The Shyft Group, Inc.

Good morning and welcome to the SHIFT Group's first quarter 2023 conference call and webcast. All participants will be in a listen-only mode until the question and answer session of the conference call. As a reminder, this call is being recorded at the request of the SHIFT Group. If anyone has any objections, you may disconnect at this time. I would now like to introduce Randy Wilson, Vice President, Investor Relations and Treasury of the SHIFT Group. Mr. Wilson, you may proceed.

Thank you for joining this morning's call. I'm joined by Daryl Adams, President and Chief Executive Officer, and John Doyer, Chief Financial Officer. Their prepared remarks will be followed by a question and answer session. For today's call, we've included a presentation deck that's been filed with the SEC and is also available on our website. Before we begin, please turn to slide two of the presentation for our safe harbor statement. Today's conference call contains forward-looking statements which are subject to risks that could cause actual results to be materially different from those expressed or implied. Primary risks that management believes could materially affect our results are identified in our Forms 10-K and 10-Q, filed with the SEC. We will be discussing non-GAAP information and performance measures we believe are useful in evaluating the company's operating performance. During today's call, We'll provide a business update before moving on to a more detailed review of the results in our 2023 outlook. We'll then open the line for Q&A. Please turn to slide three, and I'll turn it over to Darrell Adams.

Thank you, Randy. Good morning, everyone. Overall, the SHIFT group had a solid start to the year, delivered improved financial performance while continuing to deliver on our strategy and long-term growth initiatives. Our team achieved 18% sales growth led by another record quarter in our service body business and improved performance in fleet vehicles and services. Our ability to increase output enabled us to improve profitability by over 11 million versus the first quarter of last year. In addition, we delivered positive operating cash flow in the quarter and brought in nearly 34 million more than prior year, which allowed us to efficiently deploy capital. We continued to make great progress on our Blue Rock electric vehicle program in the quarter. We were very pleased to announce that not only did we achieve CARB and EPA certification for our Class 3, 4, and 5 EV delivery vehicles, but we did so with performance that more than exceeds our fleet customers' needs. The CARB test results for our Class 3 vehicle included a 225-mile city range and over a 200-mile combined city highway range. which can more than comfortably handle a daily delivery route. I would also like to take a moment to highlight a fantastic addition to the shift group as John Dunn joined the company in January as our fleet vehicle and service president. He is a proven leader in manufacturing, customer relations, and product development and has made an immediate impact with our employees, customers, and suppliers. Turning to slide four. Over the past five years, we have strategically moved the company toward last-mile delivery and infrastructure-focused specialty vehicles. We remain confident in these end markets and how the company is positioned to win over the long term. Consistent with our commentary in February, the market and macroeconomic environment remains dynamic. I will take you through how that looks by segment, starting with fleet vehicle and services. We continue to analyze the parcel market, including performing independent market surveys monitoring customer announcements, and reviewing published industry reports. The consensus is clear. After an acceleration driven by the COVID pandemic and subsequent pause in e-commerce penetration, the industry growth rate is expected to be in the mid to high single-digit range for the foreseeable future, driven by the secular shift to e-commerce. As a leader in this space, we are well positioned to benefit from this growth. As the operating environment unfolds in the near term, we continue to hear mixed feedback from our fleet operators, dealers, and suppliers. While certain fleet operators are looking to accelerate fleet replacement, others are still working to deploy vehicles from purchases made during COVID or working through efficiency actions given economic uncertainty. We remain close to our customers to support their fleet needs during this time, but remain cautious given these market signals. We remain flexible in our operations and will take the appropriate cost actions required to balance efficiency and growth. As we have previously communicated, the backlog in FES continues to normalize from the higher levels that we saw during COVID, driven by the improvement in production rates and supply chain. FES ended the quarter with a backlog of 585 million, which is still elevated compared to pre-COVID levels. Moving to specialty vehicles, Continued investment in infrastructure supported by federal government spending is bolstering demand for work trucks, with funding across end markets including transportation, power and grid enhancements, and other critical infrastructure needs. As projects begin, contractors and fleet operators are investing in their fleet to meet demand. Sales of our work truck products were up 22% year over year, delivering above market growth and demonstrating strong customer demand. Turning to our motorhome chassis business, we, like many others, have previously communicated overall softness in the RV market. While the Class A diesel segment is less cyclical, we have experienced declines as well. Our market share continues to remain strong and has been trending favorably, demonstrating the value of our product innovations and quality. Overall, the shift group continues to have industry-leading brands that are well-positioned to win in the markets we serve. We remain confident in our team's ability to execute in these dynamic times, deliver for our customers, and achieve our long-term financial targets. I'll now share some exciting developments underway in our FES and SD businesses. Please turn to slide five. Starting with FES highlights. As discussed earlier, we have seen certain delivery customers accelerate investment in fleet replenishment. We are excited to have been awarded a commercial off-the-shelf contract for over 18,000 cargo van outfits split between Ford E-Transit and Ram ProMaster. We expect deliveries to begin in mid 2023 and extend into 2024. This win demonstrates our position as a trusted industry partner and reflects our ability to deliver a highly quality product at high volumes. Moving to our SV highlights. We have been successful in our service body geographic expansion and continue to execute our strategy of being a leading national provider. Consistent with this strategy, we recently announced the opening of our new Tennessee location, which will serve as a hub for upfitting Royal, Dermag, Magnum, and Strobe's products. This location provides direct access to one of the fastest-growing regions in the country and enabled us to secure additional OEM chassis pools which will help accelerate our growth in an already strong performing business. Turning to slide six, I will provide an update on our Blue Arc EV development program. We made great progress in the first quarter, and we are on track with our original development timeline, which has us starting vehicle production in the second half of the year. At the NTA Work Truck Show in March, we saw significant interest from customers, dealers, and other industry partners. We also successfully hosted numerous future customers as part of our ride and drive. This positive response emphasizes that our Blue Arc EVs are differentiated within the commercial electric vehicle industry, both for their design and the performance. In the first quarter, the fact that we achieved CARB approval positions that previously discussed pre-order with random area to a firm commitment. Their team remains excited about our progress and we continue to work with them on finalizing specifications for their first deliveries. We also made solid progress with our production facility and remain on track for manufacturing readiness. We continue to have positive momentum both operationally and commercially. In the coming months, we expect to deliver on key milestones, including delivery of our first test units to key customers, expansion of our national dealer and service network, and commencement of pilot and production vehicle builds. We are proud of the progress we have made, and we have efficiently executed this program and look forward to providing updates on future calls. With that, I'll now turn the call over to John to discuss our first quarter financial results.