Yahoo Finance

Scott Ocholik

Thank you, John. First, I'd like to take a moment to introduce myself. I have been with Shyft for over 5 years, serving as the company's Chief Accounting Officer and corporate controller. I have over 25 years of experience in the global automotive supply and specialty vehicle markets, and I'm very excited to have the opportunity to be the interim CFO here at Shyft.
I look forward to meeting many of you over the next several weeks. With that said, please turn to slide 7, and I will start with an overview of our 4th quarter financial results.
Overall, our team delivered meaningful improvement in profitability in the fourth quarter. Sales for the quarter were $201.4 million down slightly from $202.3 million in the prior year. Our GAAP net loss was $3.4 million or $0.10 per share compared to a net loss of $4.4 million or $0.13 per share in the previous year. The net loss for the quarter was negatively impacted by $8.5 million of transaction costs related to the pending merger with Abby Schmidt.
On an adjusted basis, EBITDA was $15.9 million for the quarter, or 7.9% of sales, up from $2.3 million or 1.1% of sales in the fourth quarter of 2023. These results include a $5.8 million of EV spend. Which is down from 9.3 million in the prior year. Adjusted net income for the quarter was $5 million and adjusted EPS increased to $0.15 per share compared to a loss of $900,000 or a negative $0.03 per share in the fourth quarter of 2023.
Please turn to slide 8, and I will walk through our results by operating segment. In the quarter, our fleet vehicles and service segment achieved sales of $110.7 million down 7% compared to $119 million a year ago, reflecting continued softness in walk-in vans offset by higher volumes in heavy upfits.
Adjusted EBITDA for the quarter was $12.1 million versus a loss of $2.6 million a year ago with higher productivity offset by lower volume. Adjusted EBITDA margin, improved to 10.9% of sales compared to a negative 2.2% in the fourth quarter of last year. This marginal improvement speaks to the strength of our team and the operational achievements made throughout the year, despite the continued challenging environment for parcel demand.
FBS backlog was $244.8 million at year end, down 24.7% versus 2023, reflecting continued softness and parcel. But on a positive note, we did achieve market share gains in our walk-in ban product line during these challenging times.
Turning the specialty vehicles segment, our team closed out 2024 with profitability in line with the prior year as our infrastructure-focused vocational truck businesses delivered solid results, offsetting the ongoing market weakness in motor home.
Fourth quarter sales were $87.5 million a 5% increase from $83.4 million in the prior year. Adjusted EBITDA was $16.6 million or 19% of sales compared to $19 million or 22.8% of sales in the same period last year. This strong overall profitability was driven by the steady demand for infrastructure-related vocational trucks. As the backlog was $68.5 million at the end of the year, down 18.8% versus 2023. This was driven primarily by a decrease in motorhome orders.
Please turn to slide 9 for our 2025 outlook. With our improved financial results and continued margin expansion this quarter, we are poised to continue this momentum into 2025. Our focus remains on driving growth and profitability improvement. We do, however, remain cautious as we enter 2025 on near-term demand for parcel and motorhome vehicles as we expect the softness to persist through mid-year.
We do anticipate a modest recovery in both the parcel and motorhome markets in the second half of the year. While continuing to be strong, we are also closely monitoring infrastructure spend and the potential impacts it may have on our vocational truck business.
We expect year over year growth as blue art production is underway and we will reach near breakeven profitability for the full year. Given these factors and notwithstanding further changes in the operating environment, we are introducing our 2025 outlook as follows.
We expect sales to be in the range of $870 to $970 million. This includes approximately $50 million related to Blue Ark. Full year adjusted EBITDA in the range of $62 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 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 Abby Schmidt. With that, I will turn it back over to John to provide an update on the merger.

John Dunn

Thanks, Scott, and please turn to slide 11. This proposed merger with Abby 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 and 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've 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 Abby Schmidt's strong financial projections and market leadership.
We achieved HSR antitrust approval and are making progress in other regulatory closing conditions. We're leveraging both Schiff and Abby Schmidt's 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.

Question and Answer Session

Operator

We will open up the question, the lines for questions in a moment. Please bear with me.

Hey guys, I can hear you. Can you hear me, okay?

John Dunn

Technical difficulties this morning, but appreciate your patience.

Yeah. Sorry, I didn't hear my cue there. That's okay. Also, wanted to talk about the 2025 outlook, with respect to Blue arch. 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 break even 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, would love to hear a little bit more color on the program there.

John Dunn

Great, Matt. This is John give you an update on that. So we are in the production phase running vehicles a couple a 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 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 the 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 to 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?

John Dunn

Now we need additional orders and that scenario where Scott mentioned as well, we're striving to get to that break even 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, 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 FPS there.

John Dunn

You know 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 and how they're delivering parcel packages to the home, 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 it 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 2 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 special vehicle, and then I'll turn it over to someone else, I guess the implied order flow was a little soft and special vehicle, could you just speak to sort of what's driving that? Is that still motor home that's driving the bulk of the weakness in 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 just unpack the order trends, especially vehicle that'd be helpful.

Scott Ocholik

Yeah, 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 on the.
Work truck side of our business, we're actually starting to, it's been very steady. We're continuing to see strong orders there and especially here in the first part of 2025 we're 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 inventories. 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.

John Dunn

Thanks.

Operator

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

Yes, hi there. Good morning. Thanks for taking my question. Wanted to start off if you're in with.Your comments were about one of the drivers of growth or better trends in 25 sounds like infrastructure. If you're expecting to see some growth in infrastructure in 2025 the Shyft group, would it be fair to say that from what you know that Abby Schmidt will be growing its overall business, as fast or faster than Shyft Group, given their, greater focus on infrastructure in their mix.

John Dunn

I think that's thanks for the question and I think that's one of the key aspects of this merger bringing Avi 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's 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 they have to be seen similar activity to grow

Okay. Also, I just want to talk about the FBS margin, results in the quarter. Pretty good swing there. We're talking, 1,415 points from a negative to a positive, over the prior year in the fourth quarter. How sustainable is that like 11% even margin run rate at $110 million of sales, is that on the curve of where FDS is currently, running?

John Dunn

Yeah, I think, we're certainly seeing improvements in the FBS 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 Talked about, getting those margins over the last several quarters. So so yes, so we do expect to be able to to maintain that low double digits in that space and again it's really high focus on on operational efficiencies in that space. It helped us get there.

Got it. Maybe 11 last one for me. It's a topic, yeah. Oh, I have one other question. Oh, go ahead. Oh, sure. I just want to ask about tariff. Yeah, I wanted to ask you a little bit about. What should we think 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 There's some kind of more flexible pricing arrangement as the tariff situation changes here in the first part of 25, the money pact your business.

Scott Ocholik

Yeah, I'm like, this is Scott. Let me start off there. So yeah, 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 it'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.

Operator

The next question is from Tyler DiMatteo with BTIG.

Tyler DiMatteo

Hey guys, morning. Thanks for taking the questions. I appreciate the time. Wanted to follow up on the outlook for this year. Yeah, I, wanted to follow up real quick on the outlook here. I know the comments surrounding seasonality in the I guess what's maybe the magnitude of that? I mean, is it going to be similar to past? I know you'rnd of pe kiointed to that, hey, low single digit even 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.

John Dunn

Sure, yeah, I think it's going to be consistent, with the prior year. So, if you, look at 2024, we had a similar, slow start to ramping up in 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. Space, we have talked about the fact that you know Blue arc has moved into production now, which is going to help us from an overall cost spend perspective.
But you know in this first quarter specifically, we are still seeing the weakness in the walk-in van and the motorhome space which is which is going to be a challenge for us this quarter and I think why you're seeing that that comment on the single digit low single digits in Q1.

Tyler DiMatteo

Got it. Thank you. And then my follow up here, really surrounding maybe the the service work and the outfitting pieces of business versus the core product, if you will. I guess in terms of the service piece and the infrastructure, I guess as that. I guess how has the the approach to kind of service work from from you guys and maybe going to customers, how has that strategy evolved as you go to win, orders? I 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, if you think about your strategy and kind of how is that evolved over time, and I guess maybe how much is it the same? How do you kind of think about that going in terms of 2025?

John Dunn

And 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, Geromag and aluminum's 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 Drog service body, so we're more vertically integrated there and as we roll into the merger with Avi 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 that synergies, a lot of that synergies and opportunity is coming together in that space for the outfit business supporting infrastructure.

Tyler DiMatteo

Awesome. Thanks, guys. I appreciate the time. I'll turn it back to the queue.

John Dunn

Thank you.

Operator

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

Randy Wilson

Thank you, operator. I'd like to thank everyone for joining today's call. Manford looks forward to connecting with the investment community at the NTA Work truck week on March 5th and 6 in Indianapolis at the Roth conference in Dana Point, California on March 16 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.

Operator

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