REV Group, Inc. Q2 FY2024 earnings call

• Introduction: President and CEO Mark Skonieczny introduced new CFO Amy Campbell, who brings extensive experience from Caterpillar and other roles.
• Fire and Emergency Highlights: Strong backlogs (up to 2.5 years), operational improvements leading to a five-and-a-half year quarterly high in adjusted EBITDA margin, higher unit shipments, and a combined quarterly unit book-to-bill ratio of 1.1x. The Ocala, FL plant saw improved efficiencies and throughput.
• Recreational Vehicle: Depressed industry demand for motorized RVs, with new motorized wholesale unit shipments down 22% YTD through April. Model year 25 orders softer due to increased costs and market uncertainty.
• Strategic Actions: Sold fire regional technical center in Florida, wind down of E&C municipal transit bus business on track to complete in Q4. Returned $308.5 million to shareholders via repurchases and dividends.
• Board Updates: New board members appointed, including Cynthia Augustine with extensive HR and operating experience.

Specialty Vehicles Segment

• Sales: $437.4 million, an increase of 2.9% compared to the prior year (adjusting for Collins Bus divestiture, up 16%).
• Adjusted EBITDA: $33.8 million in Q2 2024, an increase of $13.5 million compared to Q2 2023. Adjusting for Collins Bus, earnings increased $23.7 million y-o-y, or 235%.
• Backlog: $4.1 billion, increased $706 million, or 21% (adjusting for divestiture, up 28%).

Recreational Vehicle Segment

• Sales: $179.7 million, decreased $76.9 million for 30% year-over-year.
• Adjusted EBITDA: $12.1 million, decreased $17 million or 58% versus the prior year.
• Backlog: $275 million at quarter end, decreased $220 million or 45% versus the prior year.

• 2024 Fiscal Full Year Outlook: Revenue range $2.4 billion to $2.5 billion, adjusted EBITDA $151 million to $165 million (midpoint $158 million), adjusted net income $76 million to $90 million, net income $230 million to $245 million, adjusted free cash flow $61 million to $72 million.
• Specifics: Specialty vehicles to drive momentum, offset by weakness in recreational vehicle and terminal truck segments. Fire and emergency businesses expected to offset headwinds, leading to improved margins in the back half.

• Industry Risks: Impact of higher interest rates and negative equity trade-in values on recreational vehicle sales.
• Operational Risks: Wind down of E&C municipal transit bus business, potential challenges in managing backlogs and production in fire and emergency segment, and uncertainty in recreational vehicle model year 25 order intake.

Q: In fire and emergency, how much was pricing up in the quarter, and then how much higher is pricing on what you're booking today versus what you're booking today compared to what you're delivering?

A: Fire and emergency sales up 33%, units up 18%, delta evenly split between price and mix. Over the last few years, combined pricing increases of 40% through mid-2023, then normalized 3%-4% annual increases. Fire in third to fourth inning, ambulance in fifth to sixth inning.

Q: On recreation, can you give thoughts on margin potential in 2025 if orders have started out soft?

A: Wait and see on back half of 2024. Market still choppy. Recreational vehicle margins expected to be 7% to 7.5% for full year. Focus on flexing cost structure as backlogs come down.

Q: Parsing out revenue factors: terminal truck lower, RV lower, fire and emergency partial offset. Can you detail?

A: Recreation guided ~$100M lower, terminal trucks down additional $50M, offset by second quarter beat in specialty vehicles and $70M-$80M increase in fire and emergency in back half.