Release Date: July 25, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- The Shyft Group Inc (SHYF, Financial) delivered $12.5 million of adjusted EBITDA with significant improvement in their FVS business, increasing margins to high single digits.
- The acquisition of Independent Truck Upfitters (ITU) is expected to enhance service body upfits capabilities and provide unique cross-selling opportunities.
- The Blue Arc team achieved key project milestones and is on track to deliver trucks to customers by the end of the year.
- Operational efficiency improvements have led to better margin performance and quality scoring from customers.
- The company increased its 2024 profit outlook to the higher end of the previously stated range, expecting adjusted EBITDA to be in the range of $45 million to $50 million.
Negative Points
- Sales for the second quarter were $192.8 million, down 14% from the prior-year quarter.
- Net income decreased to $2.2 million or $0.06 per share, compared to $4.7 million or $0.13 per share in the previous year.
- Adjusted EBITDA for the FVS segment was $8.4 million, down from $12.5 million a year ago, primarily driven by lower volume.
- The SV backlog was down 29% versus the end of 2023, due to lower motorhome demand.
- The parcel market recovery is now expected to be more likely in early 2025 rather than the second half of 2024.
Q & A Highlights
Q: Can you provide more details on the EBITDA multiple for the ITU acquisition and the expected synergies and tax benefits?
A: Jonathan Douyard, Chief Financial Officer: The acquisition is expected to generate $55 million in sales with low double-digit margins for 2023. We anticipate growth in 2024 and expect around $10 million of adjusted EBITDA by 2025, including synergies. These synergies will come from commercial opportunities and procurement efficiencies.
Q: What is the outlook for order flow in the fleet vehicle segment, given the current market signals?
A: Jonathan Douyard, Chief Financial Officer: While we see positive signals like increased package volume and healthier dealer inventory levels, we expect the parcel market recovery to occur more in early 2025 rather than the second half of 2024. Our focus remains on delivering our 2024 EBITDA commitments and positioning for growth in 2025.
Q: What is the latest update on the Blue Arc program and its production ramp-up?
A: Jonathan Douyard, Chief Financial Officer: We will start shipping production units this year and continue ramping up into 2025. We have strong customer interest, including an order from FedEx. We aim to get close to breakeven by the end of 2025, with a focus on efficient spending and achieving positive gross margins.
Q: Are there any one-time costs associated with integrating ITU into Shyft Group?
A: Jonathan Douyard, Chief Financial Officer: There will be some initial integration costs, but they are not expected to be significant. The focus is on leveraging ITU's capabilities and accelerating value by integrating our products into their channels.
Q: Will the ITU acquisition open doors to new chassis providers or larger vehicle classes?
A: John Dunn, President and Chief Executive Officer: ITU specializes in larger vehicles, which expands our capacity beyond the Super Duty range. This acquisition provides access to additional chassis pools and ship-through locations, enhancing our product offerings.
Q: When do you expect the motorhome business to recover?
A: John Dunn, President and Chief Executive Officer: We anticipate the motorhome market to recover in 2025. The second half of 2024 will remain soft, and we are focused on efficiency and margin protection in preparation for the recovery.
Q: How does the ITU acquisition fit into Shyft's strategy for geographic and product expansion?
A: Jonathan Douyard, Chief Financial Officer: The acquisition strengthens our presence in the Midwest and expands our product portfolio. ITU's expertise in larger and more complex vehicles complements our existing offerings and provides new commercial opportunities.
Q: What are the expected benefits of the ITU acquisition for Shyft's national footprint?
A: Jonathan Douyard, Chief Financial Officer: The acquisition adds three Midwest locations, enhancing our national footprint and providing access to additional chassis pools and ship-through locations. This expansion supports our strategy of leveraging our plants for multiple business units and brands.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
