REV Group, Inc. Q1 FY2025 earnings call

Management Statement and Operational Highlights

• Investor Day: Hosted in December, shared strategic vision and intermediate financial targets, emphasizing operational improvements and execution.
• First Quarter Performance: Record adjusted EBITDA and cash efficiency; organic performance strong excluding divested bus businesses.
• Tariffs: Direct exposure to tariffs is low; multi-sourcing strategy and supply chain improvements to mitigate risks.
• RV Segment: Tampa RV SuperShow saw increased retail sales; awaiting sustained retail sales improvement to adjust outlook.
• Share Repurchases: Resumed $250M authorization, repurchased 579,000 shares in Q1, with additional purchases post-Q1.
• Efficiency Initiatives: Streamlining operations, cost efficiencies, and supply chain resilience contributing to improved financial performance.

Segment Performance

• Specialty Vehicle Segment: First quarter sales were $370.2 million, a decrease of $47 million from the prior year. Excluding divested bus businesses, net sales increased 8.7%. Adjusted EBITDA was $35.2 million, a segment record, increasing by $9 million versus the prior year. Excluding divested bus contribution, adjusted EBITDA increased 116%. Backlog was $4.2 billion, a record, growing 12% vs prior year. Growth driven by fire apparatus and modular ambulance units, partially offset by lower terminal trucks and industrial sweepers.
• Recreational Vehicle Segment: Sales were $155 million, down 8.5% from prior year. Adjusted EBITDA was $9.2 million, down 21% versus the prior year. Backlog was $265 million, down 30% vs prior year. Lower unit volumes, increased dealer assistance, and inflationary pressures impacted results; retail sales outpaced wholesale.

Guidance

• Specialty Vehicle Segment: Expected continued year-over-year growth in high single to low double-digit range.
• Recreational Vehicle Segment: Full year revenue and adjusted EBITDA expected to be flat vs fiscal 2024.
• Consolidated: Top-line guidance $2.3B-$2.4B (mid single-digit growth); adjusted EBITDA guidance $190M-$220M (48% increase at midpoint vs 2025 pro forma).

Risks

• Tariffs: Uncertainty around tariff impacts, especially on supply chain and costs; direct exposure is low but fluid situation.
• Market Conditions: Dynamic market conditions across segments, affecting sales and margins.
• Supply Chain: Potential disruptions and inflationary pressures impacting costs.

Question and Answer

Q: Tariff impacts detail A: Direct exposure is 2% of direct material purchases; multi-sourcing strategy and supply chain improvements mitigate risks, but impact will be clearer in Q2 and beyond.

Q: RV segment outlook A: Need to see sustained retail sales improvement; wholesale and retail should return to one-to-one relationship.

Q: Pricing and backlog risk A: Can pass through inflationary costs on some products; backlog is strong but uncertainty around tariffs and inflation makes full quantification difficult.

Q: Order intake and market share A: Industry demand for fire trucks and ambulances is above long-term trends, but market share details are lumpy and uncertain.

Q: Tariff surcharge potential A: Can use surcharges on contracts in select situations, similar to how handled during COVID.

Q: Capital allocation and M&A A: Share buybacks are attractive use of capital; M&A is strategic and disciplined, looking for value-creating opportunities.