The Shyft (US:SHYF)2023-07-27 20:50Financial Data and Key Metrics Changes - Second quarter sales decreased by 3% year-over-year, totaling $225.1 million, with net income at $4.7 million or $0.13 per share, down from $5.3 million or $0.15 per share in the previous year [14][15] - Adjusted EBITDA for the second quarter was $15.9 million, representing 7% of sales, an increase from $13.7 million or 5.9% of sales in the same period last year [15][58] - The company generated $30 million in operating cash flow, reflecting significant improvement over the prior year [69] Business Line Data and Key Metrics Changes - Specialty Vehicles segment sales were $87.6 million, down 8.1% from $95.3 million in the prior year, driven by a decline in motorhome volume [16] - Adjusted EBITDA for the Specialty Vehicles segment was $17.4 million, or 19.8% of sales, compared to $12.9 million or 13.5% of sales in the same period last year [16] - Fleet Vehicles and Services (FVS) achieved sales of $139 million, up 1.5% compared to $136.9 million a year ago, with truck body sales growth offsetting declines in last mile delivery products [63] Market Data and Key Metrics Changes - The company experienced further weakness in end market conditions, particularly in last mile delivery and motorhome chassis, leading to higher dealer inventory levels and reduced OEM chassis production [8][68] - Despite declines in the market, the company increased market share in the greater than 400 horsepower diesel segment, reaching recent market share highs [60] Company Strategy and Development Direction - The company is focused on protecting the BlueArc investment and managing costs through a 25% reduction in headcount and adjustments to discretionary programs [1][68] - The company aims to leverage its facility capacity by transferring products and expanding into new customers and locations [2][9] - Long-term growth is expected in last mile delivery, infrastructure, and electric vehicles, with a commitment to building a qualified BlueArc dealer network [60][61] Management's Comments on Operating Environment and Future Outlook - Management noted that the demand environment has deteriorated, particularly for last mile delivery vehicles, leading to cancellations and deferrals of orders [68][70] - The outlook for the full year 2023 has been adjusted, with sales expected to be in the range of $850 million to $950 million, down from a previous outlook of $1 billion to $1.2 billion [17] - Management remains confident in the long-term prospects for last-mile delivery vehicles, citing ongoing customer needs despite current order deferrals [8][36] Other Important Information - The company has deployed $125 million of capital over the last 18 months, including $75 million into organic growth investments [18] - The company expects to produce and deliver 50 BlueArc units in 2023, with a disciplined approach to initial production [17][12] Q&A Session Summary Question: How should we think about the cadence of EBITDA margins in the back half of the year? - Management indicated that EBITDA margins for both FPS and SP may decline slightly, with expectations for FPS margins to improve [3] Question: Any line of sight into when demand improves? - Management noted that they expect to see more cancellations in the next few quarters but believe they may have seen the worst of cancellations and deferrals in Q2 [5][35] Question: Can you comment on the backlog and customer dynamics? - Management highlighted that both deferrals and cancellations have impacted the backlog, particularly within the FBS business, and that customer dynamics vary [20][24] Question: What are the next milestones for BlueArc? - Management mentioned that upcoming milestones include dealer agreements and service provider agreements, with a focus on ensuring vehicle safety and readiness for customers [40][42] Question: How do current margins compare to historical levels? - Management stated that current margins are lower than historical levels due to operational inefficiencies and a shift in business mix, but they expect margin expansion moving forward [44][45]