REV Group(REVG) - 2024 Q2 - Quarterly Results

Executive Summary & Q2 2024 Highlights Overall Performance Consolidated net sales declined in Q2 2024 due to the Recreational Vehicles segment, though net income and Adjusted Net Income increased year-over-year Q2 2024 vs Q2 2023 Consolidated Financial Highlights | Metric | Q2 2024 (Millions USD) | Q2 2023 (Millions USD) | Change (%) | Change (Excl. Collins) (%) | | :--- | :--- | :--- | :--- | :--- | | Net Sales | $616.9 | $681.2 | -9.5% | -2.7% | | Net Income | $15.2 | $14.2 | +7.0% | N/A | | Diluted EPS | $0.28 | $0.24 | +16.7% | N/A | | Adjusted Net Income | $20.9 | $20.8 | +0.5% | N/A | | Adjusted EBITDA | $37.5 | $41.9 | -10.4% | +18.3% | - The decrease in net sales was primarily due to lower net sales in the Recreational Vehicles segment, partially offset by higher net sales in the Specialty Vehicles segment[3] - Excluding the impact of the Collins divestiture, Adjusted EBITDA increased $5.8 million, or 18.3%, compared to the prior year quarter, driven by higher contribution from the Specialty Vehicles segment[4] CEO Commentary The CEO highlighted strong operating results, robust demand in Fire and Ambulance, and proactive cost management in Recreational Vehicles - Robust demand continues in Fire and Ambulance businesses, with operating initiatives driving throughput improvements across manufacturing sites[5] - The Specialty Vehicles segment's results demonstrate the effectiveness of operating initiatives, building on prior quarters' momentum[5] - The Recreational Vehicles segment is proactively managing its cost structure to align with end market demand, delivering operating margins in line with expectations[5] Key Corporate Actions & Events The company completed the Collins Bus sale, paid a special dividend, repurchased shares to reduce AIP ownership, and appointed a new CFO - Completed the sale of Collins Bus for $308.2 million cash consideration on January 26, 2024, using proceeds to reduce outstanding borrowings under its 2021 ABL facility to zero[11] - Returned cash to shareholders via a $3.00 per common share special cash dividend, totaling $179.3 million, on February 16, 2024[11] - Repurchased 8,000,000 shares of common stock for $126.1 million as part of a public offering by American Industrial Partners (AIP), reducing AIP's ownership to approximately 3.4%[11] - Appointed Amy Campbell as Senior Vice President / Chief Financial Officer and transitioned the fire business to a fully independent dealership distribution model[11] Segment Performance Specialty Vehicles Segment The Specialty Vehicles segment saw strong growth in sales, profitability, and backlog, driven by price realization and higher shipments Specialty Vehicles Segment Performance (Q2 2024 vs Q2 2023) | Metric | Q2 2024 (Millions USD) | Q2 2023 (Millions USD) | Change (%) | Change (Excl. Collins) (%) | | :--- | :--- | :--- | :--- | :--- | | Net Sales | $437.4 | $425.0 | +2.9% | +15.7% | | Adjusted EBITDA | $33.8 | $20.3 | +66.5% | +234.7% | | Adjusted EBITDA Margin | 7.7% | 4.8% | +2.9 pp | N/A | | Period-End Backlog | $4,064.4 | $3,358.5 | +21.0% | +26.7% | - The increase in net sales was primarily due to price realization and increased shipments of fire apparatus and ambulance units, partially offset by lower shipments of terminal trucks[9] - Profitability benefited from price realization and higher sales volume of fire apparatus and ambulance units, partially offset by inflationary pressures and lower sales volume of terminal trucks[10] - Backlog increased primarily due to continued demand and order intake for fire apparatus and ambulance units, along with pricing actions[9] Recreational Vehicles Segment The Recreational Vehicles segment experienced a significant downturn with decreased sales, profitability, and backlog due to lower shipments and discounting Recreational Vehicles Segment Performance (Q2 2024 vs Q2 2023) | Metric | Q2 2024 (Millions USD) | Q2 2023 (Millions USD) | Change (%) | | :--- | :--- | :--- | :--- | | Net Sales | $179.7 | $256.6 | -30.0% | | Adjusted EBITDA | $12.1 | $29.1 | -58.4% | | Adjusted EBITDA Margin | 6.7% | 11.3% | -4.6 pp | | Period-End Backlog | $274.7 | $495.0 | -44.5% | - The decrease in net sales was primarily due to decreased unit shipments and increased discounting, partially offset by price realization[12] - The decrease in Adjusted EBITDA was primarily due to lower unit shipments, increased discounting, and inflationary pressures, partially offset by price realization and cost reduction actions[13] - Backlog decreased primarily as a result of lower order intake in certain categories, unit shipments against backlog, and order cancelations[12] Financial Position & Capital Allocation Working Capital, Liquidity, and Capital Allocation The company reported net debt of $181.8 million with $280.3 million available under its ABL facility, while trade working capital increased slightly Working Capital, Liquidity, and Capital Allocation (as of April 30, 2024) | Metric | April 30, 2024 (Millions USD) | October 31, 2023 (Millions USD) | Change | | :--- | :--- | :--- | :--- | | Net Debt | $181.8 | N/A | N/A | | ABL Availability | $280.3 | $384.1 | -$103.8 | | Trade Working Capital | $324.0 | $318.5 | +$5.5 | | Capital Expenditures (Q2) | $5.9 | $6.8 | -$0.9 | - The increase in trade working capital was primarily due to a decrease in accounts payable and customer advances, partially offset by a decrease in accounts receivable and inventory[14] Quarterly Dividend The board of directors declared a regular quarterly cash dividend of $0.05 per share, maintaining an annualized rate of $0.20 per share - A regular quarterly cash dividend of $0.05 per share of common stock was declared, payable on July 12, 2024, to shareholders of record on June 28, 2024[16] - This equates to an annualized dividend rate of $0.20 per share of common stock[16] Fiscal Year 2024 Outlook Updated Full-Year Guidance The company raised the lower end of its full-year fiscal 2024 guidance for key financial metrics, reflecting an improved forecast Updated Full Fiscal Year 2024 Outlook (Millions USD) | Metric | Updated Guidance (Low) | Updated Guidance (High) | Prior Guidance (Low) | Prior Guidance (High) | | :--- | :--- | :--- | :--- | :--- | | Net Sales | $2,400 | $2,500 | $2,450 | $2,550 | | Net Income | $230 | $245 | $224 | $245 | | Adjusted EBITDA | $151 | $165 | $145 | $165 | | Adjusted Net Income | $76 | $90 | $72 | $90 | | Adjusted Free Cash Flow | $61 | $72 | $57 | $72 | - Net cash from operating activities is projected to be $20.0 to $35.0 million, including approximately $71.0 million of income tax and transaction costs related to divestiture activities[6] Company Information & Disclosures About REV Group REV Group is a leading designer and manufacturer of specialty and recreational vehicles, serving a diversified customer base in the United States - REV Group (REVG) designs and manufactures specialty vehicles and related aftermarket parts and services, serving a diversified customer base primarily in the United States[18] - The company operates through two segments: Specialty Vehicles (ambulances, fire apparatus, terminal trucks, industrial sweepers) and Recreational Vehicles (Class B vans to Class A motorhomes)[18] Conference Call A conference call was held on June 5, 2024, to discuss Q2 financial results, with a replay available on the company's investor relations website - A conference call to discuss Q2 2024 financial results and outlook was scheduled for June 5, 2024, at 10:00 a.m. ET[17] - A supplemental slide deck and an audio replay of the call are available on the REV Group, Inc. investor relations website[17] Note Regarding Non-GAAP Measures The company utilizes non-GAAP measures like Adjusted EBITDA and Adjusted Net Income to provide additional insight into its operating performance - Management believes that Adjusted EBITDA, Adjusted Net Income, and Adjusted Free Cash Flow enhance the evaluation of ongoing operating results[19][20] - These non-GAAP measures are reconciled to their most closely comparable GAAP measures in the financial appendix of the news release[20] Cautionary Statement About Forward-Looking Statements This release contains forward-looking statements subject to risks and uncertainties that could cause actual results to differ materially from projections - The news release includes forward-looking statements concerning results of operations, financial condition, liquidity, prospects, growth, strategies, and industry outlook[21] - These statements are subject to risks and uncertainties, as highlighted in the company's SEC filings, which may cause actual results to differ materially from projections[22] - The company does not undertake to update or revise any forward-looking statements after they are made[22] Contact Information Contact details for investor relations are provided for inquiries regarding the company's financial information - Drew Konop, VP, Investor Relations & Corporate FP&A, is the primary contact for investor inquiries[23] Financial Statements Condensed Unaudited Consolidated Balance Sheets The balance sheet shows decreased total assets and shareholders' equity as of April 30, 2024, compared to October 31, 2023 Condensed Unaudited Consolidated Balance Sheets (Millions USD) | Account | April 30, 2024 | October 31, 2023 | | :--- | :--- | :--- | | Cash and cash equivalents | $38.2 | $21.3 | | Accounts receivable, net | $210.6 | $226.5 | | Inventories, net | $630.4 | $657.7 | | Total current assets | $905.2 | $933.2 | | Total assets | $1,330.4 | $1,410.4 | | Accounts payable | $190.2 | $208.3 | | Short-term customer advances | $176.9 | $214.5 | | Total current liabilities | $518.5 | $557.2 | | Long-term debt | $220.0 | $150.0 | | Total liabilities | $950.7 | $912.4 | | Total shareholders' equity | $379.7 | $498.0 | Condensed Unaudited Consolidated Statements of Income Net income for the six-month period increased significantly due to a substantial gain on the sale of a business, despite a decrease in net sales Condensed Unaudited Consolidated Statements of Income (Millions USD, except per share) | Metric | 3 Months Ended Apr 30, 2024 | 3 Months Ended Apr 30, 2023 | 6 Months Ended Apr 30, 2024 | 6 Months Ended Apr 30, 2023 | | :--- | :--- | :--- | :--- | :--- | | Net sales | $616.9 | $681.2 | $1,202.9 | $1,264.7 | | Gross profit | $77.3 | $82.5 | $140.2 | $140.4 | | Operating income | $22.9 | $29.0 | $16.4 | $17.7 | | Net income | $15.2 | $14.2 | $197.9 | $0.7 | | Diluted EPS | $0.28 | $0.24 | $3.49 | $0.01 | | Adjusted Net Income Diluted EPS | $0.39 | $0.35 | $0.63 | $0.47 | - The six-month period's net income was significantly impacted by a $259.0 million gain on the sale of business[27] Condensed Unaudited Consolidated Statements of Cash Flows Cash from investing activities was significantly positive due to a business sale, while financing activities used cash for dividends and share repurchases Condensed Unaudited Consolidated Statements of Cash Flows (Millions USD) | Cash Flow Activity | 6 Months Ended Apr 30, 2024 | 6 Months Ended Apr 30, 2023 | | :--- | :--- | :--- | | Net cash (used in) provided by operating activities | $(29.6) | $8.2 | | Net cash provided by (used in) investing activities | $301.9 | $(8.9) | | Net cash used in financing activities | $(255.4) | $(10.7) | | Net increase (decrease) in cash and cash equivalents | $16.9 | $(11.4) | | Cash and cash equivalents, end of period | $38.2 | $9.0 | - Investing activities were significantly positive due to $318.2 million in proceeds from the sale of business[28] - Financing activities included $185.5 million in dividend payments and $126.1 million for the repurchase and retirement of common stock[28] Segment Information Specialty Vehicles showed strong growth in sales and profitability, while the Recreational Vehicles segment experienced significant declines across all key metrics Segment Net Sales (Millions USD) | Segment | 3 Months Ended Apr 30, 2024 | 3 Months Ended Apr 30, 2023 | 6 Months Ended Apr 30, 2024 | 6 Months Ended Apr 30, 2023 | | :--- | :--- | :--- | :--- | :--- | | Specialty Vehicles | $437.4 | $425.0 | $854.6 | $783.0 | | Recreational Vehicles | $179.7 | $256.6 | $349.1 | $482.6 | Segment Adjusted EBITDA (Millions USD) | Segment | 3 Months Ended Apr 30, 2024 | 3 Months Ended Apr 30, 2023 | 6 Months Ended Apr 30, 2024 | 6 Months Ended Apr 30, 2023 | | :--- | :--- | :--- | :--- | :--- | | Specialty Vehicles | $33.8 | $20.3 | $60.0 | $25.6 | | Recreational Vehicles | $12.1 | $29.1 | $23.7 | $53.4 | Segment Period-End Backlog (Millions USD) | Segment | April 30, 2024 | April 30, 2023 | | :--- | :--- | :--- | | Specialty Vehicles | $4,064.4 | $3,358.5 | | Recreational Vehicles | $274.7 | $495.0 | Adjusted Non-GAAP Reconciliations Adjusted EBITDA by Segment Reconciliations detail adjustments from net income to Adjusted EBITDA, including items like depreciation, interest, taxes, and transaction costs Adjusted EBITDA by Segment (Millions USD) | Segment | 3 Months Ended Apr 30, 2024 | 3 Months Ended Apr 30, 2023 | 6 Months Ended Apr 30, 2024 | 6 Months Ended Apr 30, 2023 | | :--- | :--- | :--- | :--- | :--- | | Specialty Vehicles | $33.8 | $20.3 | $60.0 | $25.6 | | Recreational Vehicles | $12.1 | $29.1 | $23.7 | $53.4 | | Corporate & Other | $(8.4) | $(7.5) | $(15.7) | $(15.8) | | Total Adjusted EBITDA | $37.5 | $41.9 | $68.0 | $63.2 | - Adjustments to EBITDA include transaction expenses, restructuring costs, stock-based compensation expense, and gain/loss on sale of business[32][34] Adjusted Net Income Net income is reconciled to Adjusted Net Income by adjusting for non-recurring items like transaction expenses and gain on sale of business Adjusted Net Income (Millions USD) | Metric | 3 Months Ended Apr 30, 2024 | 3 Months Ended Apr 30, 2023 | 6 Months Ended Apr 30, 2024 | 6 Months Ended Apr 30, 2023 | | :--- | :--- | :--- | :--- | :--- | | Net income | $15.2 | $14.2 | $197.9 | $0.7 | | Total Adjustments (pre-tax) | $8.2 | $7.8 | $(162.3) | $36.9 | | Income tax effect of adjustments | $(1.5) | $(2.4) | $56.9 | $(9.1) | | Adjusted Net Income | $20.9 | $20.8 | $35.6 | $27.9 | - Significant adjustments for the six-month period include a $(259.0) million gain on sale of business and $56.9 million income tax effect of adjustments[36] Adjusted Outlook Reconciliations The fiscal 2024 outlook reconciles GAAP net income and operating cash flow to the projected non-GAAP figures for key financial metrics Fiscal Year 2024 Adjusted Outlook Reconciliations (Millions USD) | Metric | Low | High | | :--- | :--- | :--- | | Adjusted EBITDA Outlook | | | | Net income | $230.0 | $245.4 | | Total Adjustments to EBITDA | $130.7 | $132.8 | | Gain on sale of business | $(259.0) | $(259.0) | | Adjusted EBITDA | $151.0 | $165.0 | | Adjusted Net Income Outlook | | | | Net income | $230.0 | $245.4 | | Total Adjustments to Net Income (pre-tax) | $(198.4) | $(199.9) | | Income tax effect of adjustments | $54.2 | $55.9 | | Adjusted Net Income | $75.8 | $90.4 | | Adjusted Free Cash Flow Outlook | | | | Net cash provided by operating activities | $20.0 | $35.3 | | Cash income taxes - divestiture activities | $66.0 | $66.5 | | Transaction expenses - divestiture activities | $5.0 | $5.0 | | Less: Capital expenditures | $(30.0) | $(35.0) | | Adjusted Free Cash Flow | $61.0 | $71.8 |