The Shyft Group, Inc.

The SHIFT Group's second 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. 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 Doyard, Chief Financial Officer. Their prepared remarks will be followed by a question and answer session. For today's call, we've included our 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 risk that could cause actual results to be materially different from those expressed or implied. Primary risks that management believes can 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, which we believe are useful in evaluating the company's operating performance. During today's call, we will provide a business update before moving on to a more detailed review of the results and our updated 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, and thank you for joining us to review our second quarter 2023 results. Overall, results in the quarter were in line with our expectations, highlighted by strong performance in specialty vehicles and robust cash generation. We made great progress on the execution of our long-term strategic priorities, delivering on key Blue Arc electric vehicle milestones. And consistent with our prior communications, we remain on track for blue arc production in the second half of the year. Excuse me. While fleet vehicles and services grew modestly in the quarter, we experienced further weakness in end market conditions as well as operational efficiencies that impacted our overall performance. Second quarter sales were down 3% year over year with strength in both our truck and service body product lines more than offset by softness in last mile delivery and motorhome. Despite the sales decline, we delivered 16 million of adjusted EBITDA up 16% versus last year, led by record margin performance in specialty vehicles. We made solid progress on reducing working capital, resulting in 30 million of operating cash flow and ending the quarter in a strong financial position. Turning to our market commentary on slide four, long-term outlook remains favorable in our key end markets, including last-mile delivery and infrastructure. And we believe we are well positioned as an industry leader in these areas. However, throughout the second quarter, we saw accelerated signs of demand weakness due to broader economic condition and evolving market dynamics. I will now provide additional details on what we are seeing within our businesses, starting with fleet vehicle and services. We previously discussed concerns and a level of uncertainty in the last mile delivery market. After speaking with our customers and listening to their public commentary, There are several factors influencing immediate buying decisions, including continued year-over-year declines in parcel package volume, as well as specific customer dynamics regarding fleet strategy. As a result, we have seen customers defer and cancel orders, leading to higher dealer inventory levels and reduced OEM chassis production. We experienced the impact of reduced chassis supply late in the second quarter, and we now expect to see more significant reductions in chassis production levels in the second half of the year. At the same time, we're also hearing from customers that there is an ongoing need for vehicles, which gives us confidence in the long-term prospects for last-mile delivery vehicles. While orders have been deferred, it is clear that fleet replacement needs, e-commerce growth projections, and regulatory requirements to reduce emissions will drive future vehicle purchases. In response to the current environment, we are taking decisive actions within FVS, including adjusting operations to efficiently support current volumes while focusing on long-term productivity drivers, driving improved product quality and on-time customer deliveries, and refocusing our sales efforts by expanding to new customers and vocations. Moving to specialty vehicles, our work truck products, including service bodies, Isuzu contract manufacturing, and police vehicle outfit continue to form well supported by increased infrastructure spending and demand for vocational vehicles. We expect these positive trends to continue and we are focused on executing our strategy to expand our products and geographies to support the growing needs of the market. For example, we recently launched our Royal XP body and opened our Nashville facility, which encompasses both service bodies and police vehicle outfit. For our motorhome chassis business, the broader RV industry has been challenged by general economic conditions after multiple years of growth. Entering 2023, we expected to see softening demand. However, in the second quarter, we have seen the demand decline accelerate and RV manufacturers have further reduced their production schedules in light of higher dealer inventory. That said, despite declines in the market, we continue to increase our market share in the greater than 400 horsepower diesel segment. and we experienced recent market share highs in the quarter. Looking forward, industry reports suggest that there will be a market improvement in 2024. However, we remain cautious about this outlook and have adjusted our business accordingly. Overall, we are confident we have positioned the SHIFT Group in markets with a long-term secular growth, including last-mile delivery, infrastructure, and electric vehicles. We have demonstrated the ability to manage challenging market conditions like the ones we are facing today, And we have industry-leading brands, flexible operations, and a talented team that will enable us to win in the future. Turning to slide five, I'll provide an update on our Blue Arc EV progress and the key milestones we expect to achieve in the second half of the year to have a successful product launch. As we review our Blue Arc operational plans, we consider these lessons learned from our decades of manufacturing experience and are ensuring that Blue Arc vehicles are built with the quality and value for the best in class products in the market. We are currently field testing our vehicle with a key customer and the initial feedback is positive, which gives us confidence in the vehicle's capability. We are excited by the vehicle's test performance in the hot weather conditions, as well as the feedback that we have received from multiple drivers as they have delivered packages on their daily routes. In addition, our suppliers are actively working to finalize component testing and provide final certification ahead of start of production. We are nearing completion of the facility construction and are conducting operator training through virtual and slow builds at our Michigan campus. We are completing the standard operating procedures and are on track for the initial production of 50 units for delivery to customers in the fourth quarter. We are committed to building out a highly qualified Blue Arc dealer network to ensure fleet customers receive the products and services they expect. We have previously talked about a nationwide dealer and service network made up of a small group of dealers and an established service provider. We remain in the process of finalizing agreements to support this structure while also establishing banking relationships to ensure dealers can support their floor plan needs. While arraignments are being finalized, dealers are highly engaged with customers and there continues to be a high level of interest in our product. We are incredibly excited about Blue Rocks Prospects and our team's ability to execute this product launch in the second half of the year. With that, I'll now turn it over to John to discuss our second quarter financial results.