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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2025.
	OR
☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to

Commission File Number 001-33582

THE SHYFT GROUP, INC.
(Exact Name of Registrant as Specified in Its Charter)

Michigan (State or Other Jurisdiction of Incorporation or Organization)		38-2078923 (I.R.S. Employer Identification No.)
41280 Bridge Street Novi, Michigan (Address of Principal Executive Offices)		48375 (Zip Code)

Registrant’s Telephone Number, Including Area Code: (517) 543-6400

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock	SHYF	The NASDAQ Stock Market LLC

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes

☒

☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes

☒

☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐	Accelerated filer	☒
Non-accelerated filer	☐	Smaller Reporting Company	☐
Emerging Growth Company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Class	Outstanding at April 17, 2025
Common Stock	35,006,084 shares

Table of Contents

THE SHYFT GROUP, INC.

INDEX

			Page

FORWARD-LOOKING STATEMENTS			3

PART I. FINANCIAL INFORMATION

	Item 1.	Financial Statements:

		Condensed Consolidated Balance Sheets – March 31, 2025 and December 31, 2024 (Unaudited)	4

		Condensed Consolidated Statements of Operations – Three Months Ended March 31, 2025 and 2024 (Unaudited)	5

		Condensed Consolidated Statements of Cash Flows – Three Months Ended March 31, 2025 and 2024 (Unaudited)	6

		Condensed Consolidated Statement of Shareholders’ Equity – Three Months Ended March 31, 2025 and 2024 (Unaudited)	7

		Notes to Condensed Consolidated Financial Statements	8

	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	19

	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	28

	Item 4.	Controls and Procedures	29

PART II. OTHER INFORMATION

	Item 1.	Legal Proceedings	30

	Item 1A.	Risk Factors	30

	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	30

	Item 5.	Other Information	30

	Item 6.	Exhibits	31

SIGNATURES			32

Table of Contents

FORWARD-LOOKING STATEMENTS

This Form 10-Q contains some statements that are not historical facts. These statements are called “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. These statements involve important known and unknown risks, uncertainties and other factors and generally can be identified by phrases using “estimate,” “anticipate,” “believe,” “project,” “expect,” “intend,” “predict,” “potential,” “future,” “may,” “will,” “should” or similar expressions or words. The Shyft Group, Inc.'s (the “Company,” “we,” “us” or “our”) future results, performance or achievements may differ materially from the results, performance or achievements discussed in the forward-looking statements. These statements are not guarantees of future performance and involve certain risks, uncertainties and assumptions (“Risk Factors”) that are difficult to predict with regard to timing, extent, likelihood and degree of occurrence. Therefore, actual results and outcomes may materially differ from what may be expressed or forecasted in such forward-looking statements.

Risk Factors include the risk factors listed and more fully described in Item 1A – Risk Factors of our Annual Report on Form 10-K for the year ended December 31, 2024, as filed with the Securities and Exchange Commission on February 20, 2025, subject to any changes and updates disclosed in Part II, Item 1A – Risk Factors below, “Risk Factors”, as well as risk factors that we have discussed in previous public reports and other documents filed with the Securities and Exchange Commission. Those risk factors include the primary risks our management believes could materially affect the potential results described by forward-looking statements contained in this Form 10-Q. However, these risks may not be the only risks we face. Our business, operations, and financial performance could also be affected by additional factors that are not presently known to us or that we currently consider to be immaterial to our operations. In addition, new Risk Factors may emerge from time to time that may cause actual results to differ materially from those contained in any forward-looking statements. Given these risks and uncertainties, although we believe that the forward-looking statements contained in this Form 10-Q are reasonable, we cannot provide you with any guarantee that the results described in those forward-looking statements will be achieved. All forward-looking statements in this Form 10-Q are expressly qualified in their entirety by the cautionary statements contained in this section, and investors should not place undue reliance on forward-looking statements as a prediction of actual results. The Company undertakes no obligation to update or revise any forward-looking statements to reflect developments or information obtained after the date this Form 10-Q is filed with the Securities and Exchange Commission.

Trademarks and Service Marks

We own or have rights to trademarks, service marks or trade names that we use in connection with the operation of our business. Solely for convenience, some of the copyrights, trademarks, service marks and trade names referred to in this Quarterly Report on Form 10-Q are listed without the ©, ® and ™ symbols, but we will assert, to the fullest extent under applicable law, our rights to our copyrights, trademarks, service marks, trade names and domain names. The trademarks, service marks and trade names of other companies appearing in this Quarterly Report on Form 10-Q are, to our knowledge, the property of their respective owners.

Table of Contents

PART I. FINANCIAL INFORMATION

Item 1.

Financial Statements

THE SHYFT GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)

(In thousands)

	March 31,		December 31,
	2025		2024
ASSETS
Current assets:
Cash and cash equivalents	$	16,171	$	15,780
Accounts receivable, less allowance of $436 and $533		102,148		86,677
Contract assets		43,763		40,896
Inventories		103,777		109,859
Other receivables – chassis pool agreements		40,474		37,032
Other current assets		7,110		7,346
Total current assets		313,443		297,590
Property, plant and equipment, net		81,114		81,067
Right of use assets – operating leases		39,208		41,101
Goodwill		64,142		64,094
Intangible assets, net		57,505		59,064
Net deferred tax assets		23,545		23,545
Other assets		2,126		2,287
TOTAL ASSETS	$	581,083	$	568,748

LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable	$	88,287	$	95,128
Accrued warranty		7,888		7,653
Accrued compensation and related taxes		11,396		16,198
Contract liabilities		10,171		3,553
Operating lease liability		9,463		9,677
Other current liabilities and accrued expenses		14,273		12,798
Short-term debt – chassis pool agreements		40,474		37,032
Current portion of long-term debt		258		235
Total current liabilities		182,210		182,274
Other non-current liabilities		9,674		9,772
Long-term operating lease liability		31,546		33,156
Long-term debt, less current portion		110,327		95,223
Total liabilities		333,757		320,425
Commitments and contingent liabilities
Shareholders' equity:
Preferred stock, no par value: 2,000 shares authorized (none issued)		-		-
Common stock, no par value: 80,000 shares authorized; 35,004 and 34,917 outstanding		101,944		99,752
Retained earnings		145,382		148,571
Total shareholders' equity		247,326		248,323
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY	$	581,083	$	568,748

See accompanying Notes to Condensed Consolidated Financial Statements.

Table of Contents

THE SHYFT GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)

(In thousands, except per share data)

	Three Months Ended March 31,
	2025			2024

Sales	$	204,599		$	197,889
Cost of products sold		164,297			163,827
Gross profit		40,302			34,062

Operating expenses:
Research and development		3,887			3,719
Selling, general and administrative		34,666			32,273
Total operating expenses		38,553			35,992

Operating income (loss)		1,749			(1,930	)

Other income (expense)
Interest expense		(2,661	)		(2,053	)
Other income		130			97
Total other income (expense)		(2,531	)		(1,956	)

Loss before income taxes		(782	)		(3,886	)
Income tax expense		654			783
Net loss	$	(1,436	)	$	(4,669	)

Basic loss per share	$	(0.04	)	$	(0.14	)
Diluted loss per share	$	(0.04	)	$	(0.14	)

Basic weighted average common shares outstanding		34,933			34,319
Diluted weighted average common shares outstanding		34,933			34,319

See accompanying Notes to Condensed Consolidated Financial Statements.

Table of Contents

THE SHYFT GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

(In thousands)

	Three Months Ended March 31,
	2025			2024
Cash flows from operating activities:
Net loss	$	(1,436	)	$	(4,669	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		5,502			4,435
Non-cash stock-based compensation expense		2,313			1,474
(Gain) loss on disposal of assets		(4	)		66
Changes in accounts receivable and contract assets		(18,338	)		(1,746	)
Changes in inventories		6,082			7,204
Changes in accounts payable		(5,966	)		(10,119	)
Changes in accrued compensation and related taxes		(1,544	)		(1,851	)
Changes in accrued warranty		235			981
Change in other assets and liabilities		8,637			268
Net cash used in operating activities		(4,519	)		(3,957	)

Cash flows from investing activities:
Purchases of property, plant and equipment		(4,984	)		(5,719	)
Proceeds from sale of property, plant and equipment		20			75
Net cash used in investing activities		(4,964	)		(5,644	)

Cash flows from financing activities:
Proceeds from long-term debt		35,000			40,000
Payments on long-term debt		(20,000	)		(25,000	)
Payments of dividends		(1,747	)		(1,716	)
Exercise and vesting of stock incentive awards		(3,379	)		(389	)
Net cash provided by financing activities		9,874			12,895

Net increase in cash and cash equivalents		391			3,294
Cash and cash equivalents at beginning of period		15,780			9,957
Cash and cash equivalents at end of period	$	16,171		$	13,251

See accompanying Notes to Condensed Consolidated Financial Statements.

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THE SHYFT GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY (Unaudited)

(In thousands)

	Number of Shares		Common Stock			Retained Earnings			Total Shareholders’ Equity
Balance at January 1, 2025		34,917	$	99,752		$	148,571		$	248,323
Issuance of common stock and tax impact of stock incentive plan		14		(121	)		-			(121	)
Dividends declared ($0.05 per share)		-		-			(1,753	)		(1,753	)
Issuance of restricted stock, net of cancellation		73		-			-			-
Non-cash stock-based compensation expense		-		2,313			-			2,313
Net loss		-		-			(1,436	)		(1,436	)
Balance at March 31, 2025		35,004	$	101,944		$	145,382		$	247,326

	Number of Shares		Common Stock			Retained Earnings			Total Shareholders’ Equity
Balance at January 1, 2024		34,303	$	93,705		$	158,461		$	252,166
Issuance of common stock and tax impact of stock incentive plan		10		(389	)		-			(389	)
Dividends declared ($0.05 per share)		-		-			(1,757	)		(1,757	)
Issuance of restricted stock, net of cancellation		48		-			-			-
Non-cash stock-based compensation expense		-		1,474			-			1,474
Net loss		-		-			(4,669	)		(4,669	)
Balance at March 31, 2024		34,361	$	94,790		$	152,035		$	246,825

See accompanying Notes to Condensed Consolidated Financial Statements.

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THE SHYFT GROUP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollar amounts in thousands, except per share data)

NOTE 1 – NATURE OF OPERATIONS AND BASIS OF PRESENTATION

As used herein, the term “Company”, “we”, “us” or “our” refers to The Shyft Group, Inc. and its subsidiaries unless designated or identified otherwise.

Nature of Operations

We are a niche market leader in specialty vehicle manufacturing and assembly for the commercial vehicle (including last-mile delivery, specialty service and vocation-specific upfit) and recreational vehicle industries. Our products include walk-in vans and truck bodies used in e-commerce/parcel delivery, upfit equipment used in the mobile retail and utility trades, service and vocational truck bodies, luxury Class A diesel motorhome chassis and contract manufacturing and assembly services. We also supply replacement parts and offer repair, maintenance, field service and refurbishment services for the vehicles that we manufacture as well as truck accessories.

The accompanying unaudited interim condensed consolidated financial statements reflect all normal and recurring adjustments that are necessary for the fair presentation of our financial position as of March 31, 2025, our results of operations for the three months ended March 31, 2025 and our cash flows for the three months ended March 31, 2025. These condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and footnotes included in our Annual Report on Form 10-K for the year ended December 31, 2024 filed with the Securities and Exchange Commission ("SEC") on February 20, 2025. The results of operations for the three months ended March 31, 2025, are not necessarily indicative of the results expected for the full year.

For a description of key accounting policies followed, refer to the notes to The Shyft Group, Inc. consolidated financial statements for the year ended December 31, 2024, included in our Annual Report on Form 10-K.

The Aebi Schmidt Transaction

On December 16, 2024, we entered into that certain Agreement and Plan of Merger, dated as of December 16, 2024 (the “Merger Agreement”), by and among the Company, Aebi Schmidt Holding AG, a Switzerland Aktiengesellschaft (“Aebi Schmidt”), ASH US Group, LLC, a Delaware limited liability company and direct, wholly owned subsidiary of Aebi Schmidt (“Holdco”), and Badger Merger Sub, Inc., a Michigan corporation and direct, wholly owned subsidiary of Holdco (“Merger Sub”), pursuant to which, on the terms and subject to the conditions set forth in the Merger Agreement, Merger Sub will merge with and into the Company (the “Merger”, and the time at which the Merger is effective, the “Effective Time”), with the Company surviving the Merger as a direct, wholly owned subsidiary of Holdco and as an indirect, wholly owned subsidiary of Aebi Schmidt (the transactions contemplated by the Merger Agreement, the “Transactions”).

At the Effective Time, each share of our common stock issued and outstanding as of immediately prior to the Effective Time (other than any shares of our common stock that are held as of immediately prior to the Effective Time by Holdco, Aebi Schmidt, Merger Sub or any of their respective subsidiaries) will automatically be converted into the right to receive 1.040166432 fully paid and nonassessable shares of common stock, par value $1.00 per share, of Aebi Schmidt (“Aebi Schmidt Common Stock”), on the terms and subject to the conditions set forth in the Merger Agreement.

Following the closing of the Transactions (the “Closing”), the holders of shares of our common stock as of immediately prior to the Effective Time will own approximately 48% of the issued and outstanding shares of Aebi Schmidt Common Stock and the holders of shares of Aebi Schmidt Common Stock as of immediately prior to the Effective Time will own approximately 52% of the issued and outstanding shares of Aebi Schmidt Common Stock.

As of immediately following the Effective Time, the board of directors of Aebi Schmidt (the “Aebi Schmidt Board”) will be composed of eleven members, six of whom will be designated by Aebi Schmidt and five of whom will be designated by the Company. James A. Sharman, the Chairman of our Board of Directors as of immediately prior to the Effective Time, will serve as the Chairman of the Aebi Schmidt Board following the Effective Time. The Merger Agreement includes a covenant requiring the Company and Aebi Schmidt to cooperate in good faith until the Closing to agree on a new name and ticker symbol for Aebi Schmidt.

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THE SHYFT GROUP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollar amounts in thousands, except per share data)

On April 4, 2025, Aebi Schmidt filed a registration statement on Form S-4 with the SEC, which includes a preliminary prospectus and proxy statement in connection with the Merger. Although the registration statement has not yet become effective and the information contained therein is subject to change, it provides important information about Shyft, Aebi Schmidt, and the Merger. The expected closing date of the Merger is mid-2025 and the closing is subject to the registration statement being declared effective by the SEC, and certain other closing conditions, including, among others, (a) the affirmative vote of the holders of a majority of the outstanding shares of our common stock, (b) the approval by a two-thirds majority of the shares of Aebi Schmidt Common Stock represented at an extraordinary meeting of the shareholders of Aebi Schmidt of the Transactions and debt financing, (c) the expiration or termination of any waiting periods (or any extension thereof) applicable to the consummation of the Merger under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the “HSR Act”), and (d) the receipt of certain required regulatory consents, approvals, non-disapprovals and other authorizations under certain applicable antitrust and foreign direct investment laws and regulations specified in the Merger Agreement. Upon the consummation of the Merger, the combined company is expected to be named Aebi Schmidt Group, and its shares will be listed and traded on the Nasdaq under the ticker symbol "AEBI".

Supplemental Disclosures of Cash Flow Information

Non-cash investing in the three months ended March 31, 2025 and March 31, 2024 included $267 and $2,007 of capital expenditures, respectively. The Company has chassis pool agreements, where it participates in chassis converter pools that are non-cash arrangements and they are offsetting between current assets and current liabilities on the Company’s Consolidated Balance Sheets. See "Note 4 – Debt" for further information about the chassis pool agreements.

NOTE 2 – ACQUISITION ACTIVITIES

On July 24, 2024, the Company acquired 100% of the outstanding membership interests of ITU Holdings, Inc. and its subsidiary Independent Truck Upfitters, LLC (collectively “ITU”) for cash consideration of $50,889 and up to an additional $8,000 earn-out amount subject to meeting certain performance criteria within the first two years after the acquisition. ITU serves utility, construction, and fleet management companies with custom solutions, including bodies, crane packages, liftgates, and aftermarket accessories for commercial work trucks. Specializing in larger vehicles and complex service body upfitting, ITU enables Shyft to enter new markets and capture a greater share of higher class-sized products. In December 2024, the Company received a partial payment for net working capital adjustment, resulting in a decrease in the cash consideration and to the purchase price of $1,000. The purchase price was funded with cash on hand and borrowings under our existing credit facility. ITU is part of our Specialty Vehicle segment.

The ITU acquisition was accounted for using the acquisition method of accounting with the purchase price allocated to the assets purchased and liabilities assumed based upon their estimated fair values at the date of acquisition. Identifiable intangible assets include customer relationships, backlog, trade names and trademarks, unpatented technology and non-competition agreements. The excess of the purchase price over the estimated fair values of the tangible and intangible assets acquired of $15,262 was recorded as goodwill, which is expected to be deductible for tax purposes.

In accordance with ASC 805, the allocation of the purchase price for the acquisition of ITU is preliminary and subject to adjustment during the measurement period, which may extend up to one year from the acquisition date. The initial allocation of assets acquired and liabilities assumed is based on preliminary estimates and assumptions, and as such, the values assigned to certain working capital balances, identifiable intangible assets, and contingent liabilities may be adjusted as additional information becomes available. These adjustments could result in changes to the amounts recognized in the consolidated financial statements, including potential adjustments to goodwill. The Company will continue to refine its estimates and assumptions as it obtains more information, and any adjustments identified during the measurement period will be recognized in the reporting period in which the adjustments are determined.

The preliminary purchase price was comprised of the following:

Preliminary purchase price:
Cash paid	$	49,889
Fair value of contingent consideration		4,300
Total preliminary purchase price	$	54,189

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THE SHYFT GROUP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollar amounts in thousands, except per share data)

The Company recorded a current and a non-current contingent consideration liability for the earn-out at a fair value of $2,680 and $1,620, respectively, as of March 31, 2025. The fair value was estimated using a Monte Carlo simulation to model the likelihood of achieving the agreed-upon performance criteria based on available information as of the acquisition date. The valuation methodology includes assumptions and judgments regarding the discount rate, estimated probability of achieving the performance criteria, and expected timing of payments.

As of March 31, 2025, the preliminary purchase price allocation to the fair value of assets acquired and liabilities assumed is as follows:

Fair value of identifiable assets and liabilities:
Cash and cash equivalents	$	2,259
Accounts receivable, less allowance		8,726
Contract assets		341
Inventory		10,711
Other current assets		13
Property, plant and equipment		5,525
Right of use assets-operating leases		33
Other assets		5
Intangible assets		18,650
Goodwill		15,262
Total assets acquired		61,525

Accounts payable		(6,395	)
Contract liabilities		(17	)
Operating lease liabilities		(6	)
Other current liabilities and accrued expenses		(891	)
Long-term operating lease liability		(27	)
Total liabilities assumed		(7,336	)
Total fair value allocation of preliminary purchase price	$	54,189

Intangible assets totaling $18,650 have provisionally been assigned to customer relationships, backlog, trade names and trademarks, unpatented technology and non-competition agreements as a result of the acquisition and consist of the following (in thousands):

	Amount		Useful Life (in years)	Weighted Average Amortization Period (in years)
Customer relationships	$	11,800	13	8.2
Backlog		1,600	1	0.1
Trade names and trademarks		1,600	6	0.5
Unpatented technology		3,400	10	1.8
Non-competition agreements		250	5	0.1
	$	18,650		10.7

The Company amortizes the customer relationships utilizing an accelerated approach and amortizes backlog, trade names and trademarks, unpatented technology and non-competition agreement assets utilizing a straight-line approach. Amortization expense, as a part of Selling, general and administrative expense as presented on the Consolidated Statement of Operations, was $791 for the three months ended March 31, 2025.

Goodwill consists of operational synergies that are expected to be realized in both the short and long-term and the opportunity to enter into new markets which will enable us to increase value to our customers and shareholders. Key areas of expected cost savings include an expanded dealer network, complementary product portfolios and manufacturing and supply chain work process improvements.

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THE SHYFT GROUP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollar amounts in thousands, except per share data)

Due to its insignificant size relative to the Company, supplemental pro forma financial information of the combined entity for the prior reporting period is not provided.

NOTE 3 – INVENTORIES

Inventories are summarized as follows:

	March 31, 2025		December 31, 2024
Finished goods	$	6,936	$	7,654
Work in process		4,660		3,304
Raw materials and purchased components		92,181		98,901
Total inventories	$	103,777	$	109,859

NOTE 4 – DEBT

Short-term debt consists of the following:

	March 31, 2025		December 31, 2024
Chassis pool agreements	$	40,474	$	37,032
Total short-term debt	$	40,474	$	37,032

Chassis Pool Agreements

The Company obtains certain vehicle chassis for its walk-in vans, service bodies and specialty vehicles directly from the chassis manufacturers under converter pool agreements. Chassis are obtained from the manufacturers based on orders from customers, and in some cases, for unallocated orders. The agreements generally state that the manufacturer will provide a supply of chassis to be maintained at the Company’s facilities with the condition that we will store such chassis and will not move, sell, or otherwise dispose of such chassis except under the terms of the agreement. In addition, the manufacturer typically retains the sole authority to authorize commencement of work on the chassis and to make certain other decisions with respect to the chassis including the terms and pricing of sales of the chassis to the manufacturer’s dealers. The manufacturer also does not transfer the certificate of origin to the Company nor permit the Company to sell or transfer the chassis to anyone other than the manufacturer (for ultimate resale to a dealer).

Although the Company is party to related finance agreements with manufacturers, the Company has not historically settled related obligations in cash, except as required under our credit agreement. The obligation is usually settled by the manufacturer upon reassignment of the chassis to an accepted dealer, and the dealer is invoiced for the chassis by the manufacturer. The Company has included this financing agreement on the Company’s Condensed Consolidated Balance Sheets within Other receivables – chassis pool agreements and Short-term debt – chassis pool agreements. Typically, chassis are converted and delivered to customers within 90 days of the receipt of the chassis by the Company. The chassis converter pool is a non-cash arrangement and is offsetting between Current assets and Current liabilities on the Company’s Condensed Consolidated Balance Sheets.

Long-term debt consists of the following:

	March 31, 2025			December 31, 2024
Line of credit revolver	$	110,000		$	95,000
Finance lease obligation		585			458
Total debt		110,585			95,458
Less current portion of long-term debt		(258	)		(235	)
Total long-term debt	$	110,327		$	95,223

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THE SHYFT GROUP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollar amounts in thousands, except per share data)

Revolving Credit Facility

On November 30, 2021, we entered into an Amended and Restated Credit Agreement by and among us and certain of our subsidiaries as borrowers, Wells Fargo Bank, N.A., as administrative agent, and the lenders party thereto consisting of Wells Fargo, N.A., JPMorgan Chase Bank, N.A., PNC Bank, N.A. and Bank of America, N.A. (the "Lenders"). Certain of our other subsidiaries have executed guaranties guarantying the borrowers' obligations under the Credit Agreement.

On March 27, 2024, we entered into the Second Amendment to Amended and Restated Credit Agreement (the “Credit Agreement”). The Credit Agreement, among other things, (i) reduced the revolving credit commitments from $400,000 to $300,000, (ii) increased the applicable margin for term Secured Overnight Financing Rate ("SOFR") loans and base rate loans, (iii) adjusted the calculation of debt for purposes of determining the leverage ratio and (iv) temporarily increased the maximum leverage ratio through June 30, 2024.

Under the Credit Agreement, we may borrow up to $300,000 from the Lenders under a secured revolving credit facility which matures November 30, 2026. We may also request an increase in the facility of up to $200,000 in the aggregate, subject to customary conditions. The revolving credit facility is also available for the issuance of letters of credit of up to $20,000 and swing line loans of up to $10,000, subject to certain limitations and restrictions. The revolving credit facility carries an interest rate of either (i) the highest of prime rate, the federal funds effective rate from time to time plus 0.5%, or the one month adjusted SOFR including a credit spread adjustment plus 2.0%; or (ii) adjusted SOFR, in each case plus a margin based upon our ratio of debt to earnings from time to time. The applicable borrowing rate including the margin was 5.92% (or one-month SOFR including a credit spread adjustment plus 1.50%) at March 31, 2025. The revolving credit facility is secured by security interests in, and liens on, all assets of the borrowers and guarantors, other than real property and certain other excluded assets. At March 31, 2025 and December 31, 2024, we had outstanding letters of credit totaling $1,900, related to our workers’ compensation insurance.

Under the terms of our Credit Agreement, available borrowings (exclusive of outstanding borrowings) totaled $76,888 and $77,950 at March 31, 2025 and December 31, 2024, respectively. The Credit Agreement requires us to maintain certain financial ratios and other financial covenants; prohibits us from incurring additional indebtedness; limits certain acquisitions, investments, advances or loans; limits our ability to pay dividends in certain circumstances; and restricts substantial asset sales, all subject to certain exceptions and baskets. Our net leverage ratio limits available borrowings. At March 31, 2025 and December 31, 2024, we were in compliance with all covenants in our Credit Agreement.

NOTE 5 – REVENUE

Changes in our contract assets and liabilities for the three months ended March 31, 2025 and 2024 are summarized below:

	March 31, 2025			March 31, 2024
Contract Assets
Contract assets, beginning of period	$	40,896		$	50,304
Reclassification of the beginning contract assets to receivables, as the result of rights to consideration becoming unconditional		(25,439	)		(37,163	)
Contract assets recognized, net of reclassification to receivables		28,306			39,662
Contract assets, end of period	$	43,763		$	52,803

Contract Liabilities
Contract liabilities, beginning of period	$	3,553		$	4,756
Reclassification of the beginning contract liabilities to revenue, as the result of performance obligations satisfied		(2,776	)		(3,319	)
Cash received in advance and not recognized as revenue		9,394			2,502
Contract liabilities, end of period	$	10,171		$	3,939

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THE SHYFT GROUP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollar amounts in thousands, except per share data)

The aggregate amount of the transaction price allocated to remaining performance obligations in existing contracts that are yet to be completed in the Fleet Vehicles and Services ("FVS") and Specialty Vehicles ("SV") segments are $245,337 and $89,997, respectively.

In the following tables, revenue is disaggregated by primary geographical market and timing of revenue recognition. The tables also include a reconciliation of the disaggregated revenue within the reportable segments.

	Three Months Ended March 31, 2025
	FVS		SV		Eliminations and Other		Total
Primary geographical markets
United States	$	95,246	$	81,997	$	26,297	$	203,540
Other		870		189		-		1,059
Total sales	$	96,116	$	82,186	$	26,297	$	204,599

Timing of revenue recognition
Products transferred at a point in time	$	17,856	$	21,553	$	26,297	$	65,706
Products and services transferred over time		78,260		60,633		-		138,893
Total sales	$	96,116	$	82,186	$	26,297	$	204,599

	Three Months Ended March 31, 2024
	FVS		SV		Eliminations and Other		Total
Primary geographical markets
United States	$	81,369	$	90,098	$	-	$	171,467
Other		26,390		32		-		26,422
Total sales	$	107,759	$	90,130	$	-	$	197,889

Timing of revenue recognition
Products transferred at a point in time	$	12,281	$	42,757	$	-	$	55,038
Products and services transferred over time		95,478		47,373		-		142,851
Total sales	$	107,759	$	90,130	$	-	$	197,889

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THE SHYFT GROUP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollar amounts in thousands, except per share data)

NOTE 6 – PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment are summarized by major classifications as follows:

	March 31, 2025			December 31, 2024
Land and improvements	$	14,607		$	14,007
Buildings and improvements		60,065			57,539
Plant machinery and equipment		72,395			70,840
Furniture and fixtures		19,474			19,500
Vehicles		2,226			2,249
Construction in process		832			1,960
Subtotal		169,599			166,095
Accumulated depreciation		(88,485	)		(85,028	)
Total property, plant and equipment, net	$	81,114		$	81,067

We recorded depreciation expense of $3,943 and $3,566 during the three months ended March 31, 2025 and 2024, respectively.

NOTE 7 – LEASES

We have operating and finance leases for land, buildings and certain equipment. Our leases have remaining lease terms of one year to 15 years, some of which include options to extend the leases for up to 15 years. Our leases do not contain residual value guarantees. Assets recorded under finance leases were immaterial (See "Note 4 – Debt").

Operating lease expenses are classified as Cost of products sold and Operating expenses on the Condensed Consolidated Statements of Operations. The components of lease expense were as follows:

	Three Months Ended
	March 31,
	2025		2024
Operating leases	$	2,827	$	2,744
Short-term leases⁽¹⁾		129		318
Total lease expense	$	2,956	$	3,062

⁽¹⁾Includes expenses for month-to-month equipment leases, which are classified as short-term as the Company is not reasonably certain to renew the lease term beyond one month.

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THE SHYFT GROUP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollar amounts in thousands, except per share data)

The weighted average remaining lease term and weighted average discount rate were as follows:

	March 31,
	2025			2024
Weighted average remaining lease term of operating leases (in years)		7.0			7.0
Weighted average discount rate of operating leases		3.4	%		3.0	%

Supplemental cash flow information related to leases was as follows:

	Three Months Ended March 31,
	2025		2024
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flow for operating leases	$	2,758	$	2,918

Right of use assets obtained in exchange for lease obligations:
Operating leases	$	524	$	1,879
Finance leases	$	160	$	7

Maturities of operating lease liabilities as of March 31, 2025 are as follows:

Years ending December 31:
2025⁽¹⁾	$	8,292
2026		9,087
2027		6,398
2028		5,087
2029		4,095
2030		3,143
Thereafter		10,061
Total lease payments		46,163
Imputed interest		(5,154	)
Total lease liabilities	$	41,009

⁽¹⁾Excluding the three months ended March 31, 2025.

NOTE 8 – COMMITMENTS AND CONTINGENT LIABILITIES

At March 31, 2025, we and our subsidiaries were parties, both as plaintiff and defendant, to a number of lawsuits and claims arising out of the normal course of our businesses. In the opinion of management, our financial position, future operating results or cash flows will not be materially affected by the final outcome of these legal proceedings.

Warranty Related

We provide limited warranties against assembly/construction defects. These warranties generally provide for the replacement or repair of defective parts or workmanship for a specified period following the date of sale. The end users also may receive limited warranties from suppliers of components that are incorporated into our chassis and vehicles.

Certain warranty and other related claims involve matters of dispute that ultimately are resolved by negotiation, arbitration or litigation. Infrequently, a material warranty issue can arise which is beyond the scope of our historical experience. We provide for any such warranty issues as they become known and are estimable. It is reasonably possible that additional warranty and other related claims could arise from disputes or other matters beyond the scope of our historical experience. An estimate of possible penalty or loss, if any, cannot be made at this time.

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THE SHYFT GROUP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollar amounts in thousands, except per share data)

Changes in our warranty liability are summarized below:

	Three Months Ended March 31,
	2025			2024
Balance of accrued warranty at January 1	$	7,653		$	7,231
Accruals for warranties issued		1,321			2,257
Changes in liability for pre-existing warranties		(129	)		273
Cash settlements		(957	)		(1,549	)
Balance of accrued warranty at March 31	$	7,888		$	8,212

NOTE 9 – TAXES ON INCOME

Our income tax expense was $654 and $783 for the three months ended March 31, 2025 and 2024, respectively. The tax expense represented a (83.6%) and (20.1%) effective tax rate for the three months ended March 31, 2025 and 2024, respectively.

The effective tax rate for the three months ended March 31, 2025 and 2024 differs from the U.S. statutory rate of 21% primarily due to the tax benefit of research credits partially offset by state tax expense and non-deductible officer compensation and a discrete tax expense related to the difference in stock compensation expense recognized for financial reporting purposes and tax purposes upon vesting.

NOTE 10 – BUSINESS SEGMENTS

We identify our reportable segments based on our management structure and the financial data utilized by our chief operating decision maker to assess segment performance and allocate resources among our operating units. We have two reportable segments: Fleet Vehicles and Services and Specialty Vehicles.

We evaluate the performance of our reportable segments based on Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) and it is 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 before interest, income taxes, depreciation and amortization, as adjusted to eliminate the impact of restructuring charges, transaction related expenses and adjustments, non-cash stock-based compensation expenses, and other gains and losses not reflective of our ongoing operations.

Our FVS segment focuses on designing and manufacturing walk-in vans for parcel delivery, mobile retail, and trades and construction industries, the production of commercial truck bodies, and the distribution of related aftermarket parts and accessories.

Our SV segment consists of service bodies operations, operations that engineer and manufacture motorhome chassis, specialty upfit, other specialty chassis and distributes related aftermarket parts and assemblies. We also provide vocation-specific equipment upfit services, which are marketed and sold under the Strobes-R-Us brand.

The accounting policies of the segments are the same as those described, or referred to, in “Note 1 – Nature of Operations and Basis of Presentation.” Assets and related depreciation expense in the column labeled “Eliminations and Other” pertain to capital assets maintained at the corporate level. Eliminations for inter-segment sales and Blue Arc EV sales are shown in the row labeled “Eliminations and Other.” Interest expense and Income tax expense are not included in the information utilized by the chief operating decision maker to assess segment performance and allocate resources, and accordingly, are excluded from the segment results presented below.

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THE SHYFT GROUP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollar amounts in thousands, except per share data)

	Three Months Ended March 31, 2025
	Segment
		FVS		SV		Total
Fleet vehicle sales	$	78,260	$	-	$	78,260
Motorhome chassis sales		-		14,028		14,028
Other specialty vehicle sales		-		60,633		60,633
Aftermarket parts and accessories sales		17,856		7,525		25,381
Segment sales	$	96,116	$	82,186		178,302
Eliminations and other						26,297
Total consolidated sales					$	204,599

	Three Months Ended
	March 31, 2025
	Segment
	FVS		SV		Eliminations and Other		Consolidated
Depreciation and amortization expense	$	1,540	$	2,320	$	1,642	$	5,502
Segment assets	$	203,252	$	293,011	$	84,820	$	581,083
Capital expenditures	$	425	$	16	$	3,668	$	4,109

The reconciliation of the significant segment expenses to Adjusted EBITDA by business segment is as follows:

	Three Months Ended
	March 31, 2025
	Segment
	FVS			SV
Sales	$	96,116		$	82,186
Cost of products sold		(84,408	)		(57,836	)
Research and development		(582	)		(365	)
Selling, general and administrative		(7,268	)		(10,821	)
Other segment items ¹		(229	)		1,090
Adjusted EBITDA	$	3,628		$	14,254

¹ Other segment items include interest and other income, management fees, depreciation and amortization, restructuring and other related charges, and non-cash stock-based compensation expense.

The reconciliation of total Segment Adjusted EBITDA to income (loss) before income taxes as follows:

		Three Months Ended
		March 31, 2025
Total Segment Adjusted EBITDA	$	17,882
Unallocated corporate expenses and other		(5,601	)
Interest expense		(2,661	)
Depreciation and amortization		(5,502	)
Restructuring and other related charges		(356	)
Transaction related expenses and adjustments		(2,231	)
Non-cash stock-based compensation expense		(2,313	)
Income (loss) before income taxes	$	(782	)

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THE SHYFT GROUP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollar amounts in thousands, except per share data)

	Three Months Ended March 31, 2024
	Segment
		FVS		SV		Total
Fleet vehicle sales	$	95,478	$	-	$	95,478
Motorhome chassis sales		-		30,771		30,771
Other specialty vehicle sales		-		53,405		53,405
Aftermarket parts and accessories sales		12,281		5,954		18,235
Segment sales	$	107,759	$	90,130		197,889
Eliminations and other						-
Total consolidated sales					$	197,889

	Three Months Ended
	March 31, 2024
	Segment
	FVS		SV		Eliminations and Other		Consolidated
Depreciation and amortization expense	$	1,753	$	1,542	$	1,140	$	4,435
Segment assets	$	217,779	$	212,288	$	77,614	$	507,681
Capital expenditures	$	785	$	413	$	943	$	2,141

The reconciliation of the significant segment expenses to Adjusted EBITDA by business segment is as follows:

	Three Months Ended
	March 31, 2024
	Segment
	FVS			SV
Sales	$	107,759		$	90,130
Cost of products sold		(99,158	)		(64,670	)
Research and development		(382	)		(303	)
Selling, general and administrative		(7,030	)		(8,393	)
Other segment items ¹		(253	)		209
Adjusted EBITDA	$	935		$	16,973

¹ Other segment items include interest and other income, management fees, depreciation and amortization, restructuring and other related charges, and non-cash stock-based compensation expense.

The reconciliation of total Segment Adjusted EBITDA to income (loss) before income taxes as follows:

	Three Months Ended
	March 31, 2024
Total Segment Adjusted EBITDA	$	17,908
Unallocated corporate expenses and other		(11,820	)
Interest expense		(2,053	)
Depreciation and amortization		(4,435	)
Restructuring and other related charges		(52	)
Non-cash stock-based compensation expense		(1,474	)
Legacy legal matters		(1,850	)
CEO transition		(110	)
Income (loss) before income taxes	$	(3,886	)

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Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The Shyft Group, Inc. was organized as a Michigan corporation and is headquartered in Novi, Michigan. We are a niche market leader in specialty vehicle manufacturing and assembly for the commercial vehicle (including last-mile delivery, specialty service and vocation-specific upfit segments) and recreational vehicle industries. Our products include walk-in vans and truck bodies used in e-commerce/parcel delivery, upfit equipment used in the mobile retail and utility trades, service and vocational truck bodies, luxury Class A diesel motorhome chassis and contract manufacturing and assembly services. We also supply replacement parts and offer repair, maintenance, field service and refurbishment services for the vehicles that we manufacture as well as truck accessories.

Our vehicles, parts and services are sold to commercial users, original equipment manufacturers (OEMs), dealers, individual end users, and municipalities and other governmental entities. Our diversification across several sectors provides numerous opportunities while reducing overall risk as the various markets we serve tend to have different cyclicality. We have an innovative team focused on building lasting relationships with our customers by designing and delivering market leading specialty vehicles, vehicle components, and services. Additionally, our business structure is agile and able to quickly respond to market needs, take advantage of strategic opportunities when they arise and correctly size and scale operations to ensure stability and growth.

We believe we can best carry out our long-term business plan and obtain optimal financial flexibility by using a combination of borrowings under our credit facilities, and internally or externally generated equity capital, as sources of expansion capital.

The Aebi Schmidt Transaction

On December 16, 2024, we entered into that certain Agreement and Plan of Merger, dated as of December 16, 2024 (the “Merger Agreement”), by and among the Company, Aebi Schmidt Holding AG, a Switzerland Aktiengesellschaft (“Aebi Schmidt”), ASH US Group, LLC, a Delaware limited liability company and direct, wholly owned subsidiary of Aebi Schmidt (“Holdco”), and Badger Merger Sub, Inc., a Michigan corporation and direct, wholly owned subsidiary of Holdco (“Merger Sub”), pursuant to which, on the terms and subject to the conditions set forth in the Merger Agreement, Merger Sub will merge with and into the Company (the “Merger”, and the time at which the Merger is effective, the “Effective Time”), with the Company surviving the Merger as a direct, wholly owned subsidiary of Holdco and as an indirect, wholly owned subsidiary of Aebi Schmidt (the transactions contemplated by the Merger Agreement, the “Transactions”).

Following the closing of the Transactions (the “Closing”), the holders of shares of our common stock as of immediately prior to the Effective Time will own approximately 48% of the issued and outstanding shares of Aebi Schmidt Common Stock and the holders of shares of Aebi Schmidt Common Stock as of immediately prior to the Effective Time will own approximately 52% of the issued and outstanding shares of Aebi Schmidt Common Stock.

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On April 4, 2025, Aebi Schmidt filed a registration statement on Form S-4 with the SEC, which includes a preliminary prospectus and proxy statement in connection with the Merger. Although the registration statement has not yet become effective and the information contained therein is subject to change, it provides important information about Shyft, Aebi Schmidt, and the Merger. The expected closing date of the Merger is mid-2025 and the closing is subject to the registration statement being declared effective by the SEC, and certain other closing conditions, including, among others, (a) the affirmative vote of the holders of a majority of the outstanding shares of our common stock, (b) the approval by a two-thirds majority of the shares of Aebi Schmidt Common Stock represented at an extraordinary meeting of the shareholders of Aebi Schmidt of the Transactions and debt financing, (c) the expiration or termination of any waiting periods (or any extension thereof) applicable to the consummation of the Merger under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the “HSR Act”), and (d) the receipt of certain required regulatory consents, approvals, non-disapprovals and other authorizations under certain applicable antitrust and foreign direct investment laws and regulations specified in the Merger Agreement. Upon the consummation of the Merger, the combined company is expected to be named Aebi Schmidt Group, and its shares will be listed and traded on the Nasdaq under the ticker symbol "AEBI".

Executive Overview

	●	Sales of $204.6 million for the first quarter of 2025, an increase of 3.4% compared to $197.9 million for the first quarter of 2024.
	●	Gross margin of 19.7% for the first quarter of 2025, compared to 17.2% for the first quarter of 2024.
	●	Operating expense of $38.6 million, or 18.8% of sales for the first quarter of 2025, compared to $36.0 million, or 18.2% of sales for the first quarter of 2024.
	●	Operating income of $1.7 million for the first quarter of 2025, compared to operating loss of $1.9 million for the first quarter of 2024.
	●	Income tax expense of $0.7 million for the first quarter of 2025, compared to $0.8 million for the first quarter of 2024.
	●	Net loss of $1.4 million for the first quarter of 2025, compared to net loss of $4.7 million for the first quarter of 2024.
	●	Diluted loss per share of $0.04 for the first quarter of 2025, compared to diluted loss per share of $0.14 for the first quarter of 2024.
	●	Order backlog of $335.3 million at March 31, 2025, a decrease of $104.1 million or 23.7% from our backlog of $439.4 million at March 31, 2024.

We believe we are well positioned to take advantage of long-term opportunities and continue our efforts to bring product innovations to each of the markets that we serve. Some of our recent innovations, strategic developments and strengths include:

●

Acquired Independent Truck Upfitters (“ITU”), a Midwest-based provider of vocational service body upfit for commercial fleets and government service vehicles, on July 24, 2024 for cash consideration of $49.9 million and up to an additional $8.0 million earn-out amount. The ITU acquisition aligns with our growth strategy by expanding our service body product offerings and upfit capabilities. This transaction provides unique synergies and cross-selling opportunities with current products, adds a chassis pool and increases ship-thru capability to support future growth. ITU is part of our Specialty Vehicle segment.

●

In March 2022, we introduced Blue Arc™ Electric Vehicle ("EV") Solutions, a go-to-market brand of The Shyft Group. Now in production and on the road, the Blue Arc Class 4 all-electric truck is a zero-emission vehicle built from the ground up to deliver commercial-grade performance, driver-first comfort, and fleet-ready versatility. With a range of over 200 miles, this purpose-built EV features a lightweight composite body for increased payload capacity, ergonomic seating, a noise-reducing cab, and advanced safety systems. Its configurable cargo area, ranging from 600 to 1,000 cubic feet, makes it ideal for a wide range of applications. Designed for durability and powered by components from top-tier suppliers, the Class 4 Blue Arc EV undergoes rigorous testing to exceed industry standards—delivering the reliability and low total cost of ownership that modern fleets demand.

●

In March 2024, we announced the deployment of our Rapid Driver Cooling System in 5,860 walk-in vans. Designed for versatility, the Rapid Driver Cooling System can be integrated into both new and existing vehicles, ranging from walk-in vans to vocational delivery trucks. The system efficiently lowers ambient cabin temperatures from 105 degrees to 85 degrees Fahrenheit within two minutes. It can serve as a supplementary solution or a complete replacement for traditional in-dash air conditioning, focusing on cooling the driver’s area and the cabin space effectively.

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Business Trends

We continue to monitor macroeconomic trends and uncertainties such as key raw material and component inflation, the effects of recently implemented tariffs, and the potential imposition of modified or additional tariffs, which may have adverse effects on net sales and profitability. As a result of the tariffs announced by the U.S. presidential administration on April 2, 2025, and potential tariff modifications or the imposition of tariffs or export controls by other countries, we anticipate increased supply chain challenges, commodity cost volatility, and consumer and economic uncertainty due to rapid changes in global trade policies. We are continuing to evaluate these factors and their potential effects as well as our ability to potentially offset all or a portion of cost increases through pricing actions and cost savings efforts. Economic pressures on customers and consumers, including the challenges of high inflation and the effects of increased tariffs, may negatively affect our net sales and profitability in the future.

The following section provides a narrative discussion about our financial condition and results of operations. Certain amounts in the narrative may not sum due to rounding. The comments should be read in conjunction with our Condensed Consolidated Financial Statements and related Notes thereto included in Item 1 of this Form 10-Q and in conjunction with our 2024 Annual Report on Form 10-K filed with the SEC on February 20, 2025.

RESULTS OF OPERATIONS

The following table sets forth, for the periods indicated, the components of the Company’s Condensed Consolidated Statements of Operations as a percentage of sales (percentages may not sum due to rounding):

	Three Months Ended
	March 31,
	2025			2024
Sales		100.0			100.0
Cost of products sold		80.3			82.8
Gross profit	19.7				17.2
Operating expenses:
Research and development		1.9			1.9
Selling, general and administrative		16.9			16.3
Operating income (loss)		0.9			(1.0	)
Other income (expense)		(1.2	)		(1.0	)
Loss before income taxes		(0.4	)		(2.0	)
Income tax expense		0.3			0.4
Net loss		(0.7	)		(2.4	)

Three Months Ended March 31, 2025 Compared to the Three Months Ended March 31, 2024

Sales

For the three months ended March 31, 2025, we reported consolidated sales of $204.6 million, compared to $197.9 million for the three months ended March 31, 2024, an increase of $6.7 million or 3.4%. This increase was driven by sales of our Blue Arc EV, partially offset by lower sales volumes in our Specialty Vehicles ("SV") segment and lower sales volumes in our Fleet Vehicles and Services ("FVS") segment including lower USPS pass-through chassis sales.

Cost of Products Sold

Cost of products sold was $164.3 million in the first quarter of 2025, compared to $163.8 million for the first quarter of 2024, an increase of $0.5 million or 0.3%. The increase was due to $8.3 million in higher volume including the impact of the ITU acquisition and sales of our Blue Arc EV, partially offset by $3.6 million in favorable mix, $3.4 million in lower pass-through chassis costs and $0.8 million higher productivity net material and labor inflation.

Gross Profit

Gross profit was $40.3 million for the first quarter of 2025, compared to $34.1 million for the first quarter of 2024, an increase of $6.2 million or 18.3%. The increase was due to $1.8 million of favorable volume, $3.6 million favorable product mix net of pricing, and $0.8 million in higher productivity net of material and labor inflation.

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Operating Expenses

Operating expenses were $38.6 million for the first quarter of 2025, compared to $36.0 million for the first quarter of 2024, an increase of $2.6 million or 7.1%. Research and development expense for the first quarter of 2025 was $3.9 million, compared to $3.7 million in the first quarter of 2024, an increase of $0.2 million attributed to development projects in the FVS segment. Selling, general and administrative expense was $34.7 million for the first quarter of 2025, compared to $32.3 million for the first quarter of 2024. The increase was primarily attributed to $2.2 million of transaction related costs and $2.2 million in higher compensation and other employee costs including the addition of ITU. Prior year included a $2.0 million legal settlement.

Other Income (Expense)

Other expense was $2.5 million for the first quarter of 2025, compared to $2.0 million for the first quarter of 2024, driven by increased borrowings, primarily due to the ITU acquisition, and higher borrowing costs.

Income Tax Expense (Benefit)

Our income tax expense was $0.7 million for the first quarter of 2025, compared to an income tax expense of $0.8 million for the first quarter of 2024. The tax expense represented a (83.6%) effective tax rate and (20.1%) effective tax rate for the three months ended March 31, 2025 and 2024, respectively, which reflects the impact of current statutory income tax rates on our income before income taxes combined with the tax expense of non-deductible officer compensation offset by the benefit of research credits combined with a discrete tax expense related to the difference in stock compensation expense recognized for financial reporting purposes and tax purposes upon vesting.

Net Loss

Net loss was $1.4 million for the first quarter of 2025 compared to net loss of $4.7 million for the first quarter of 2024, a decrease of $3.3 million. Diluted loss per share was $0.04 for the first quarter of 2025 compared to diluted loss per share of $0.14 for the first quarter of 2024. Driving this decrease were the factors noted above.

Adjusted EBITDA

Our consolidated Adjusted EBITDA for the first quarter of 2025 was $12.3 million, compared to $6.1 million for the first quarter of 2024, an increase of $6.2 million.

The table below describes the changes in Adjusted EBITDA for the three months ended March 31, 2025 compared to the same period for 2024 (in millions):

Adjusted EBITDA three months ended March 31, 2024	$	6.1
Sales volume		1.8
Product pricing and mix		3.6
EV development/program costs		2.0
General and administrative costs and other		(1.2	)
Adjusted EBITDA three months ended March 31, 2025	$	12.3

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Order Backlog

Our order backlog by reportable segment is summarized in the following table (in thousands):

	March 31, 2025		March 31, 2024
Fleet Vehicles and Services	$	245,337	$	356,089
Specialty Vehicles		89,997		83,334
Total consolidated	$	335,334	$	439,423

The consolidated backlog at March 31, 2025 totaled $335.3 million, a decrease of $104.1 million, or 23.7%, compared to $439.4 million at March 31, 2024.

Our FVS backlog decreased by $110.8 million, or 31.1%, primarily due to vehicle sales and softer demand in delivery vans. Our SV segment backlog increased by $6.7 million, or 8.0%, attributable to higher demand for our service truck bodies.

Orders in the backlog are subject to modification, cancellation or rescheduling by customers. Although the backlog of unfilled orders is one of many indicators of market demand, several factors, such as changes in production rates, available capacity, new product introductions, supply of chassis, competitive pricing actions, and dealer inventories, may affect actual sales. Accordingly, a comparison of backlog from period-to-period is not necessarily indicative of eventual actual shipments.

Reconciliation of Non-GAAP Financial Measures

This report presents Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization), which is a non-GAAP financial measure. This non-GAAP measure is 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 before interest, income taxes, depreciation and amortization, as adjusted to eliminate the impact of restructuring charges, transaction 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.

We use 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.

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The following table reconciles Net Income to Adjusted EBITDA for the periods indicated.

Financial Summary (Non-GAAP)

Consolidated

(In thousands, Unaudited)

	Three Months Ended
	March 31,
	2025			2024
Net loss	$	(1,436	)	$	(4,669	)
Add (subtract):
Interest expense		2,661			2,053
Depreciation and amortization expense		5,502			4,435
Income tax expense		654			783
Restructuring and other related charges		356			52
Transaction related expenses and adjustments		2,231			-
Non-cash stock-based compensation expense		2,313			1,474
Legacy legal matters		-			1,850
CEO transition		-			110
Adjusted EBITDA	$	12,281		$	6,088

Our Segments

For certain financial information related to each segment, see "Note 10 – Business Segments," of the Notes to Condensed Consolidated Financial Statements appearing in Item 1 of this Form 10-Q.

Fleet Vehicles and Services

	Financial Data
	(Dollars in Thousands)
	Three Months Ended March 31,
	2025					2024
	Amount		Percentage			Amount		Percentage

Sales	$	96,116		100.0	%	$	107,759		100.0	%
Adjusted EBITDA		3,628		3.8	%		935		0.9	%

Sales in our FVS segment were $96.1 million for the first quarter of 2025, compared to $107.8 million for the first quarter of 2024, a decrease of $11.7 million or 10.8%. This decrease was primarily attributable to softness in the delivery van markets and lower pass-through chassis sales, partially offset by higher upfit volume.

Adjusted EBITDA in our FVS segment for the first quarter of 2025 was $3.6 million compared to $0.9 million for the first quarter of 2024, an increase of $2.7 million. This increase was attributable to $3.0 million of favorable mix and $0.4 higher productivity net of higher labor and other costs, partially offset by $0.7 million in lower volume.

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Specialty Vehicles

	Financial Data
	(Dollars in Thousands)
	Three Months Ended March 31,
	2025					2024
	Amount		Percentage			Amount		Percentage

Sales	$	82,186		100.0	%	$	90,130		100.0	%
Adjusted EBITDA		14,254		17.3	%		16,973		18.8	%

Sales in our SV segment were $82.2 million in the first quarter of 2025, compared to $90.1 million for the first quarter of 2024, a decrease of $7.9 million or 8.8%. This decrease was primarily attributable to lower motorhome chassis market demand, partially offset by higher service body sales including the impact of the ITU acquisition.

Adjusted EBITDA for our SV segment for the first quarter of 2025 was $14.3 million, compared to $17.0 million for the first quarter of 2024, a decrease of $2.7 million. The decrease is attributable to $1.1 million lower volume net of favorable mix and $1.6 million in higher labor and other costs including the impact of the ITU acquisition.

LIQUIDITY AND CAPITAL RESOURCES

Cash Flows

Cash and cash equivalents increased by $0.4 million from December 31, 2024, to a balance of $16.2 million as of March 31, 2025. These funds, in addition to cash generated from future operations and availability under our existing credit facility, are expected to be sufficient to finance our foreseeable liquidity and capital needs, including potential future acquisitions.

Cash Flow from Operating Activities

We used $4.5 million of cash from operating activities during the three months ended March 31, 2025, an increase of $0.5 million from $4.0 million of cash used in operating activities during the three months ended March 31, 2024. The $4.5 million of cash used in the first three months of 2025 was driven by a $6.4 million net inflow related to income adjusted for non-cash charges to operations, partially offset by a $10.9 million net outflow related to the change in net working capital. The change in working capital in the first three months of 2025 was driven by a $18.3 million net outflow related to increased accounts receivable and contract assets, a $6.0 million net outflow related to decreased payables primarily attributable to timing of payments within the period, a $1.5 million net outflow related to accrued compensation and related taxes, partially offset by a $6.1 million net inflow driven by decreased inventories and a $8.6 million net inflow related to other assets and liabilities primarily attributable to increased contract liabilities.

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Cash Flow from Investing Activities

We used $5.0 million in investing activities during the three months ended March 31, 2025, a decrease of $0.6 million from $5.6 million used during the three months ended March 31, 2024. The decrease in cash used in investing activities is primarily due to a $0.7 million decrease in the purchases of property, plant and equipment.

Cash Flow from Financing Activities

We generated $9.9 million of cash through financing activities during the three months ended March 31, 2025, a decrease of $3.0 million from $12.9 million of cash generated during the three months ended March 31, 2024. The decrease in cash provided by financing activities is primarily attributable to a $3.0 million increase in the exercising and vesting of stock incentive awards and a $5.0 million of decreased proceeds from long-term debt, offset by a $5.0 million of decreased payments on long-term debt.

Debt

On November 30, 2021, we entered into an Amended and Restated Credit Agreement by and among us and certain of our subsidiaries as borrowers, Wells Fargo Bank, N.A., as administrative agent, and the lenders party thereto consisting of Wells Fargo, N.A., JPMorgan Chase Bank, N.A., PNC Bank, N.A. and Bank of America, N.A. (the "Lenders"). Certain of our other subsidiaries have executed guaranties guarantying the borrowers' obligations under the Credit Agreement.

On March 27, 2024, we entered into the Second Amendment to Amended and Restated Credit Agreement (the “Credit Agreement”). The Credit Agreement, among other things, (i) reduced the revolving credit commitments from $400.0 million to $300.0 million, (ii) increased the applicable margin for term Secured Overnight Financing Rate ("SOFR") loans and base rate loans, (iii) adjusted the calculation of debt for purposes of determining the leverage ratio and (iv) temporarily increased the maximum leverage ratio through June 30, 2024.

Under the Credit Agreement, we may borrow up to $300.0 million from the Lenders under a secured revolving credit facility which matures November 30, 2026. We may also request an increase in the facility of up to $200.0 million in the aggregate, subject to customary conditions. The revolving credit facility is also available for the issuance of letters of credit of up to $20.0 million and swing line loans of up to $15.0 million, subject to certain limitations and restrictions. The revolving credit facility carries an interest rate of either (i) the highest of prime rate, the federal funds effective rate from time to time plus 0.5%, or the one month adjusted SOFR including a credit spread adjustment plus 1.50%; or (ii) adjusted SOFR, in each case plus a margin based upon our ratio of debt to earnings from time to time. The applicable borrowing rate including the margin was 5.92% (or one-month SOFR including a credit spread adjustment plus 1.50%) at March 31, 2025. The revolving credit facility is secured by security interests in, and liens on, all assets of the borrowers and guarantors, other than real property and certain other excluded assets. At March 31, 2025 and December 31, 2024, we had outstanding letters of credit totaling $1.9 million, related to our workers’ compensation insurance.

Under the terms of our Credit Agreement, available borrowings (exclusive of outstanding borrowings) totaled $76.9 million and $78.0 million at March 31, 2025 and December 31, 2024, respectively. The Credit Agreement requires us to maintain certain financial ratios and other financial covenants; prohibits us from incurring additional indebtedness; limits certain acquisitions, investments, advances or loans; limits our ability to pay dividends in certain circumstances; and restricts substantial asset sales, all subject to certain exceptions and baskets. At March 31, 2025 and December 31, 2024, we were in compliance with all financial covenants in our Credit Agreement.

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Equity Securities

On February 22, 2022, we announced that our Board of Directors had authorized the repurchase of up to $250.0 million of our common stock. The repurchase authorization does not have an expiration date. We believe that we have sufficient resources to fund any potential stock buyback in which we may engage over the long-term, although we are currently restricted from repurchasing our common stock under the terms of the Merger Agreement.

Dividends

The amounts or timing of any dividends are subject to earnings, financial condition, liquidity, capital requirements and such other factors as our Board of Directors deems relevant. We declared dividends on our outstanding common shares in 2025 and 2024 as shown in the table below.

Date dividend declared	Record date	Payment date	Dividend per share ($)
Feb. 14, 2025	Feb. 27, 2025	Mar. 28, 2025	$	0.05
Oct. 30, 2024	Nov. 15, 2024	Dec. 16, 2024	$	0.05
Aug. 2, 2024	Aug. 16, 2024	Sep. 16, 2024	$	0.05
May 3, 2024	May 17, 2024	June 17, 2024	$	0.05
Feb. 1, 2024	Feb. 16, 2024	Mar. 18, 2024	$	0.05

Effect of Inflation

Inflation affects us in two principal ways. First, our revolving credit facility is generally tied to the Prime and SOFR interest rates so that increases in those interest rates would be translated into additional interest expense. Second, general inflation impacts prices paid for labor, parts and supplies. Whenever possible, we attempt to cover increased costs of production and capital by adjusting the prices of our products. However, we generally do not attempt to negotiate inflation-based price adjustment provisions into our contracts. We have limited ability to pass on cost increases to our customers on a short-term basis. In addition, the markets we serve are competitive in nature, and competition limits our ability to pass through cost increases in many cases. We strive to minimize the effect of inflation through cost reductions and improved productivity. Refer to the Commodities Risk section in Item 3 of this Form 10-Q for further information regarding commodity cost fluctuations.

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Item 3.

Quantitative and Qualitative Disclosures About Market Risk.

Interest Rate Risk

We are exposed to market risks related to changes in interest rates and the effect of such a change on outstanding variable rate short-term and long-term debt. At March 31, 2025, we had $110.0 million debt outstanding under our revolving credit facility. An increase of 100 basis points in interest rates would result in $1.1 million of incremental interest expense on an annualized basis. We believe that we have sufficient financial resources to accommodate this hypothetical increase in interest rates. We do not enter into market-risk-sensitive instruments for trading or other purposes.

Commodities Risk

We are also exposed to changes in the prices of raw materials, primarily steel and aluminum, along with components that are made from these raw materials. We generally do not enter into derivative instruments for the purpose of managing exposures associated with fluctuations in steel and aluminum prices. We do, from time to time, engage in pre-buys of components that are impacted by changes in steel, aluminum and other commodity prices in order to mitigate our exposure to such price increases and align our costs with prices quoted in specific customer orders. We also actively manage our material supply sourcing and may employ various methods to limit risk associated with commodity cost fluctuations due to normal market conditions and other factors including tariffs. See Management’s Discussion and Analysis of Financial Condition and Results of Operations included in Part 1, Item 2 of this Form 10-Q for information on the impacts of changes in input costs during the three months ended March 31, 2025.

We do not believe that there has been a material change in the nature or categories of the primary market risk exposures or in the particular markets that present our primary risk of loss. As of the date of this report, we do not know of or expect any material changes in the general nature of our primary market risk exposure in the near term. In this discussion, “near term” means a period of one year following the date of the most recent balance sheet contained in this Form 10-Q.

Prevailing interest rates, interest rate relationships and commodity costs are primarily determined by market factors that are beyond our control. All information provided in response to this item consists of forward-looking statements. Reference is made to the section captioned “Forward-Looking Statements” before Part I of this Form 10-Q for a discussion of the limitations on our responsibility for such statements.

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Item 4.

Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended), as of the end of the period covered by this Form 10-Q. Based on the evaluation of our disclosure controls and procedures as of March 31, 2025, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective.

Changes in Internal Control over Financial Reporting

There have been no changes during the quarter ended March 31, 2025 in our internal control over financial reporting that have materially affected, or are likely to materially affect, our internal control over financial reporting.

Inherent Limitations on Effectiveness of Controls

An effective internal control system, no matter how well designed, has inherent limitations, including the possibility of human error or overriding of controls, and therefore can provide only reasonable assurance with respect to reliable financial reporting. Because of its inherent limitations, our internal control over financial reporting may not prevent or detect all misstatements, including the possibility of human error, the circumvention or overriding of controls, or fraud. Effective internal controls can provide only reasonable assurance with respect to the preparation and fair presentation of financial statements.

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PART II. OTHER INFORMATION

Item 1.

Legal Proceedings

See “Note 8 – Commitments and Contingent Obligations,” included in Part I, Item 1, “Notes to Unaudited Consolidated Financial Statements,” within this Form 10-Q.

Item 1A.

Risk Factors

We have included in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2024, a description of certain risks and uncertainties that could affect our business, future performance or financial condition (the “Risk Factors”). There have been no material changes from the disclosure provided in the Form 10-K for the year ended December 31, 2024 with respect to the Risk Factors. Investors should consider the Risk Factors prior to making an investment decision with respect to our stock.

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

Issuer Purchases of Equity Securities

On February 17, 2022, our Board of Directors authorized the repurchase of up to $250.0 million of our common stock in open market transactions. We believe that we have sufficient resources to fund potential stock buybacks in which we may engage over the long term, although we are currently restricted from repurchasing our common stock under the terms of the Merger Agreement.

Period	Total Number of Shares Purchased⁽¹⁾		Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs		Approximate Dollar Value of Shares That May Yet be Purchased Under Announced Plans or Programs⁽²⁾ (In millions)
January 1 to January 31		-	$	-		-	$	223.0
February 1 to February 28		-		-		-		223.0
March 1 to March 31		33,603		8.30		-		223.0
Total		33,603				-

(1) During the quarter ended March 31, 2025, 33,603 shares were delivered by employees in satisfaction of tax withholding obligations that occurred upon the vesting of restricted shares.

(2) This column reflects the aggregate dollar amount of shares that may yet be purchased pursuant to the February 17, 2022 Board of Directors authorization described above.

Item 5.

Other Information

During the quarter ended March 31, 2025, no director or officer (as defined in Rule 16a-1(f) under the Exchange Act) of the Company adopted, modified or terminated a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement” (as each term is defined in Item 408 of Regulation S-K).

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Item 6.

Exhibits.

(a) Exhibits. The following exhibits are filed as a part of this report on Form 10-Q:

Exhibit No.		Document

10.37		Form of Restricted Stock Agreement (2025 LTI)*

10.38		Form of Restricted Stock Agreement (Retention)*

10.38		Form of Restricted Unit Agreement (2025 LTI)*

31.1		Certification of President and Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act

31.2		Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act

32		Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. § 1350

101.INS		Inline XBRL Instance Document (the Instance Document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document)

101.SCH		Inline XBRL Taxonomy Extension Schema Document

101.CAL		Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF		Inline XBRL Taxonomy Extension Definition Linkbase Document

101.LAB		Inline XBRL Taxonomy Extension Label Linkbase Document

101.PRE		Inline XBRL Taxonomy Extension Presentation Linkbase Document

104		Cover Page Interactive Data File (Embedded within the Inline XBRL document and included in Exhibit 101)

*Management contract or compensatory plan or arrangement.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Date: April 24, 2025	THE SHYFT GROUP, INC.



	By	/s/ Scott M. Ocholik
		Scott M. Ocholik Interim Chief Financial Officer and Vice President, Chief Accounting Officer and Corporate Controller (Principal Financial Officer and Principal Accounting Officer)

SHYFT GROUP, INC. 10-Q