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 assets–operating 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. shareholders'equity		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

The Shyft Group Reports Third Quarter 2023 Results