $15,988  $(12,977) $10,988 


The Shyft Group, Inc. and Subsidiaries
Sales and Other Financial Information by Business Segment
(Unaudited)
 
Quarter Ended September 30, 2022 (in thousands of dollars)      
       
 Business Segments     
  Fleet Vehicles   Specialty   Eliminations &     
  & Services   Vehicles   Other   Consolidated 
Fleet vehicle sales$173,673  $-  $-  $173,673 
Motorhome chassis sales -   50,399   -   50,399 
Other specialty vehicles sales -   48,570   (2,335)  46,235 
Aftermarket parts and accessories sales 10,821   4,947   -   15,768 
Total Sales$184,494  $103,916  $(2,335) $286,075 
                
Adjusted EBITDA$24,361  $15,550 $(12,849) $27,062 


The Shyft Group, Inc. and Subsidiaries
Sales and Other Financial Information by Business Segment
(Unaudited)
 
Period End Backlog (amounts in thousands of dollars)
  Sept. 30, 2023   Jun. 30, 2023  Mar. 31, 2023   Dec. 31, 2022  Sept. 30, 2022 
Fleet Vehicles and Services$383,448  $437,802  $584,933 $736,690  $915,135 
                   
Specialty Vehicles                  
Motorhome Chassis 28,304   25,123   28,180   35,471   49,769 
Other Specialty Vehicles 52,679   47,279   54,298   60,552   79,000 
Total Specialty Vehicles 80,983   72,402   82,478   96,023   128,769 
                    
Total Backlog$464,431  $510,204  $667,411  $832,713  $1,043,904 


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 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 September 30,
The Shyft Group, Inc. 2023  % of sales  2022  % of sales
Net income$4,518   2.2% $17,286   6.0%
Add (subtract):               
Restructuring and other related charges 58     53   
Acquisition related expenses and adjustments 149     243   
Non-cash stock-based compensation expense 2,097     1,214   
CEO transition 235     -   
Tax effect of adjustments (363)    (226)  
Adjusted net income$6,694   3.3% $18,570   6.5%
                
Net income$4,518   2.2% $17,286   6.0%
Add (subtract):               
Depreciation and amortization 4,310     3,359   
Income tax expense (benefit) (1,951)    3,770   
Interest expense 1,572     1,137   
EBITDA$8,449   4.2% $25,552   8.9%
Add:               
Restructuring and other related charges 58     53   
Acquisition related expenses and adjustments 149     243   
Non-cash stock-based compensation expense 2,097     1,214   
CEO transition

 235     -   
Adjusted EBITDA$10,988   5.5% $27,062   9.5%
                
Diluted net earnings per share$0.13    $0.49   
Add (subtract):               
Non-cash stock-based compensation expense 0.06     0.04   
CEO transition 0.01     -   
Tax effect of adjustments (0.01)    -   
Adjusted diluted net earnings per share$0.19    $0.53   


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$4,565  $7,065  $9,565 
Add:     
Depreciation and amortization 17,000   17,000   17,000 
Interest expense 6,200   6,200   6,200 
Taxes (965)  (965)  (965)
EBITDA$26,800  $29,300  $31,800 
Add:     
Non-cash stock-based compensation and other charges 13,200   13,200   13,200 
Adjusted EBITDA$40,000  $42,500  $45,000 
      
Earnings per share$0.13  $0.20  $0.27 
Add:     
Non-cash stock-based compensation and other charges 0.38   0.38   0.38 
Less: tax effect of adjustments (0.09)  (0.09)  (0.09)
Adjusted earnings per share$0.42  $0.49  $0.56 

*Total amounts in the table may not add due to rounding


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