The Shyft Group Reports Fourth Quarter and Full-Year 2022

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