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SHYFT GROUP, INC. (SHYF)·Q2 2024 Earnings Summary

Executive Summary

  • Q2 2024 delivered sales of $192.8M, GAAP EPS of $0.06, and adjusted EPS of $0.16; Adjusted EBITDA was $12.5M (6.5% margin), sequentially stronger vs Q1 on operational improvements in FVS and continued strength in SV .
  • Management raised the FY 2024 adjusted EBITDA outlook midpoint to $47.5M and narrowed ranges, while lowering the revenue range to $800–$850M (assumes no Blue Arc EV revenue); free cash flow guide maintained at $25–$35M .
  • Strategic catalysts: 150-unit FedEx Blue Arc order (deliveries begin late 2024), initial pilot production vehicle built, and acquisition of Independent Truck Upfitters (ITU) to accelerate SV growth; management expects ITU to add ~$25M sales and ~$3–$4M adjusted EBITDA in 2H24 .
  • Parcel market recovery timing shifted to early 2025; motorhome demand remains soft, pressuring FVS/SV backlogs (total backlog fell to $354.4M from $439.4M in Q1) .

What Went Well and What Went Wrong

What Went Well

  • “We delivered $12.5M of adjusted EBITDA with significant improvement in our FVS business, with margin increasing to high single-digits in the quarter,” reflecting operational efficiency and margin progression in FVS; Blue Arc achieved milestones toward 2024 production .
  • Specialty Vehicles continued to post strong profitability: SV adjusted EBITDA was $17.5M (21.2% margin), marginally above last year despite softer sales .
  • Strategic execution: FedEx placed a 150-unit Blue Arc order after rigorous route testing; the first Blue Arc production pilot vehicle was built, and Amerit agreement secured nationwide EV service support .

What Went Wrong

  • Revenue declined 14.4% YoY and adjusted EPS fell to $0.16 vs $0.25 in Q2 2023, driven by softer parcel/motorhome demand and lower FVS volume .
  • Backlog contracted to $354.4M (down ~30% YoY), led by FVS and motorhome softness, limiting near-term visibility .
  • Full-year sales guidance lowered to $800–$850M (from $850–$900M), reflecting demand softness despite improved profitability conversion; GAAP EPS range tightened to $0.07–$0.20 (from $0.07–$0.30) .

Financial Results

Headline financials vs prior year and prior quarter:

MetricQ2 2023Q1 2024Q2 2024
Revenue ($USD Millions)$225.1 $197.9 $192.8
Diluted EPS ($USD)$0.13 $(0.14) $0.06
Adjusted EPS ($USD)$0.25 $(0.04) $0.16
Gross Profit ($USD Millions)$42.8 $34.1 $40.6
Operating Income ($USD Millions)$6.6 $(1.9) $3.7
Adjusted EBITDA ($USD Millions)$15.9 $6.1 $12.5
EBITDA Margin (%)7.0% 3.1% 6.5%
Consolidated Backlog ($USD Millions)$510.2 $439.4 $354.4

Segment breakdown:

Segment MetricQ2 2023Q2 2024
FVS Sales ($USD Millions)$139.0 $109.8
FVS Adjusted EBITDA ($USD Millions)$12.5 $8.4
SV Sales ($USD Millions)$87.6 $82.9
SV Adjusted EBITDA ($USD Millions)$17.4 $17.5

KPIs – Backlog trajectory:

KPIJun 30 2023Dec 31 2023Mar 31 2024Jun 30 2024
FVS Backlog ($USD Millions)$437.8 $325.0 $356.1 $294.6
SV Backlog ($USD Millions)$72.4 $84.3 $83.3 $59.9
Total Backlog ($USD Millions)$510.2 $409.3 $439.4 $354.4

Notes:

  • Q2 results included $5.9M of EV program costs (vs $7.4M prior year), implying adjusted EBITDA ex-EV ~9.5% of sales per management commentary .
  • Gross margin improved YoY while revenue declined; sequential profitability improved vs Q1 on operational efficiencies in FVS .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Sales ($USD)FY 2024$850M–$900M $800M–$850M Lowered
Adjusted EBITDA ($USD)FY 2024$40M–$50M (mid $45M) $45M–$50M (mid $47.5M) Raised midpoint
Net Income ($USD)FY 2024$2.5M–$10.5M $2.6M–$6.9M Narrowed lower
GAAP EPS ($USD)FY 2024$0.07–$0.30 $0.07–$0.20 Narrowed lower
Adjusted EPS ($USD)FY 2024$0.28–$0.51 $0.35–$0.50 Raised lower bound; trimmed upper
Capital Expenditures ($USD)FY 2024$20M–$25M $20M–$25M Maintained
Free Cash Flow ($USD)FY 2024$25M–$35M $25M–$35M Maintained

Management expects ITU to contribute ~$25M sales and ~$3–$4M adjusted EBITDA in Aug–Dec 2024; EPS impact minimal in 2024 .

Earnings Call Themes & Trends

TopicPrevious Mentions (Q4’23, Q1’24)Current Period (Q2’24)Trend
Parcel demand/recoverySoft end markets; cautious H1’24; backlog down; adoption uncertainty Recovery timing shifted to early 2025; some positive signals at large parcel customer; dealer inventories trending healthier Recovery pushed out; signals improving
Motorhome demandWeakness noted; SV offset via vocational strength Soft through 2H24; recovery likely in 2025; SV backlog down from YE Continued softness
Blue Arc programBattery supplier transition; production pushed to late 2024; >200-mile range; pilot builds Pilot production built; deliveries begin late 2024; FedEx 150-unit order; ramp into 2025; breakeven potentially <500 units Execution progressing; commercial traction
EV service infrastructureNoted Tier 1 suppliers, readiness Amerit nationwide 24/7 maintenance agreement; dealer network and Blue Arc tech support Strengthened support
Operational efficiencyOne Shyft framework; procurement synergy; footprint flexing FVS margin improved sequentially; leadership streamlining; Mission Zero safety initiative Efficiency gains continuing
M&A/portfolio expansionEvaluating M&A cautiously, core focus first Acquired ITU; cross-selling (Royal, DuraMag, Utilimaster); procurement synergies; ROIC >15% by Year 3 Strategic expansion

Management Commentary

  • “We delivered $12.5 million of adjusted EBITDA…with margin increasing to high single-digits in [FVS].…Blue Arc achieved milestones that position us for vehicle delivery later this year.” — John Dunn, CEO .
  • “We are at an inflection point…on the cusp of starting commercial vehicle production…battery performance…continues to perform at our expectations.” — John Dunn on Blue Arc .
  • “Updated adjusted EBITDA is now expected to be in the range of $45 million to $50 million…supported by improved first half profit conversion, the ITU acquisition, [and] offsetting ongoing end market softness.” — Jon Douyard, CFO .
  • “Initial deliveries will be the FedEx order…we’re striving for [EV program] to be closer to breakeven next year…can get closer…with even…less than 500 units.” — Jon Douyard .

Q&A Highlights

  • ITU acquisition: Management targets ~$10M adjusted EBITDA run-rate in 2025, with quick-to-realize commercial synergies (cross-selling Royal, DuraMag, Utilimaster) and procurement benefits; minimal one-time integration costs in 2H24 .
  • Parcel outlook: Recovery shifted from 2H24 to early 2025; teams active in diversifying into utilities and food/beverage; catalysts into 2025 include ITU, Blue Arc production, and parcel end-market recovery .
  • Blue Arc ramp: Deliveries begin late 2024 with FedEx and Randy Marion; disciplined spend, aiming for breakeven by end of 2025 with variable gross margin positive units from launch .
  • Motorhome: Continued softness through 2H24; efficiency actions to protect margins while preparing for recovery in 2025 .
  • Footprint and chassis availability: Footprint flex underway (e.g., Bristol plant); chassis supply improving; demand, not supply, the limiter in FVS .

Estimates Context

  • S&P Global consensus estimates for Q2 2024 were unavailable via our data connection at the time of analysis; therefore, formal beats/misses vs Wall Street consensus cannot be provided (data retrieval error indicated missing CIQ mapping for SHYF).
  • Implications: The raised adjusted EBITDA outlook midpoint and lowered revenue range suggest estimate revisions skew higher for profitability and lower for revenue near-term, pending broader end-market recovery .

Key Takeaways for Investors

  • Sequential margin recovery is underway, notably in FVS, with adjusted EBITDA margin up to 6.5%; SV remains a strong profit engine (21.2% margin) .
  • FY 2024 adjusted EBITDA midpoint raised despite lowering revenue guidance, signaling disciplined execution and cost control amidst soft end markets .
  • Blue Arc enters initial production in late 2024 with a marquee FedEx order; breakeven path in 2025 appears achievable with sub-500 units, aided by variable gross margin positive pricing .
  • ITU acquisition enhances SV capabilities and cross-selling, adding ~$25M sales and ~$3–$4M adjusted EBITDA in 2H24; expected ROIC >15% by Year 3 .
  • Backlog contraction reflects sustained parcel/motorhome softness; recovery now targeted for early 2025, tempering near-term revenue growth but setting up for multi-catalyst 2025 (Blue Arc, ITU, parcel rebound) .
  • Near-term trading: Focus on delivery of Blue Arc milestones, SV margin durability, and incremental signs of parcel demand improvement; estimate revisions likely mix-shifted toward EBITDA vs revenue .
  • Medium-term thesis: Portfolio enhancement (SV/ITU), EV commercialization, and operational framework execution support profitable growth as end markets normalize .

Sources: Q2 2024 8-K and press release ; Q2 2024 call transcript ; Q1 2024 press release and call ; Q4 2023 8-K and call ; FedEx Blue Arc order PR ; Amerit service agreement PR .