The Shyft Group, Inc. (NASDAQ:SHYF), the North American leader in specialty vehicle manufacturing, assembly, and upfit for the commercial, retail, and service vehicle markets, reported its second quarter 2024 financial results. The company also announced the strategic acquisition of Independent Truck Upfitters (ITU), a leading service body and work truck upfitter based in the Midwest.

Financials

For the full year 2023, The Shyft Group reported annual revenue of $872.2 million and net income of $64.96 million. The company generated annual operating cash flow of $56.24 million and free cash flow of $35.51 million.

In the second quarter of 2024, the company reported sales of $192.8 million, a decrease of 14.4% compared to $225.1 million in the prior year quarter. Net income for the quarter was $2.2 million, or $0.06 per share, compared to $4.7 million, or $0.13 per share, in the same period last year. Adjusted EBITDA for the quarter was $12.5 million, or 6.5% of sales, down from $15.9 million, or 7.0% of sales, in the prior year quarter.

The company's Fleet Vehicles and Services (FVS) segment reported sales of $109.8 million, down 21.0% from the prior year quarter, while Adjusted EBITDA was $8.4 million, or 7.6% of sales, compared to $12.5 million, or 9.0% of sales, in the same period last year. The Specialty Vehicles (SV) segment delivered sales of $82.9 million, down 5.4% year-over-year, with Adjusted EBITDA of $17.5 million, or 21.2% of sales, compared to $17.4 million, or 19.8% of sales, in the prior year quarter.

The company's consolidated backlog as of June 30, 2024 was $354.4 million, a decrease of 30.5% compared to $510.2 million at the end of the second quarter of 2023. The FVS backlog decreased 32.7% to $294.6 million, while the SV backlog declined 17.3% to $59.9 million.

Commenting on the results, John Dunn, President and CEO of The Shyft Group, said,

"We continued to drive our Shyft operating strategy and saw progress in the quarter despite ongoing market softness. The SV team delivered another strong financial quarter, FVS generated sequential margin improvement, and Blue Arc achieved milestones that position us for vehicle delivery later this year."

Acquisition of Independent Truck Upfitters (ITU)

The Shyft Group announced the acquisition of Independent Truck Upfitters (ITU), a leading service body and work truck upfitter based in the Midwest. The transaction aligns with the company's Specialty Vehicles segment growth strategy, expanding its service body product offerings and upfit capabilities.

ITU, which generated approximately $55 million in sales in 2023, specializes in larger vehicles and complex service body upfitting for utility, construction, and fleet management companies. The acquisition provides unique synergies and cross-selling opportunities for The Shyft Group, allowing it to sell its Royal, DuraMag, and Utilimaster products through ITU's channels, while also leveraging ITU's upfitting capabilities and commercial relationships.

The initial cash consideration for the acquisition was $46 million, subject to customary adjustments, with an additional $8 million earnout based on meeting certain performance criteria over the next two years. The transaction is expected to be accretive to earnings in 2025 and deliver a return on invested capital greater than 15% by the third year.

"We are thrilled to welcome ITU to the Shyft Group family. ITU's unique products and capabilities are a fantastic complement to our existing portfolio, allowing us to offer even greater value to our collective customers,"

"We look forward to working with ITU's team members, customers, and suppliers as we accelerate our growth and strengthen our market position."

Blue Arc EV Solutions Update

The Shyft Group also provided an update on its Blue Arc electric vehicle (EV) solutions. The company announced an order from FedEx for 150 Blue Arc trucks earlier in the quarter and has achieved key project milestones as it transitions to production. The company expects to begin delivering Blue Arc vehicles to customers by the end of 2024.

"We have made great progress since launching Blue Arc back in 2021, and I'm happy to say, sitting here today, we are in an inflection point in the program,"

"We are on the cusp of starting commercial vehicle production and our focus is ensuring that we only put high quality vehicles on the road."

Outlook

For the full year 2024, The Shyft Group expects sales to be in the range of $800 million to $850 million, with Adjusted EBITDA of $45 million to $50 million. This updated Adjusted EBITDA outlook represents a 19% increase at the midpoint compared to the prior year. The company also expects net income of $2.6 million to $6.9 million, with earnings per share of $0.07 to $0.20, and adjusted earnings per share of $0.35 to $0.50.

The company's capital expenditures are expected to be approximately $20 million to $25 million, with free cash flow of $25 million to $35 million. The outlook includes the contribution from the recently acquired ITU business, which is expected to add approximately $25 million in sales and $3 million to $4 million in Adjusted EBITDA for the period of August through December 2024.

"Our team remains focused on delivering our financial commitments for the year, investing in growth, and maintaining our financial strength as we gain momentum heading into 2025,"

Conclusion

The Shyft Group delivered a solid second quarter performance, with sequential margin improvement in the FVS segment and continued strong profitability in the SV business. The acquisition of ITU further enhances the company's specialty vehicle capabilities and provides opportunities for cross-selling and operational synergies.

With the Blue Arc EV program progressing towards initial deliveries and the company's updated 2024 financial outlook, The Shyft Group appears well-positioned to navigate the current market environment and drive long-term growth and shareholder value.