Aebi Schmidt Holding AG (AEBI) 2025 Q3 法說會逐字稿

Good day and thank you for standing by. Welcome to the Abby Schmidt Group 3rd quarter 2025 earnings call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there'll be a question-and-answer session. To ask a question during the session, you will need to press 1 and 1 on your telephone. You will then hear an automated message advising your hand is raised to withdraw your question, please press 1 and 1 again. Please be advised that today's conference is being recorded. I would now like to send the conference over to your first speaker today, Jay Goldbaum, general counsel, please go ahead.

All right, thank you, Sharon. We'll start on slide 2 with 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 S4 and 10Q filed with the SEC.

We'll be discussing non-GAAP information and performance measures, which we believe are useful in evaluating the company's operating performance. Reconciliations for these non-GAAP measures can be found in the conference call materials. Please also note that historic financials presented herein for the purposes of comparing our third quarter 2025 performance are presented on a combined basis. And do not reflect any pro forma adjustments or adjustments for costs related to integration activities, cost savings, or synergies that have occurred or may have been achieved if the acquisition of the former shift group had occurred on January 1, 2024.

Turning to slide 3.

I'd like to introduce the speakers for today's earnings call and the agenda for our presentation.

Barn Fruithoff, Group CEO, will provide the 3rd quarter highlights, outlook, and concluding remarks.

Stefan Schwerda, CEO of North America, will detail the performance and developments in North America, and Marco Portman, Group CFO will provide a financial overview.

With that.

I'll hand the call over to Barn.

Thank you and good morning everyone. I would like to welcome you to Eddie Schmidt Group's earnings call for the 3rd quarter, our first quarter after our takeover of the Shift Group on July 1st.

We have made considerable progress in integrating the two businesses, leveraging the expertise and knowledge of our employees of both of the combined business.

And we see very tangible improvements. We have created a new, stronger group with significant step up in profitability. Looking at our highlights on slide 5.

Despite a continued challenging economic environment with many uncertainties, we show an ongoing very strong order momentum with our surf water intake up 33% year over year.

This growth is supported by the sales excellence we have implemented at the legacy shift business. Stefan will speak about this in more detail.

We achieved $471 million sales, a 3% increase year over year, driven by significant organic growth in Europe. North America's sales are flat due to soft sales in walking vans and truck bodies at our legacy shift operation.

To address this soft demand, we have implemented substantial countermeasures, reorganized the business, and already see a recovery in the walk-in van orders in the 3rd quarter. Driven by this order momentum, we expect a significant increase in our 4th quarter sales.

Our profitability improved significantly with an adjusted EBITA of $42.2 million, a 25% increase year over year, driven by North America with a double-digit adjusted EBITA margin of 2.

10.2%. Europe and the rest of the world is also recovering fast, making substantial progress compared to the recent quarters.

We continue to carry an elevated working capital to support our strong growth. We have dedicated actions in implementation that will improve our working capital efficiency by year end, contributing to expected strong positive cash flow in the 4th quarter.

A highlight of our operation is our new supercenter in Chicago, which went live in early October, providing excellent customer service as a one-stop shop, broadening our service portfolio, and with our second earnings release post acquisition, we can provide our second increase of expected synergies. Let's have a look at slide 6.

Prior to the acquisition, we identified synergies of $25 to $30 million with our Q2 earnings relief. We increased this target by $10 million to $35 to$40 million. Today we can confidently say that we will reach the upper end of the increased target of $40 million.

We're also confident that we can deliver those synergies on an accelerated timeline versus our initial target.

We expect half of the synergies by mid-2026 and the full realization by mid-2027. In addition, we have implemented operational cost savings to support our profitability until the sustainable realization of the synergies materializes.

And we see first positive impacts on our 3rd quarter results with a significantly improved EBITA margin.

Let's have a closer look at Europe and the rest of the world on slide 7. Airports and municipal votes continue to show very strong order momentum and organic growth with improved margins.

Our investments in the next generation sweepers, including electrified sweepers and our updated product offering in agriculture, are expected to provide further momentum in 2026. Despite the summer holidays in Europe, we achieved sales of $135 million, an increase of 2.9% from the second quarter. Europe and the rest of the world's profitability significantly recovered with an adjusted EBITDA of $7.9 million, 50% above the second quarter. I now hand it over to Stefan for North America.

Thank you, Byron, and good morning, everybody. Thanks for giving me the opportunity to speak to you today. Let's talk about our market environment on slide 9.

Currently we see a very good market momentum. Our airport business is going very strong. We have a solid backlog moving into 2026, and we are working on adding capacity to bring lead times further down. This should enable us to capture additional opportunities. In the goods transport. We see improvements in order entry for walk-in vans. This will give us a good tailwind until year end and into the next year. We also believe that we are currently able to gain market share.

On the commercial truck side, we see strong performance in the fleet sector. Dealer inventories are still elevated, but also here we see good developments for AB Schmidt. And finally, on the municipal side, we see very strong coding activity and order entry. This provides a very good backlog for 2026. And in addition, we are expanding our geographical footprint to support additional market share growth.

Let's go to slide 10.

As you can see, backlog, order entry, and sales have improved quarter over quarter.

And on the profitability side, we are on the right track with delivering a double-digit EBITDA margin this quarter.

And for additional context, the 10.2% EBITSA margin in Q3 this year is 290 basis points higher than in Q3 2024.

Finally, on slide 11.

You can see the strong development in the order entry of the former shift. We certainly see some market recovery on the walk-in bin side.

But in addition to that, everybody in North America is now working with the same sales tools. This allows us to fully capitalize new opportunities which emerge across all segments. So we're going into 2026 with a very healthy backlog, and with a traditionally strong production setup from the legacy shift side, we have a good level of confidence to also succeed in 2026.

Thanks everybody for listening, and with that being said, I'll hand it over to Marco.

Thanks very much, Stephan, and good morning, everyone.

We continue on slide 13 with a more detailed look at our 3rd quarter results.

As already mentioned by my colleagues, we see a substantial order momentum, further growing our backlog. Our order intake increased 33% year over year and 17% versus the second quarter, with significant growth both in Europe, the rest of the world, and North America, driven by airport and municipal and a recovery in walk-in vans.

Our order backlog increased another 6% since June 2025 to $1.13 billion, which will translate into sales within the next 15 months, supporting our 2026 outlook with expected significant organic growth.

Moving on to slide 14.

Our third quarter sales reached $471 million, a 3% increase year over year, and notably a 4% increase versus the second quarter, despite the usual summer breaks in Europe.

However, I also have to point out a disappointing fact—the sales of the acquired Shift business.

We see a shortfall of $200 million versus their announced $969 million sales for full year 2025.

While the strong order momentum will allow us to improve significantly going forward, it will take its time to recover to previously planned sales loss.

Despite this weakness, in the month of September alone, we achieved sales of over $180 million and expect a continuation on that level, ending the year with a substantial sales growth in the fourth quarter, our seasonally strongest quarter.

Looking at our profitability on slide 15.

You can see that we translated that 3% increase in sales year over year into a 25% increase in adjusted EBITDA delivering $42.2 million versus $33.7 million the year prior.

North America achieved a double-digit adjusted EBITDA margin of 10.2% in the third quarter, substantially overperforming high performance.

And again, this profitability uplift was achieved despite lagging sales and legacy Shift.

Europe and the rest of the world delivered $7.9 million adjusted EBITDA, a significant improvement from prior quarters, but only a first stepping stone with an adjusted EBITDA margin of 5.8% for the third quarter. This was achieved despite the third quarter typically being the weakest in Europe.

For the group, this is a substantial 160 basis point improvement year over year, with the entire group, not just our North American segment, achieving a double-digit margin in the month of September.

Moving on to slide 16 to take a look at our balance sheet.

Our net working capital stood at $451 million at the end of September, an improvement of $36 million versus the prior year.

Our expected significant sales growth requires us to carry an ongoing high working capital, but we are implementing actions to improve our working capital efficiency and expect a significant contribution by year end with additional structural actions materializing in 2026.

Our target is to largely compensate the growth-induced working capital needs with efficiency gains.

Our net debt amounted to $469 million, increasing $22 million since the end of June, just prior to the closing of the acquisition of the former Shift Group. This increase is driven by the material transaction-related expenses and the expenses related to the restructuring and integration of the acquired Shift business.

Our leverage is consequently elevated for the time being, but we expect the first improvements, driven also by a strong positive cash flow in the fourth quarter to be lower leverage of 3.0 by year-end 2025 and below 2.0 by year-end 2026.

As we mentioned in our last earnings call, deleveraging remains a key pillar of our strategy as we continue an opportunistic approach for strategic tuck-in acquisitions and are watching the market closely. With that, I hand it back to Barran for the outlook and conclusion.

Thank you, Marco. Let me summarize on slide 18.

Abby Schmidt Group's strategic vision is to establish itself as a premier leader in the specialty vehicle market. Targeting revenues of $3 billion and achieving emits adjusted EBITA margin, with our third quarter results, we have already taken big steps in that direction.

Our integration is progressing exceptionally well, allowing us to confirm the upper end of the increased synergy target of $40 million.

Our order momentum is very strong, particularly against a challenging market with an order backlog that supports ambitious growth targets. Our profitability has taken a big step upwards, with 160 basis points margin improvement year over year.

Our net debt will significantly improve, supported by an expected strong positive cash flow in the fourth quarter, and our commitment to substantially deleveraging by year end 2026.

We confirm our market guidance for the full year 2025. We expect sales at the midpoint of our guidance range of $1.85 billion to $2 billion, and we expect an adjusted EITA at the upper half of our guidance range of $145 to $165 million.

We are very proud of our teams and what we have delivered in such a short time. We will continue to execute the integration, delivering our synergies and grow our market shares. That concludes our presentation. I will now turn it over to our operator to open up the line for questions, operator.

(Operator instruction)

Ben Summers from BTIG.

Hey, good morning and thank you for taking my question. So it's nice to hear that you noted that you're starting to see a pickup in the walk of band business. Just kind of curious, what you think is driving this pickup and I guess what your near term outlook is here.

That Hey, Ben, good morning. This is Stefan. So, we believe that there is a recovery going on in the market, the demand was fairly low over the last years, and with talking to customers, there is a general increase here in the sentiment, and basically, the demand is picking up from here.

. And that is what we believe is just a market recovery or what do you mean just, it is a market recovery in the walk-in van business. How far this takes, how long it goes, I cannot tell you, but at the moment, there's a very healthy and good order entry.

Awesome thank you. Then just a little bit on the M&A opportunities that you guys mentioned, curious what you guys are seeing in the market there and then just kind of, any potential timeline on when you think, we can maybe start to see us really, pursuing this kind of opportunistic strategy of these talking and acquisitions.

Good question. Thanks a lot, Ben. So, we're constantly being approached from kind of smaller, let's call it competitors, also in Canada.

More on the snow and ice side at the moment, but H1stly, we just looked at it, so at the moment we're really focusing on the integration, making sure that we can further improve our profitability and making sure that we also have our new organization under control.

Awesome thank you guys for taking my questions and thanks for the update.

Michael Schlitzky from DA Davidson.

Good morning and thank you. You had some discussion on sales excellence initiatives at the shift group business.

Let me TRY a little more color of, what you've done there, and you have more implement there. Have the results really been shown in the recent walk-in van orders, or is it being shown across, Royal Durmag across all businesses?

Thanks Mike for the question. So we have done a few things. So we first of all, we aligned the organization. Secondly, we already have now one common IT platform. So we migrated all to Salesforce by 1st of November so that everyone works with the same IT platform and. That's already a big step forward, I think, and that will help, especially to steer also the sales and to measure our people in a different way. And then we have also implemented some concrete measures, and I would like to give the word to Stefan to answer this a bit more in detail.

So Mike, this is Stefan. Thanks for the question. So it's not only on the walk-in van side, I think it is across the entire organization. Since November 1st, we're all on Salesforce.com. So every salesperson is required to put in call reports. We get the KPIs, a common set of KPIs across the entire organization out of Salesforce with a weekly performance. So basically what we discussed earlier, we executed on that and we are in operational mode here. On top of that, we did many executive meetings with customers, the bar and Jacob, myself, we were out, with customers talking to them, and we require from people in every unit clear strategies for a strategic client management.

So this is now spreading all over the organization, and we see good results here. So we will continue this path. We are at the beginning of the integration when it comes to Salesforce and all the performance data, and I firmly believe that we will gain a lot of traction from here.

Outstanding. Thanks. And as my follow-up, looking to 2026, I think Marco, you suggested or said that you're looking for a guarant growth next year.

I know you've got the backlog certainly to back up a lot of that statement. Any thoughts here whether it's going to be more vocational growth or it's going to be more, final mile, any comments you can make about airport, just some a bit more of a breakdown as to where you feel best and where you feel like you have to do a little extra work for 2026.

Yeah, it's going to be a combination of, growth in a variety of our markets. I mean, as we do have a very strong backlog, particularly in airport and municipal, and that concerns also both segments. But that's the case in Europe, as well as in the US.

That, of course, will be, let's say the starting point for continued growth.

And that is also what we really see already in our books. We're also quite confident that we have further opportunities, in our segments, in Europe, and expect to beat, the basic GDP growth by quite a bit. So we have quite some ambitions for Europe 2026. And in the US, it is, yes, as we talked about, and Stefan also mentioned, we do see, some very good momentum at the moment in walking vans. We'll have to see how that continues, how long that continues. Of course, it's still a bit of a question mark. But at the moment, what we can see and what we're booking, we're very confident about that. But it's maybe a little bit more difficult remains truck bodies, that's a bit more of a question mark. So we'll have to see how we can develop there in 206.

Thank you.

Matt Koranda from Roth Capital Partners.

Hi guys, this is Joseph on for Matt. Just want to see if you guys can unpack here the margin improvement drivers both at your United States segment as well as Europe. Anything you can give us there for details.

Sure, Marco here. I mean, look, in the US it is really what we can see now with that significant marginal improvement that we, are the new combined company. And so we see the marginal improvement, on a gross margin level where you can push for, better pricing policy from our side. And then especially, and that's the big one here in the 3rd quarter, on the cost side, which is in parts the accelerated realization of synergies, but also just a lot of good cost management, operational cost management, because we have seen, of course, the combined overhead, and that provides ample opportunities here to really, push for that increase. And that's what uplifted us in North America very significantly, and also very immediately.

In Europe it's really, a recovery, I would say a first step as we commented on in terms of recovery to where we want to be. Not yet, of course, at the margin level that is acceptable long-term, but we have made a significant step forward with the recovery in our after sales business in a margin that we generate there.

And with a better pricing as well. So that is really supporting Europe. And if you see a further growth there, as we expect, as we commented on in 2026, we will have a nice scaling up there on the generated profitability at the end of the day. So as we said, we feel, we are in a comfortable place at the moment. The market, of course, has some uncertainties, but for us what we can see in all the momentum and in our internal activities, we're well on track with what we expected.

May I add one point, Matt, we have also two things on our radar screen, and that's what will be the future footprint of our operations. That is something for sure we need to look at. And then the second point, we also think that we have some potential.

On the cog side which we already have digged into, but that takes a bit of time. So after the first clean up, now we need to do a bit more our our strategic work and that will be also part of our upcoming budget discussion.

Got it. Thanks for the details there, Vern. And then as we look at the synergies, you're coming off well ahead of like the pre-acquisition of range that you guys gave back in December, in your presentation and as we're looking to shift order intake growth growing 100% sequentially, can you remind us of just other levers as we kind of move toward this goal of the $40 million in synergies?

So our synergies.

I mean, let me reiterate what we're looking at here, right? So, pre-merger, we were talking about $25 to $30 million. .

Apologies. And the large part of that was already, cost-related. So basically, we identified what we said is roughly $5 million revenue synergies, about $5 million in procurement synergies, with some vertical integration that we have between the two businesses, and then the rest was cost synergy. So the big part was always cost synergies. What we now can see what uplift is at the moment, with our second increase here, to now saying we will reach the full $40 million of the increased target that we have given last quarter, that is predominantly coming as well from additional costs energy. So really, on the overhead cost, the overhead spend, that's where we rather immediately have identified further opportunities. As Barron just alluded, in terms of the procurement, synergies, we're talking here, the internal, replacement of bodies, that will also likely, achieve that $5 million plus that we were talking about initially, but it takes a bit of time. We are working on that, progressing very well, but it is a topic that will only kick in in the second half year of 2026. And then on top, we have the revenue synergies, which, of course, are the ones that take the longest to fully implement. We do have good feedback, we do have good identification of, customers where we can sell more products from our product range now. So that is going on, very nicely, but to really have that fully materialized, that's what you can expect to see, not just in the second half of 26, but also what drags us into 2027. In terms of the majority, of course, of synergies, they are and will remain to be cost-related. And that's also why we're confident in realizing then also a little bit on an accelerated time frame versus what we initially talked about.

Got it.

Thank you for taking my questions. I'll go ahead and leave it there.

Thanks very much Joseph.

Thank you. This concludes the Q&A for today, and I will now hand back to Jay Garba for closing remarks.

Thank you, Sharon. And I would like to thank everyone for joining today's call and your interest in the Abby Schmidt Group. As always, please feel free to reach out to investor.relations@ AbbySchmidt.com if you have any follow-up questions. For that, Sharon, please disconnect the call.

Thank you, this concludes today's conference call.

Thank you for participating, you may now disconnect.