REV Group(REVG) - 2021 Q1 - Quarterly Report

PART I. FINANCIAL INFORMATION This section provides the unaudited condensed consolidated financial information for REV Group, Inc., including financial statements, management's discussion and analysis, and disclosures on market risk and controls Financial Statements This section presents REV Group, Inc.'s unaudited condensed consolidated financial statements for Q1 2021, including balance sheets, operations, cash flows, and detailed notes Condensed Unaudited Consolidated Balance Sheets As of January 31, 2021, total assets decreased to $1,259.1 million, total liabilities decreased to $783.8 million, and shareholders' equity slightly increased to $475.3 million Consolidated Balance Sheet Highlights (in millions) | Account | Jan 31, 2021 | Oct 31, 2020 | | :--- | :--- | :--- | | Total Current Assets | $777.3 | $812.0 | | Total Assets | $1,259.1 | $1,312.3 | | Total Current Liabilities | $403.1 | $447.3 | | Total Liabilities | $783.8 | $840.0 | | Total Shareholders' Equity | $475.3 | $472.3 | Condensed Unaudited Consolidated Statements of Operations For Q1 2021, net sales increased to $554.0 million, gross profit rose to $61.7 million, and the company achieved breakeven net income, a significant improvement from a prior-year loss Statement of Operations Summary (in millions) | Metric | Q1 2021 | Q1 2020 | | :--- | :--- | :--- | | Net Sales | $554.0 | $532.1 | | Gross Profit | $61.7 | $47.4 | | Operating Income (Loss) | $9.7 | $(4.7) | | Net Income (Loss) | $0.0 | $(9.4) | | Diluted EPS | $0.00 | $(0.15) | Condensed Unaudited Consolidated Statements of Cash Flows Net cash from operating activities turned positive at $1.9 million in Q1 2021, investing activities provided $7.1 million, and financing activities used $11.3 million, leading to a $2.3 million net decrease in cash Cash Flow Summary (in millions) | Cash Flow Activity | Q1 2021 | Q1 2020 | | :--- | :--- | :--- | | Net cash from operating activities | $1.9 | $(13.3) | | Net cash from investing activities | $7.1 | $(1.3) | | Net cash from financing activities | $(11.3) | $78.6 | | Net (decrease) increase in cash | $(2.3) | $64.0 | Notes to Financial Statements Notes detail the Spartan ER acquisition, the divestiture of REV Brazil resulting in a $3.8 million loss, and the company's debt structure, confirming compliance with all covenants - On February 1, 2020, the company acquired Spartan Emergency Response (Spartan ER) for an adjusted purchase price of $47.3 million, funded via its ABL credit facility, resulting in an $8.2 million gain[32][33][35] - In Q1 2021, the company decided to divest its REV Brazil business, classifying it as held for sale and recognizing a $3.8 million loss[41] - As of January 31, 2021, total debt was $332.1 million, with $165.0 million under the ABL facility and $167.1 million under the Term Loan, and $230.0 million availability under the ABL Facility[43][49] - The company is involved in pending putative securities class actions and derivative actions related to its 2017 IPO and secondary offering, with an undetermined outcome[73][74] Management's Discussion and Analysis (MD&A) Management discusses Q1 2021 performance, highlighting a 4.1% increase in consolidated net sales to $554.0 million, improved gross profit margin to 11.1%, and a doubling of Adjusted EBITDA to $23.2 million, with total backlog exceeding $2.0 billion Q1 2021 vs Q1 2020 Performance Highlights (in millions) | Metric | Q1 2021 | Q1 2020 | Change | | :--- | :--- | :--- | :--- | | Net Sales | $554.0 | $532.1 | +4.1% | | Gross Profit | $61.7 | $47.4 | +30.2% | | Net Income (Loss) | $0.0 | $(9.4) | +100.0% | | Adjusted EBITDA | $23.2 | $11.3 | +105.3% | - The company is in the process of refinancing its term loan and ABL credit facility, with completion expected by the end of Q2 fiscal year 2021[126] Results of Operations Consolidated net sales growth was driven by the Spartan ER acquisition and Recreation segment performance, while Commercial sales declined due to divestitures and market softness, leading to expanded gross profit margin and varied Adjusted EBITDA across segments - Consolidated net sales increased by $21.9 million (4.1%) year-over-year, primarily due to the Spartan ER acquisition and favorable mix in the Recreation segment[103][104] - Gross profit margin improved to 11.1% from 8.9% year-over-year, driven by increased net sales, lower sales discounts, and operational enhancements[105] Segment Performance Fire & Emergency net sales grew 35.9% due to the Spartan ER acquisition, Commercial net sales fell 47.5% due to divestitures, and Recreation net sales increased 14.0% from favorable product mix Segment Net Sales (in millions) | Segment | Q1 2021 | Q1 2020 | % Change | | :--- | :--- | :--- | :--- | | Fire & Emergency | $280.6 | $206.5 | +35.9% | | Commercial | $83.1 | $158.2 | -47.5% | | Recreation | $190.2 | $166.8 | +14.0% | Segment Adjusted EBITDA (in millions) | Segment | Q1 2021 | Q1 2020 | % Change | | :--- | :--- | :--- | :--- | | Fire & Emergency | $10.2 | $1.7 | +500.0% | | Commercial | $7.1 | $10.8 | -34.3% | | Recreation | $15.1 | $7.0 | +115.7% | Backlog Total company backlog significantly increased to $2,006.2 million as of January 31, 2021, driven by strong growth in Recreation and Fire & Emergency segments, while Commercial backlog decreased Backlog by Segment (in millions) | Segment | Jan 31, 2021 | Jan 31, 2020 | | :--- | :--- | :--- | | Fire & Emergency | $1,017.9 | $807.3 | | Commercial | $234.0 | $455.6 | | Recreation | $754.3 | $158.3 | | Total Backlog | $2,006.2 | $1,421.2 | Liquidity and Capital Resources Primary liquidity sources are cash from operations and the ABL credit facility, with net cash from operations improving to $1.9 million in Q1 2021, and $230.0 million availability under the ABL Facility - The company suspended its quarterly dividend starting in Q2 fiscal year 2020, with future reassessment[132] - As of January 31, 2021, the company had $230.0 million in availability under its ABL Facility and was in compliance with all financial covenants[135][137] Quantitative and Qualitative Disclosures About Market Risk No material changes occurred in the company's exposure to market risks, including interest rate, foreign exchange, and commodity price risks, since the last annual report - There have been no material changes in the company's exposure to interest rate, foreign exchange, and commodity price risks since the last annual report[152] Controls and Procedures Management concluded that disclosure controls and procedures were effective as of January 31, 2021, with no material changes to internal control over financial reporting during the quarter - Based on an evaluation as of January 31, 2021, the CEO and CFO concluded that the company's disclosure controls and procedures were effective[153] - There were no material changes in the company's internal control over financial reporting during the quarter ended January 31, 2021[154] PART II. OTHER INFORMATION This section provides additional information, including details on legal proceedings, risk factors, and a list of exhibits filed with the report Legal Proceedings This section refers to Note 13 for details on pending consolidated federal and state putative securities class actions related to the company's 2017 IPO and secondary offering - The company is facing pending securities class action lawsuits related to its 2017 IPO and secondary offering, which it intends to vigorously defend[73][74][155] Risk Factors No material changes have occurred to the risk factors previously disclosed in the Annual Report on Form 10-K for the fiscal year ended October 31, 2020 - There have been no material changes to the business's risk factors since the last Annual Report on Form 10-K[156] Exhibits This section lists exhibits filed with the Form 10-Q, including CEO and CFO certifications and Inline XBRL documents containing financial data - Exhibits filed include CEO and CFO certifications under Sarbanes-Oxley Act Sections 302 and 906, and Inline XBRL data files[158]