AEBI

Business Context and Reporting Period

This Form 10-Q covers the quarterly period ended June 30, 2026, for Aebi Schmidt Holding AG, a provider of technical products for cleaning, clearing traffic areas, and mowing green spaces, as well as specialty vehicle manufacturing. The reporting period reflects the full integration of The Shyft Group, Inc. ("Shyft"), acquired via merger on July 1, 2025. The Company operates two reportable segments: North America and Europe and Rest of the World (ROW).

Key Financial Metrics

Material Changes vs. Prior Period

• Revenue Growth: Sales increased by 79% ($218.7 million) for the quarter and 81% ($425.0 million) for the six months compared to the prior year periods. This growth is primarily driven by the inclusion of Shyft, which contributed $210.9 million in Q2 and $397.2 million in the first half of 2026.
• Profitability: The Company returned to profitability, reporting net income of $10.5 million for the quarter, compared to a net loss of $2.3 million in the prior year quarter. Operating income rose 95% year-over-year for the quarter.
• Expenses: Cost of products sold increased 81% due to Shyft integration. Selling, general, and administrative (SG&A) expenses rose 66% ($22.1 million) for the quarter, largely due to Shyft-related costs ($20.7 million). Amortization of purchased intangibles increased 135% due to the Shyft acquisition.
• Segment Performance: North America sales surged 144% to $356.3 million, while Europe and ROW sales grew 7% to $140.1 million.

Guidance, Outlook, Risks, and Unusual Items

• Outlook: Management believes available liquidity is sufficient to meet obligations for at least 12 months. No specific forward-looking financial guidance (e.g., full-year revenue targets) was provided in this text.
• Material Weaknesses in Internal Controls: Management concluded that disclosure controls and procedures were not effective as of June 30, 2026, due to material weaknesses. These include insufficient personnel with U.S. GAAP expertise, lack of formal accounting policies, segregation of duties issues, and ineffective IT general controls over SAP and other systems. A remediation plan involving hiring, training, and system upgrades is underway.
• Debt Covenants: The Company is in compliance with all debt covenants, including a leverage ratio requirement not to exceed 3.75x.
• Unusual Items: The financial results include significant one-time impacts from the Shyft merger, including transaction-related expenses, integration costs, and amortization of acquired intangibles. The Company also incurred $1.4 million in legal matters and $3.9 million in integration costs during the first six months of 2026.

Investor Verification Checklist

• Internal Control Remediation: Verify the progress of the remediation plan for the identified material weaknesses in internal controls over financial reporting, specifically regarding IT general controls and U.S. GAAP expertise.
• Shyft Integration Synergies: Assess whether the projected synergies from the Shyft acquisition are being realized, given the significant increase in SG&A and amortization expenses.
• Working Capital Trends: Monitor the $53.4 million unfavorable change in accounts payable and the $45.9 million increase in inventory during the first six months of 2026 to ensure liquidity is not strained by working capital build-up.
• Debt Service Capacity: Confirm the Company's ability to service $617.7 million in total debt, particularly with variable interest rates averaging near 6% on major facilities.
• Non-GAAP Reconciliations: Review the reconciliation of Adjusted EBITDA to Net Income to understand the magnitude of non-recurring adjustments (e.g., transaction costs, integration costs) impacting reported earnings.