Aebi Schmidt Holding AG ($AEBI)

Good day, and thank you for standing by. Welcome to the Aebi Schmidt Group First Quarter 2026 Earnings Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Simone Grancini, Investor Relations Director. Please go ahead.

Thank you, Sharon. Good morning, and welcome to the Aebi Schmidt First Quarter 2026 Earnings Call. Joining me on the call today are Barend Fruithof, Group CEO, who will provide the first quarter highlights, outlook and concluding remarks. Steffen Schewerda, CEO, North America; and Henning Schroeder, CEO of Europe and Rest of World, who will detail the performance in the respective segments; and Marco Portmann, Group CFO, who will provide a financial overview. Before I turn the call over to Barend, I remind you that today's comments include forward-looking statements subject to the safe harbor language contained in this morning's press release and in Aebi Schmidt's filing with the SEC. As a reminder, all Q1 2025 comparative figures referenced in today's material, like all figures prior to the merger closing date are presented on a combined basis for Aebi Schmidt and the acquired Shyft Group. Accordingly, all year-over-year comparisons are based on combined Q1 2025 financial information of both companies rather than stand-alone historical results. And with that, I hand the call over to Barend.

Good morning, everyone. As shown on Page 5, Q1 2026 was marked by strong order momentum, increased sales and profitability, especially in Europe and Rest of the World. In Q1 2026, our order intake increased by 9% and order backlog by 23% versus Q1 2025. And net sales reflected an underlying like-for-like growth of 7%. Our adjusted EBITDA increased 6% year-over-year, delivering a significantly higher adjusted EBITDA margin of 7.3% versus 6.9% in the prior year, and net income improved by 7% year-over-year. On Page 6, I will provide you with some more details on these achievements. In Q1, we launched our new brand architecture, completed key facility ramp-ups and positioned the company to execute on our record backlog of $1.3 billion. We also announced a strategic partnership with Yeti Move, a leading provider of autonomous and driver assistance solutions to accelerate the future of autonomous mobility for airports. Both our segments secured major wins, including a landmark EUR 40 million European airport deal, a $15 million truck body contract, a $45 million orders from multiple state departments of transportation and a $30 million award with an American airport. Net sales delivered an underlying growth of 7% on a like-for-like basis with Europe and rest of the world as a strong contributor to this performance, driven by the successful launch of the new Cleango compact sweepers and continued momentum from the Ladog product. Ultimately, our adjusted EBITDA improved by 6% in the first quarter of 2026 compared to the first quarter of 2025. Europe contributed to this with an outstanding 201% increase year-over-year. And now I turn the call over to Steffen.

Thank you, Barend, and good morning, everybody, and thanks for having me. If I had to summarize it in one sentence, 2026 started with strong order entry and solid progress of the integration, especially of our commercial truck business. Our Airport business is still growing strong with over $30 million of recent awards. This also includes the new products we introduced last year, the Badger and the P-Series. Barend mentioned earlier the partnership with Yeti Move. This is very compelling for North America because we have exclusive rights to bring Yeti Move's autonomous technology to the airports here in the U.S. Our chassis team continues to demonstrate operational excellence. Spartan RV Chassis received Newmar's 2025 Supplier of the Year award for industry-leading quality, innovation, service and customer support. On the goods transport side, we secured a $15 million contract over the next 3 years with a leading e-commerce player, starting with an initial order of several hundred units. Walk-in vans continued to improve month by month, and our commercial business achieved growth year-over-year, also driven by the vertical integration of our service bodies. Our Municipal business is still seeing strong quoting activity, including $45 million of awards for Monroe and Swenson. Slide 9, please. As you can see, our backlog in Q1 increased 29% year-over-year. That was driven after a strong Q4 2025 by an 8% increase year-over-year in order intake. The successful order momentum was driven by the product and services from airports, chassis, municipal, as well as strong signs of recovery for walk-in vans. Net sales increased by 3.6% year-over-year on a like-for-like basis, excluding the Blue Arc sales in Q1 2025. Finally, we saw a profitability impact during the ramp-up of the walk-in van production to meet our full year revenue goals. And with that being said, I hand the call over to my colleague, Henning Schroeder. Henning?

Thank you, Steffen, and good morning from Switzerland. Europe and Rest of the World delivered an outstanding Q1 2026 performance, supported by solid order intake, high net sales and a significant improvement in profitability. As illustrated on Page 11, our markets are showing increasing momentum, particularly in Airport and Municipal, with After Sales making a substantial contribution to profitability growth. The Airport business is entering a key phase with several large tenders announced or anticipated across major civil and military airports. In Q1, we secured a landmark EUR 40 million strategic contract with Paris airports, covering up to 29 airport machines, including a 20-year service agreement. In parallel, we are building a solid footprint in the APAC region by broadening our local product portfolio. Within the Municipal business, the launch of the new 4 cubic meter Cleango 550 and continued market share gains by Ladog drove strong order momentum. Street cleaning demand remains on an elevated level with particularly strong traction in Southern Europe. The After Sales business once again proved to be a core profitability driver, fueled by strong post-snowfall demand in Central Europe. In parallel, we are investing in technician capacity and pricing optimization to underpin continued growth. Turning to Page 12. We see continued order momentum driven by solid volume execution and margin expansion, supporting our ongoing improvement trajectory. I'm particularly proud of the team for delivering an exceptional 201% year-over-year increase in profitability, a standout achievement driven by improved pricing, higher volumes in new business and a significant contribution from After Sales. Net sales performance remained robust, supported by efficient operations, high production output and improved material availability. That concludes my comments, and I'll now turn the call over to Marco.

Thank you, Henning, and good morning, everyone. As we see on Page 14, our first quarter saw solid order momentum, underpinning consistent backlog growth against the challenging market and despite various uncertainties given the geopolitical situation. This order performance resulted in a very healthy order backlog of now $1.3 billion, up 23% year-over-year, providing good visibility for the remainder of 2026. Moving on to Slide 15. Net sales in the first quarter reached $456 million, representing a 7% year-over-year increase on a like-for-like basis, overcoming that challenging environment and as we believe, representing a continued growth in relevant market shares. Sales in North America increased by 3.6% versus the first quarter 2025, excluding $26 million of Blue Arc sales realized in '25. Net sales in Europe and the rest of the world organically grew by an impressive 16%. And as mentioned, we expect to see significant improvements in net sales materializing in the second quarter and especially in the second half of 2026. This is due to the typical seasonality of our business. Our demand pattern results in a softer start to a new year with a continuous quarterly improvement and ultimately a strong year-end. Looking at profitability on Slide 16. In our first quarter of 2026, we converted an overall stable net sales into a 6% growth in adjusted EBITDA versus prior year first quarter, delivering $33.1 million of adjusted EBITDA in Q1 or a 7.3% margin, representing a strong 40 basis point improvement. North America's EBITDA margin decreased by 40 basis points, which was driven by ramp-up expansion of new facilities and preparations to convert walk-in van orders into revenue beginning in the second quarter. And as highlighted earlier, Europe and the Rest of World were a key contributor to the group's performance with substantially improved margins, tripling their adjusted EBITDA versus prior year. Finally, having a look at our balance sheet on Slide 17. Net working capital stood at $449 million as of March 2026, reflecting a typical seasonal increase of $26 million from year-end 2025, while improving $4 million versus prior March 2025. This is driven by required inventory investments to facilitate the expected growth in net sales, which we offset by efficiency gains and improvements in collections of accounts receivables. Our net debt increased to $455 million as of March 2026, an increase of $18 million versus year-end '25, driven by that seasonal and temporary increase of working capital. With this, we have maintained a stable leverage ratio of 2.88 and are on track to our targets to improve to a leverage of 2.0x by year-end 2026. That concludes my comments, and I hand it back to Barend for the closing remarks.

Thank you, Marco. Continuing on Page 19. Q1 performance was in line with the expected pronounced seasonality and supports our full year 2026 outlook. Europe and Rest of the World delivered an exceptional Q1, particularly on profitability, while North America showed strong order momentum despite geopolitical and commercial market headwinds. Ultimately, the strong order intake and backlog will drive net sales conversion through the second quarter and into the second half of the year. Additionally, we will see further materialization of merger synergies throughout the year. Moving to Page 20. Our priorities remain firmly focused on converting our strong momentum into profitable growth and delivering on our full year guidance. In North America, the priority is execution. We are focused on converting our record backlog into revenue, supported by accelerating walk-in van deliveries and increasing throughput at our Chicago Supercenter. At the same time, we are capturing merger synergies, expanding vertical integration and optimizing our operational footprint to further improve efficiency and margins. We also continue to strengthen our After Sales organization, which remains a key driver for profitable growth. In Europe and Rest of the World, we are driving operational improvements through factory efficiency programs and continued pricing initiatives. In parallel, we are accelerating our After Sales capabilities and expanding our electrical municipal vehicle solutions to capture long-term growth opportunities tied to sustainability and fleet transformation. Overall, we believe the actions we are taking across both segments position us well to improve execution, expand profitability and support sustainable growth. Moving to Page 21, covering our outlook and summary. We confirm our full year 2026 guidance, net sales in the range of $1.95 to $2.15 billion, adjusted EBITDA between $175 million and $195 million and year-end leverage at or below 2x. Q1 has put us on track to deliver these targets, supported by strong order intake growth, exceptional performance in Europe and Rest of the World, meaningful profitability improvement and solid progress on working capital. In addition, we expect North America to return to significant growth from Q2 2026 onwards, driven by strong order momentum, new locations and further realization of synergies. That concludes our presentation. I now turn it over to our operator to open up the line for questions. Operator?

[Operator Instructions] And our first question today comes from the line of Michael Shlisky from D.A. Davidson.

Can you maybe tell us a little bit more about the autonomous airport product agreement that you made? I guess I'm kind of wondering what will Aebi Schmidt's role be in that? It's just an upfitting but just of a vehicle that's on a tarmac? And also, any sense the size of what that might mean for your EBITDA in the coming years?

So Mike, this is Steffen. I take this one. So what that means is we will integrate that technology into our products. That goes beyond upfitting because we will integrate the entire system into the vehicles that go on the airports, and we took -- we take the full ownership of the entire system. That also requires a very close cooperation with the airports. When you're asking about the impact, the financial impact, there will be one in the mid and long term. These things are usually in the development phase for a couple or several years. So there's nothing in the short term, but what we expect here in the short term is that we will have some prototypes running on airports. I hope that answers your question.

Yes. Also wanted to follow up with some details on your walk-in van comments, Barend. You had mentioned things are getting better there. Orders are increasing. Can you just give us a sense as to when things are up and running again. It sounds like you had some automation or some outside help or help from Europe brought over to the U.S. to help that walk-in van business ramp up this time around, this brand-new cycle here. Curious as to, a, how that's going? Are things on schedule with hiring, with making the production improvements? And then secondly, whether there could be some large margin expansion this cycle versus what Shyft Group saw last time around?

So Mike, thanks for that. I'll take that, too. So indeed, we had some ramp-up procedures here through the first quarter, and we commented on that as well. The comment related to the support from Europe is we have expats over here, which are here also on a long-term base to support that ramp-up. So we are through this at the moment, and we see a massive improvement here through Q2 into Q3, supported by a strong order entry. On the margin expansion, I don't want to comment that too much in detail, but we see an improvement here, significant improvement over the last months month-over-month.

I mean, Mike, this is Marco speaking. To add on that, I mean, that's really the underlying basis here, right? You're fully on point with that question. We have seen a depressed walk-in van market in the past couple of years. We now see that structural recovery from the order momentum. And yes, of course, not just with the improvement of our production setup and efficiency, but also generally with the recovering of the walk-in van market, we will see that margin that you're asking about coming back and be realized over the coming quarters, absolutely.

Your next question comes from the line of Greg Lewis from BTIG.

I appreciate the strong order intake. It would be helpful, I think, for us if you could kind of bracket kind of the time lines of converting that as we look at airport, municipal and even the walk-in van. Just kind of curious how we should be thinking about that maybe this year and maybe even in the next year.

Okay. Thanks, Mark (sic) [ Greg ], for this question. As we mentioned in our presentation, we still have a huge backlog in the municipal area with the launch of the supercenter in Chicago, we really started to ramp up and to convert. So there, you will see definitely much higher revenues in the second quarter. Then airport, as we already mentioned with fourth quarter results, I mean, it's still we're booking into end of 2027, beginning also 2028. So there, we also ramped up our output. So there we are well on track. And also on the walk-in van, we improved our output. At the same time, we also were able to reduce our net working capital in that specific area. And we also received already orders for 2027 in the walk-in van area. So that's a bit high level. Europe is like quite stable as we had in the past. So the only area where we see a bit slow -- where we see slow activity is in the area of commercial business. So -- but also here, we see some positive trends. And Marco, I don't know if you want to add a few things.

Yes. I mean, look, Greg, to be a bit more specific as much as I can, at least, we have guided and still do so also in our today's earnings materials that we expect to realize about 45% of our revenue this year in the first half and about 55% in the second half. So you already see, if you take that math from the midpoint, you see that's a 22% increase that we expect for those 2 second -- for those 2 half years. And you can expect to see already a sizable step-up now in the second quarter, which, as Barend just alluded, right? So it's the walk-in van orders coming in with a lot of other things that materializing in the next couple of months on top of that.

Okay. Great. And then just a follow-up, Marco. As we think about the guidance, what kind of swings us between the low end and the high end on revenues?

Well, I mean, look, in terms of Airport and Municipal, we do have the very strong backlog, which now also is indeed looking very healthy in the meantime in walk-in van orders. which I should point out is a little bit unusual, right? So typically, walk-in van is a lower cycle between orders and realization, but this is really now the bigger recovery of the bigger orders. And you can see that this also has built up some backlog, which we now translate. So what drives us then consequently between the lower and upper end of the guidance? As you know, we also have the other segments, commercial specifically, and that's also where we commented on. That is still soft, and that's still unclear how it will develop for the second half year. So we will see how much of that we can realize in the coming months and how the market is developing, but that will be ultimately one of the key drivers between the revenue guidance of $1.95 billion to $2.15 billion we've given.

Your next question today comes from the line of Matt Koranda from ROTH Capital.

Is there any way to break apart the North American order flow of $366 million that you called out? I'm just curious, sort of, the breakdown between walk-in van and then municipal and airport. I guess the reason I ask is just trying to get a sense for the flow of walk-in van order demand. I know it was quite strong at the end of last year. It sounds like it's continued strong in the first quarter. But I guess there's some crosscurrents at the parcel fleets if you listen to their sort of commentary around average daily package volume and whatnot. So just trying to get a sense for sort of how sustainable walk-in van order demand is.

Yes, I'll take this one. This is again, Marco speaking, Matt. I fully get where your question is coming from. But as you do know, we are not necessarily giving too much details out, especially on the order data between our end-customer segments. But I can confirm that walk-in van recovery, and as we said with the full year guidance -- or let me actually -- let me take a larger bracket even, right? So we saw the recovery coming in end of 2025. And as we commented in November with our third quarter '25 release, we didn't know at the time whether this was structural because it was a few customers, it was some selected orders, but it was a very good healthy sign. And as we said then with the full year release, we have really seen that this is now broadening. It's throughout the customer portfolio, and that's exactly what we also can confirm today. We see that this is really a healthy development. And as we said, we believe this is really now structural with that market coming back after a long depressed phase in the last couple of years following the COVID times. So it is a sizable part of the $300-plus million order intake. But again, unfortunately, I can't give you the exact specifics. We're not breaking that down into the actual customer end segments.

Okay. That's fair, and I appreciate the comments. And then on, just like, the cadence of the year, especially for North America, it sounds like you're signaling a steady ramp-up in production throughout the year, so probably sequential improvement across the year in terms of revenue. Should we assume that EBITDA sort of improves commensurately with sales growth as well sequentially throughout the year?

Yes, Matt, this is Steffen. I'll take this one. Yes, this assumption is correct. And we see this trend kicking in, and that is a -- that's a correct assumption, yes.

Okay. Got it. And then just last one, from a broader perspective, in terms of the guidance reiterated for the full year. How did you, if at all, I guess, factor in any increased component costs associated with higher oil prices and freight across the globe?

So Matt, very good question. I mean, in certain areas where we have a very high backlog, so there we have a few challenges. But honestly, that is already factored into our guidance because we were always kind of cautious there. And we already have taken measures given material and commodity price increases, we also have increased freight costs, and we also have done a few things on the After Sales. So on that end, we feel so far quite comfortable. So that will not heavily impact our EBITDA. So I think we feel comfortable. And as you know, normally, we lock in the steel. So we have long-term contracts with our suppliers. So we feel quite comfortable and that will not heavily impact our EBITDA guidance. Does this help?

This concludes the Q&A for today. And I will now hand back to Simone Grancini for closing remarks. Please go ahead.

Thank you, Sharon. I thank everyone for joining today's call and your interest in the Aebi Schmidt Group. As always, please reach out to [email protected] if you have any follow-up questions. And with that, Sharon, please disconnect the call.

Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect.