The Shyft Group Reports Fourth Quarter and Full-Year 2022 Results

• Reports Q4 sales of $302 million, growth of 9% versus prior year; Achieved record full year sales of $1.0 billion
• Remain on target for Blue Arc Electric Vehicle (EV) production in the second half of 2023
• Introduce 2023 outlook with sales of $1.0 to $1.2 billion; Adjusted EBITDA of $70 to $100 million, up 20% year-over-year at the midpoint
  

NOVI, Mich., Feb. 23, 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 reported operating results for the fourth quarter and full-year ending December 31, 2022.

Fourth Quarter 2022 Financial Highlights¹        
For the fourth quarter of 2022 compared to the fourth quarter of 2021:

• Sales of $302.0 million, an increase of $24.7 million, or 8.9%, from $277.3 million
• Income from continuing operations of $17.8 million, or $0.50 per share, compared to $20.5 million, or $0.56 per share
• Adjusted EBITDA of $30.7 million, or 10.2% of sales, an increase of $4.1 million, from $26.6 million, or 9.6% of sales; Results include $7.6 million of EV development costs versus $4.0 million in the prior year
• Adjusted net income of $20.5 million, or $0.58 per share, compared to adjusted net income of $20.2 million, or $0.56 per share in the fourth quarter of 2021
• Consolidated backlog of $832.7 million as of December 31, 2022, down $130.9 million, or 13.6%, compared to $963.6 million as of December 31, 2021
  

Full-Year 2022 Financial Highlights¹
For the full-year 2022 compared to the full-year 2021:

• Sales of $1.0 billion, an increase of $35.4 million, or 3.6%, from $991.8 million
• Income from continuing operations of $36.6 million, or $1.03 per share, compared to $70.0 million, or $1.91 per share; The current year reflects an effective income tax rate of 16.8%
• Adjusted EBITDA of $70.8 million, or 6.9% of sales, a decrease of $37.3 million, from $108.1 million, or 10.9% of sales; Results include $26.9 million of EV development costs versus $6.4 million in the prior year
• Adjusted net income of $44.5 million, or $1.25 per share, compared to adjusted net income of $75.0 million, or $2.08 per share in 2021  
• Net leverage ratio of 0.93x times adjusted EBITDA as of December 31, 2022
  

“I am proud of the Shyft Group team’s ability to execute and close out the year strong, with solid growth in sales and adjusted EBITDA for the fourth quarter. We overcame dynamic challenges in our supply chain and inflationary pressures, remaining nimble and responsive to the needs of our customers while taking advantage of opportunities to invest in future growth,” said Daryl Adams, President and CEO.

Fourth Quarter 2022 Business Segment Financial Highlights

Fleet Vehicles and Services (FVS)

• Sales were $212.9 million for the fourth quarter of 2022, up 16.6% or $30.3 million year over year
• Adjusted EBITDA for the fourth quarter of 2022 increased 5.6% to $27.7 million, or 13.0% of sales, compared to $26.2 million, or 14.4% of sales, a year ago
• Segment backlog was $736.7 million as of December 31, 2022, down 14.3% compared to $859.4 million as of December 31, 2021
  

Specialty Vehicles (SV)

• Sales were $93.2 million for the fourth quarter of 2022, a decrease of $1.5 million, or 1.5%, from $94.7 million a year ago
• Adjusted EBITDA for the fourth quarter of 2022 was $15.9 million, or 17.1% of sales, an increase of $5.6 million, or 55.2%, from $10.3 million, or 10.8% of sales, a year ago
• Segment backlog was $96.0 million as of December 31, 2022, down 7.8% compared to $104.1 million as of December 31, 2021
  

2023 Financial Outlook
“We are focused on delivering improved profitability in 2023. Current uncertainty surrounding broader macroeconomic conditions has led us to take a cautious approach to our outlook,” said Jon Douyard, Chief Financial Officer. “Our balance sheet strength and ample liquidity provide financial flexibility to fund operations and growth investments.”

Guidance for full-year 2023, notwithstanding further changes in the operating environment, is as follows:

• Sales to be in the range of $1.0 billion to $1.2 billion
• Adjusted EBITDA of $70 to $100 million
• Net income of $28 to $50 million, with an income tax rate of approximately 25%
• Earnings per share of $0.77 to $1.38
• Adjusted earnings per share of $0.97 to $1.59
• Capital expenditures of approximately $35 million
• Free cash flow conversion ratio as a percent of net income greater than 100%
  

Adams concluded, “Our Blue Arc EV timeline remains on track with vehicle production planned for the second half of the year. We are differentiating the Shyft Group by investing in transformative initiatives that will deliver meaningful long-term growth and value for our customers and shareholders.”

Conference Call and Webcast Information

The Shyft Group will host a conference call at 10 a.m. ET today to discuss these results and current business trends. The conference call and webcast will be available via:

Webcast: www.the shyftgroup.com/webcasts
Conference Call: 1-844-868-8845 (domestic) or 412-317-6591 (international); passcode: 10174805

For more information about Shyft, please visit www.theshyftgroup.com.

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 & Services™ and Shyft Specialty Vehicles™. Today, its family of brands include Blue Arc™ EV Solutions, Utilimaster®, 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 Michigan, Indiana, Maine, Pennsylvania, South Carolina, Florida, Missouri, California, Arizona, Texas, and Saltillo, Mexico. The Company reported sales of $1.0 billion in 2022. Learn more about The Shyft Group at TheShyftGroup.com.

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)
	December 31,			December 31,
		2022			2021
ASSETS
Current assets:
Cash and cash equivalents	$	11,548		$	37,158
Accounts receivable, less allowance of $246 and $187		115,742			87,262
Contract assets		86,993			21,483
Inventories		100,161			67,184
Other receivables - chassis pool agreements		19,544			9,926
Other current assets		11,779			10,813
Total current assets		345,767			233,826
Property, plant and equipment, net		70,753			61,057
Right of use assets – operating leases		53,386			43,316
Goodwill		48,880			48,880
Intangible assets, net		49,078			52,981
Net deferred tax asset		10,390			4,880
Other assets		2,227			2,927
TOTAL ASSETS	$	580,481		$	447,867
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable	$	124,309		$	82,442
Accrued warranty		7,161			5,975
Accrued compensation and related taxes		14,434			19,064
Contract liabilities		5,255			988
Operating lease liability		10,888			7,934
Other current liabilities and accrued expenses		19,452			9,256
Short-term debt - chassis pool agreements		19,544			9,926
Current portion of long-term debt		189			252
Total current liabilities		201,232			135,837
Other non-current liabilities		10,033			8,108
Long-term operating lease liability		44,256			36,329
Long-term debt, less current portion		56,266			738
Total liabilities		311,787			181,012
Shareholders' equity:
Preferred stock, no par value: 2,000 shares authorized (none issued)		-			-
Common stock, no par value : 80,000 shares authorized; 35,066 and 35,416 outstanding		92,982			95,375
Retained earnings		175,611			171,379
Total The Shyft Group, Inc. shareholders' equity		268,593			266,754
Non-controlling interest		101			101
Total shareholders' equity		268,694			266,855
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY	$	580,481		$	447,867

The Shyft Group, Inc. and Subsidiaries
Consolidated Statements of Operations
(In thousands, except per share data)
(Unaudited)

			Three Months Ended								Twelve Months Ended
			December 31,								December 31,
			2022				2021				2022			2021
	Sales	$	302,011			$	277,300			$	1,027,164		$	991,792
	Cost of products sold		243,723				225,985				846,731			792,527
	Gross profit		58,288				51,315				180,433			199,265
	Operating expenses:
	Research and development		5,783				4,237				25,324			8,541
	Selling, general and administrative		29,155				28,027				107,600			106,672
	Total operating expenses		34,938				32,264				132,924			115,213
	Operating income		23,350				19,051				47,509			84,052
	Other income (expense):
	Interest expense		(1,079		)		(104		)		(2,833	)		(414)
	Other income (expense)		(408	)			99				(750	)		842
	Total other income (expense)		(1,487		)		(5		)		(3,583	)		428
	Income from continuing operations before income taxes		21,863				19,046				43,926			84,480
	Income tax expense (benefit)		4,022				(1,446		)		7,368			14,506
	Income from continuing operations		17,841				20,492				36,558			69,974
	Income from discontinued operations, net of income taxes		-				100				-			181
	Net income		17,841				20,592				36,558			70,155
	Less: net income attributable to non-controlling interest		-				128				-			1,230
Net income attributable to The Shyft Group, Inc.		$	17,841			$	20,464			$	36,558		$	68,925
	Basic earnings per share
	Continuing operations	$	0.51			$	0.58			$	1.04		$	1.94
	Discontinued operations		-				-				-			0.01
	Basic earnings per share	$	0.51			$	0.58			$	1.04		$	1.95
	Diluted net earnings per share
	Continuing operations	$	0.50			$	0.56			$	1.03		$	1.91
	Discontinued operations		-				-				-			-
	Diluted earnings per share	$	0.50			$	0.56			$	1.03		$	1.91
Basic weighted average common shares outstanding			35,067				35,341				35,073			35,333
Diluted weighted average common shares outstanding			35,443				36,185				35,494			36,097

The Shyft Group, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(In thousands, except par value)

(Unaudited)

	Year Ended December 31,
		2022				2021
Cash flows from operating activities:
Net income	$	36,558			$	70,155
Adjustments to reconcile net income to net cash used in operating activities
Depreciation and amortization		14,774				11,536
Non-cash stock based compensation expense		7,619				8,745
Deferred income taxes		(5,510	)			880
Loss (gain) on disposal of assets		826				(110		)
Changes in accounts receivable and contract assets		(93,989		)		(34,522		)
Changes in inventories		(32,977		)		(20,756		)
Changes in accounts payable		41,302				34,954
Changes in accrued compensation and related taxes		(4,630		)		1,930
Changes in accrued warranty		1,186				53
Changes in other assets and liabilities		15,998				1,324
Net cash provided by (used in) operating activities		(18,843		)		74,009
Cash flows from investing activities:
Purchases of property, plant and equipment		(20,564		)		(23,002		)
Proceeds from sale of property, plant and equipment		148				22
Acquisition of business, net of cash acquired		-				904
Net cash used in investing activities		(20,416		)		(22,076		)
Cash flows from financing activities:
Proceeds from long-term debt		145,000				45,000
Payments on long-term debt		(89,000		)		(67,400	)
Payments of debt issuance costs		-				(1,360		)
Payments of dividends		(7,148		)		(3,551		)
Purchase and retirement of common stock		(26,789		)		(3,348		)
Issuance and vesting of stock incentive awards		(8,414	)			(2,949	)
Purchase of non-controlling interest		-				(2,162	)
Net cash provided by (used in) financing activities		13,649				(35,770		)
Net increase (decrease) in cash and cash equivalents		(25,610		)		16,163
Cash and cash equivalents at beginning of year		37,158				20,995
Cash and cash equivalents at end of year	$	11,548			$	37,158

The Shyft Group, Inc. and Subsidiaries
Sales and Other Financial Information by Business Segment
(Unaudited)

	Quarter Ended December 31, 2022 (in thousands of dollars)
								Business Segments
				Fleet Vehicles				Specialty				Eliminations &
				& Services				Vehicles				Other				Consolidated
	Fleet vehicle sales	$		202,257		$		-		$		-			$	202,257
	Motorhome chassis sales			-				37,030				-				37,030
	Other specialty vehicles sales			-				51,562				(4,148	)			47,414
	Aftermarket parts and accessories sales			10,658				4,652				-				15,310
	Total Sales	$		212,915		$		93,244		$		(4,148	)		$	302,011
	Adjusted EBITDA	$		27,704		$		15,905		$		(12,924	)		$	30,685

The Shyft Group, Inc. and Subsidiaries
Sales and Other Financial Information by Business Segment
(Unaudited)

	Quarter Ended December 31, 2021 (in thousands of dollars)
								Business Segments
				Fleet Vehicles				Specialty				Eliminations &
				& Services				Vehicles				Other				Consolidated
	Fleet vehicle sales	$		172,240		$		-		$		-			$	172,240
	Motorhome chassis sales			-				49,500				-				49,500
	Other specialty vehicles sales			-				40,562				-				40,562
	Aftermarket parts and accessories sales			10,364				4,634				-				14,998
	Total Sales		$	182,604			$	94,696			$	-			$	277,300
	Adjusted EBITDA	$		26,246		$		10,251		$		(9,912		)	$	26,585

The Shyft Group, Inc. and Subsidiaries
Sales and Other Financial Information by Business Segment
(Unaudited)

	Year Ended December 31, 2022 (in thousands of dollars)
								Business Segments
				Fleet Vehicles				Specialty				Eliminations &
				& Services				Vehicles				Other				Consolidated
	Fleet vehicle sales	$		605,253		$		-		$		-			$	605,253
	Motorhome chassis sales			-				175,030				-				175,030
	Other specialty vehicles sales			-				191,882				(6,483	)			185,399
	Aftermarket parts and accessories sales			41,750				19,732				-				61,482
	Total Sales		$	647,003			$	386,644			$	(6,483	)		$	1,027,164
	Adjusted EBITDA	$		65,719		$		54,413		$		(49,339		)	$	70,793

The Shyft Group, Inc. and Subsidiaries
Sales and Other Financial Information by Business Segment
(Unaudited)

	Year Ended December 31, 2021 (in thousands of dollars)
								Business Segments
				Fleet Vehicles				Specialty				Eliminations &
				& Services				Vehicles				Other				Consolidated
	Fleet vehicle sales	$		624,874		$		-		$		-			$	624,874
	Motorhome chassis sales			-				168,166				-				168,166
	Other specialty vehicles sales			-				145,134				-				145,134
	Aftermarket parts and accessories sales			34,558				19,060				-				53,618
	Total Sales	$		659,432		$		332,360		$		-			$	991,792
	Adjusted EBITDA	$		108,621		$		32,668		$		(33,223		)	$	108,066

The Shyft Group, Inc. and Subsidiaries
Sales and Other Financial Information by Business Segment
(Unaudited)

Period End Backlog (amounts in thousands of dollars)
			Dec. 31, 2022			Sept. 30, 2022			Jun. 30, 2022			Mar. 31, 2022			Dec. 31, 2021
Fleet Vehicles and Services		$	736,690		$	915,135		$	1,000,021		$	1,148,700		$	859,442
Motorhome Chassis			35,471			49,769			62,811			61,297			54,583
Other Specialty Vehicles			60,417			78,794			72,058			62,406			49,407
Aftermarket Parts and Accessories			135			206			293			296			127
Total Specialty Vehicles			96,023			128,769			135,162			123,999			104,117
Total Backlog		$	832,713		$	1,043,904		$	1,135,183		$	1,272,699		$	963,559

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 from continuing operations 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 December 31,												Twelve Months Ended December 31,
The Shyft Group, Inc.		2022		% of sales				2021		% of sales				2022		% of sales				2021		% of sales
Income from continuing operations	$	17,841		5.9	%		$	20,492		7.4	%		$	36,558		3.6	%		$	69,974		7.0	%
Net (income) attributable to non-controlling interest		-						(128	)					-						(1,230	)
Add (subtract):
Restructuring and other related charges		243						-						757						505
Acquisition related expenses and adjustments		84						777						884						1,585
Non-cash stock-based compensation expense		2,697						2,174						7,619						8,745
Non-recurring professional fees		-						1,568						-						1,568
Loss from liquidation of JV		-						-						-						643
Non-recurring tax benefits		-						(4,392	)					-						(4,392	)
Tax effect of adjustments		(371	)					(266	)					(1,348	)					(2,429	)
Adjusted net income	$	20,494		6.8	%		$	20,225		7.3	%		$	44,470		4.3	%		$	74,969		7.6	%
Income from continuing operations	$	17,841		5.9	%		$	20,492		7.4	%		$	36,558		3.6	%		$	69,974		7.1	%
Net (income) attributable to non-controlling interest		-						(128	)					-						(1,230	)
Add (subtract):
Depreciation and amortization		4,719						3,044						14,774						11,356
Taxes on income		4,022						(1,446	)					7,368						14,506
Interest expense		1,079						104						2,833						414
EBITDA	$	27,661		9.2	%		$	22,066		8.0	%		$	61,533		6.0	%		$	95,020		9.6	%
Add (subtract):
Restructuring and other related charges		243						-						757						505
Acquisition related expenses and adjustments		84						777						884						1,585
Non-cash stock-based compensation expense		2,697						2,174						7,619						8,745
Non-recurring professional fees		-						1,568						-						1,568
Loss from liquidation of JV		-						-						-						643
Adjusted EBITDA	$	30,685		10.2	%		$	26,585		9.6	%		$	70,793		6.9	%		$	108,066		10.9	%
Diluted net earnings per share	$	0.50					$	0.56					$	1.03					$	1.91
Add (subtract):
Restructuring and other related charges		0.01						-						0.02						0.01
Acquisition related expenses and adjustments		-						0.02						0.02						0.04
Non-cash stock-based compensation expense		0.08						0.07						0.21						0.24
Non-recurring professional fees		-						0.04						-						0.04
Loss from liquidation of JV		-						-						-						0.02
Non-recurring tax benefits		-						(0.12	)					-						(0.12	)
Tax effect of adjustments		(0.01	)					(0.01	)					(0.03	)					(0.06	)
Adjusted diluted net earnings per share	$	0.58					$	0.56					$	1.25					$	2.08

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
Income from continuing operations			$	27,562			$	38,681			$	49,800
Add:
Depreciation and amortization				19,250				19,925				20,600
Interest expense				4,000				3,500				3,000
Taxes				9,188				12,894				16,600
EBITDA			$	60,000			$	75,000			$	90,000
Add:
Non-cash stock-based compensation and other charges				10,000				10,000				10,000
Adjusted EBITDA			$	70,000			$	85,000			$	100,000
Earnings per share			$	0.77			$	1.07			$	1.38
Add:
Non-cash stock-based compensation and other charges				0.28				0.28				0.28
Less tax effect of adjustments				(0.07	)			(0.07	)			(0.07	)
Adjusted earnings per share			$	0.97			$	1.28			$	1.59

*Total amounts may not add due to rounding.

¹ Results reflected are for Continuing Operations; The Company divested its Emergency Response Vehicles (ERV) business effective February 1, 2020. Accordingly, the financial results of ERV have been classified as discontinued operations for all periods presented. Unless otherwise noted, financial results presented are based on continuing operations.