Aebi Schmidt Holding (NASDAQ:AEBI) Q1 2026 Earnings Call

0:00 Good day and thank you for standing by. Welcome to the Aebi Schmidt Group First Quarter twenty twenty six Earnings Call. At this time, all participants are in a listen only mode. After the speakers' presentation, there will be a question and answer session. Session. 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 Grandcini, Investor Relations Director. Please go ahead. Thank you, Sharon. Good morning, and welcome to the Aebi Schmidt First Quarter twenty twenty six Earnings Call.

0:46 Joining me on the call today are Biren Freudhof, Group CEO, who will provide the fourth quarter highlights, outlook and concluding remarks Stefan Scheverda, CEO of North America and Henning Schroeder, CEO of Europe and Rest of World, who will detail the performance in the respective segments and Marco Portman, 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 twenty twenty five comparative figures referenced in today's material, like all figures prior to the merger closing day, are presented on a combined basis for Aebi Schmidt and the acquired Schiff Group.

1:46 Accordingly, all year over year comparisons are based on combined Q1 twenty twenty five financial information of both companies rather than standalone historical results. And with that, I hand the call over to Varun. Good morning, everyone. As shown on page five, Q1 twenty twenty six was marked by strong order momentum, increased sales, and profitability, especially in Europe and the rest of the world. In Q1 twenty twenty six, our order intake increased by 9% and order backlog by 23% versus Q1 twenty twenty five, and net sales reflected an underlying like for like growth of 7%.

2:37 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 six, 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 $1,300,000,000. We also announced a strategic partnership with YetiMov, a leading provider of autonomous and driver assistance solutions, to accelerate the future of autonomous mobility for airports.

3:32 Both our segment secured major wins, including a landmark 40,000,000 Euro European airport deal, a $50,000,000 truck body contract, a $45,000,000 orders from multiple state departments of transportation, and a $30,000,000 award with an American airport. Net sales delivered an underlying growth of 7% on a like for like basis, with Europe and the rest of the world as a strong contributor to this performance, driven by the successful launch of the new Klingo compact sweepers and continued momentum from the Lodoc product. Ultimately, our adjusted EBITDA improved by 6% in the first quarter of twenty twenty six compared to the first quarter of twenty twenty five.

4:28 Europe contributed to this with an outstanding 201% increase year over year. And now I turn the call over to Stefan. Thank you, Boris, 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 $30,000,000 of recent awards. This also includes the new products we introduced last year, the Badger and the P Series. Bharat mentioned earlier the partnership with YETI Move.

5:13 This is very compelling for North America because we have exclusive rights to bring YETIMOVES autonomous technology to the airports here in The US. 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 $50,000,000 contract over the next three years with a leading e commerce player, starting with an initial order of several 100 units. Walk in vents 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.

6:03 Our municipal business is still seeing strong quoting activity, including $45,000,000 of awards for Monroe and Swenson. Slide nine, please. As you can see, our backlog in Q1 increased 29% year over year. That was driven after a strong Q4 twenty twenty five by an 8% increase year over year in order entry. The successful order momentum was driven by the products 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 BluArc sales in Q1 twenty twenty five.

6:55 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, Stefan, and good morning from Switzerland. Europe and rest of the world delivered an outstanding Q1 twenty twenty six 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 aftersales 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.

7:47 In Q1, we secured a landmark $40,000,000 strategic contract with Paris airports, covering up to 29 airport machines, including a twenty 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 four cubic meter Klingo five fifty and continued market share gains by LARLOC drove strong order momentum. Street cleaning demand remains on an elevated level with particularly strong traction in Southern Europe. The after sites business once again proved to be a core profitability driver fueled by strong post snowfall demand in Central Europe.

8:34 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 aftersales. Net sales performance remained robust, supported by efficient operations, high production output and improved material availability.

9:21 That concludes my comments. And I 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 markets and despite various uncertainties given the geopolitical situation. This order performance resulted in a very healthy order backlog of now $1,300,000,000 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 four fifty six million dollars 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.

10:16 Sales in North America increased by 3.6% versus the first quarter twenty twenty five, excluding $26,000,000 of blue arc sales realized in 'twenty five. 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 twenty twenty six. 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 twenty twenty six, we converted an overall stable net sales into a 6% growth in adjusted EBITDA versus prior year first quarter, delivering $33,100,000 of adjusted EBITDA in Q1 or a 7.3% margin, representing a strong 40 basis point improvement.

11:20 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 $449,000,000 as of March 2026, reflecting a typical seasonal increase of $26,000,000 from year end 2025, while improving $4,000,000 versus prior year March 2025.

12:07 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 $455,000,000 as of March 2026, an increase of $18,000,000 versus year end 'twenty five, 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 2.0 times by year end 2026. That concludes my comments, and I hand it back to Borin 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.

13:01 Europe and the 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.

13:48 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 aftersales 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.

14:35 In parallel, we are accelerating our aftersales 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 1,950,000,000 to $2,150,000,000 adjusted EBITDA between 175,000,000 and 195,000,000 and year end leverage at or below two times.

15:30 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 twenty twenty six 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? Thank you. We will now go to our first question.

16:34 And our first question today comes from the line of Michael Schlitzky from DA Davidson. Please go ahead. Hello and thank you. 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 upfitting but just of a vehicle that's on a tarmac? And also any sense of the size of what that might mean for your EBITDA in the coming years? So Mike, this is Stefan. Good morning. 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 vehicles that go on the airports and we take the full ownership of the entire system. That also requires very close cooperation with the airports.

17:40 When you are 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, thank you so much for that. Also wanted to follow-up with the details on your walk in van comments. You had mentioned things are getting better, their orders are increasing. Just gives a sense that the one thing is up and running again, it sounds like you had some automation or some outside help or help from Europe brought over to The US to help that walk in van business ramp up this time around this brand new cycle here. Curious as to, A, how well that's going? Are things on schedule with hiring, with making the production improvements?

18:45 And then secondly, whether there could be some large margin expansion this cycle versus what shift 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 experts 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 strong order entry.

19:36 On the margin expansion, 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. Mean, Mike, this is Marco 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.

20:23 Great. I appreciate the color guys. I'll pass it along. Thank you. Thank you. You. Your next question comes from the line of Greg Lewis from BTIG. Please go ahead. Yes. Hi, thank you and good afternoon gentlemen and thanks for taking my questions. I appreciate the strong order intake. It would be helpful, I think, us if you could kind of bracket kind of the timelines of converting that as we look at airport municipal and even the walk in van. Just kinda curious how we should be thinking about that, you know, maybe this year and maybe even in the next year. Okay. Thanks, Mark, for this question.

21:10 You know, as we mentioned in our presentation, we still have a huge backlog in the municipal area with, you know, 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, you know, airport, as we already mentioned, with four quarter results, I mean, it's still we're booking into end of twenty twenty seven, beginning also 2028. So there, we also ramped up our output. So there we are well on track. And also on the the walk in van, we improved our output.

21:55 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 activities in the 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. 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 two second or for those two half years.

23:00 And you can expect to see already a sizable step up now in the second quarter, which as Bart and just alluded, right, so it's the walk in manors coming in with a lot of other things that are materializing in the next couple of months on top of that. Okay, great. And then just following up, Maher, 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 man orders, which I should point out is a little bit unusual, right? So typically walk in main 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.

24:00 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 very 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 one point nine five to 2.15 we've given. Helpful. Thank you. Thank you. Your next question today comes from the line of Matt Koranda from ROTH Capital. Please go ahead. Is there any way to break apart the North American order flow of $366,000,000 that you called out? I'm just curious sort of the breakdown between walk in van and then municipal and airport.

24:58 I guess the reason I asked is 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 the walk in band order demand is. Yeah, 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 that walk in bin 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 twenty twenty five.

25:54 And as we commented in November with our third quarter twenty twenty five 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 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 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.

26:41 Okay. That's fair and I appreciate the comments. And then on just like the cadence of the year, especially for North America, sounds like you're signaling the 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 Stefan. I'll take this one. Yes, this assumption is correct. And we see this trend kicking in and 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.

27:33 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 challenge, but honestly, that is already factored in 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.

28:19 So, on that end, we feel, so far quite comfortable, so that will not heavily impact our our EBITDA. So I think we feel comfortable. And as you know, normally, we log in the steel, so we have long term contracts with our suppliers. So, we feel quite comfortable, that will not heavily impact our EBITDA guidance. Does this help? Okay. Very much so. Thank you. I appreciate it. I'll leave it there. Thank you. This concludes the Q and A for today. And I will now hand back to Simon Sirmani Grangini for closing remarks. Please go ahead. Thank you, Sharon.

29:05 I thank everyone for joining today's call and your interest in the Aebi Schmidt Group. As always, please reach out to investor. Relationsebi Schmidt dot com 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.