REV Group, Inc. Q3 FY2025 earnings call

Management Statement and Operational Highlights

• Operational Momentum: Sustained gains in manufacturing throughput, quality, and efficiency in fire and ambulance businesses. Fire unit shipments increased 11% and ambulance unit shipments increased 7% versus 2024.
• Facility Expansion: Groundbreaking of a major $20 million facility expansion at Spartan Emergency Response in Brandon, South Dakota, to expand fire apparatus production capacity by 40%, adding 56,000 square feet and creating 50 new jobs.
• Business Divestiture: Completed the sale of the Lance Camper business, streamlining the RV portfolio to focus on motorized RVs in Class A, B, and C categories.
• Financial Strength: Strong year-to-date cash flow, solid balance sheet, and financial flexibility to invest in the business, pursue share repurchases, maintain a dividend, and evaluate M&A opportunities.

Segment Performance

• Specialty Vehicles Segment: Third-quarter sales were $483.3 million, an increase of 11.8% compared to the prior year (excluding the divested municipal transit bus business, net sales increased 24.6%). Adjusted EBITDA was $64.6 million, up 71.4% from the prior year. Backlog exiting the quarter was $4.3 billion. For the fourth quarter, low single-digit sequential revenue growth is expected, with tariff-related headwinds of $5 million to $7 million, resulting in mid-teens revenue growth versus the prior year's pro forma base.
• Recreational Vehicle Segment: Sales of $161.7 million increased 9.7% versus the prior year's third quarter. Adjusted EBITDA was $8.1 million, down 13.8% versus the prior year. Segment backlog of $224 million declined 7% versus the prior year. Full-year recreational vehicle segment guidance remains unchanged with revenue expected in the range of $625 million to $650 million and adjusted EBITDA in the range of $30 million to $35 million.

Guidance

• Full-Year 2025: Raised consolidated revenue guidance to a range of $2.4 billion to $2.45 billion. Specialty Vehicles segment is expected to have mid-teens revenue growth versus the 2024 pro forma base. Full-year adjusted EBITDA is updated to a range of $220 million to $230 million. Net income is in the range of $95 million to $108 million, and adjusted net income is in the range of $107 million to $138 million. Free cash flow is raised to a range of $140 million to $150 million.

Risks

• Tariffs: Expected $5 million to $7 million of tariff-related headwinds in the fourth quarter, with ongoing impact into 2026. Macro-economic uncertainty affecting demand in the recreational vehicle segment.

Q: Fiscal third quarter EBITDA margins, schedule to meet 10%-12% goals by 2027 A: Mark Skonieczny states they're on track with the progression, pleased with Q3 performance, and the cadence is in line with expectations.

Q: Near-term margin, tariffs impact on 2026 A: Amy Campbell mentions the full effect of tariffs in Q4, first quarter sales expected to be down sequentially, with incrementals for specialty vehicles in the first half of 2026 in the range of 20%-25% then reverting to 30%-40%.

Q: Tariffs impact on fire and hazards business, pricing and margin expectations A: Amy Campbell says they're looking at pricing to offset inflation, not taking price increases for tariffs, but have opportunities to reduce cost structure.

Q: Tariffs impact on machinery peers, REV Group's exposure A: Mark Skonieczny states exposure is ~$50-$60 million in component purchases from abroad, working with the supply base to minimize impacts.

Q: Fire and hazards capacity expansion, sustainability of demand A: Mark Skonieczny says they're working on throughput improvements, with the goal of industry-leading lead times and backlog normalization expected by 2027.

Q: Specialty vehicle backlog, pricing of new orders A: Amy Campbell clarifies backlog is down in terms of months to deliver, not units, and pricing will convert as they ship through the backlog.

Q: Capacity expansion beyond Q4, 2026-2027 improvements A: Mark Skonieczny says more details will be provided in December, continuing to see throughput improvements including facility expansions.

Q: Free cash flow, capital deployment A: Mark Skonieczny says they're opportunistic with M&A, but first focus is on internal investments in productivity, disciplined in evaluating accretive acquisitions.