REV Group(US:REVG)2022-12-14 22:33Financial Data and Key Metrics Changes - Consolidated net sales for Q4 2022 increased by 5.7% compared to the prior year, primarily driven by higher sales in the commercial recreation segments, partially offset by lower FNE sales due to chassis and supply chain constraints [27] - Full-year consolidated net sales decreased by 2.1% versus fiscal 2021, mainly due to decreased sales within the F&E segment, partially offset by increased sales in the Commercial and Recreation segments [50] - Full-year adjusted EBITDA decreased by $36 million or 26% year-over-year, primarily due to decreased contributions from F&E and Commercial segments, partially offset by higher contributions from the Recreation segment [53] Business Line Data and Key Metrics Changes - Fire and Emergency segment sales for Q4 2022 were $253 million, a decrease of 9% compared to the prior year, primarily due to fewer shipments of fire apparatus and ambulances [29] - Commercial segment sales increased by 17% to $111 million, driven by higher sales of school buses, terminal trucks, and street sweepers, despite lower sales of municipal buses [39] - Recreation segment sales increased by 19% to $260 million, primarily due to increased shipments of Class B and Class C units and pricing actions [46] Market Data and Key Metrics Changes - Total F&E backlog was $2.6 billion, an increase of 73% year-over-year, driven by strong unit orders and pricing actions taken over the past year [36] - Commercial segment backlog was $526 million at the end of Q4, reflecting pricing actions taken throughout fiscal '22 and increased orders of municipal transit buses [43] - Recreation segment backlog decreased by 9% to $1.1 billion, primarily due to continued production against backlog and lower orders across product categories [48] Company Strategy and Development Direction - The company aims to simplify and commonize product designs while maintaining brand identity, with a focus on improving manufacturing designs [9] - Investment in engineering capabilities and multi-sourcing initiatives are expected to improve throughput and financial performance [14][19] - The company is committed to leading in zero-emission product development, with a focus on battery electric and hydrogen fuel powertrains [17] Management's Comments on Operating Environment and Future Outlook - The operating environment in fiscal 2022 was challenging due to supply chain disruptions and labor market constraints, but the company is optimistic about improvements in throughput and financial performance in fiscal 2023 [18][28] - Management expects typical first-quarter seasonality within the F&E segment with an approximate 10% revenue decline, but anticipates sequential revenue growth throughout the year as multi-sourcing initiatives take hold [37] - Full-year guidance reflects continued uncertainty surrounding chassis supply and key component availability, with expectations for improved results as the year progresses [59] Other Important Information - The company returned a total of $82 million to shareholders in the form of dividends and share repurchases, maintaining a strong financial position with total liquidity of $308 million [22][58] - Full-year capital expenditure is estimated to be in the range of $30 million to $35 million, including carryover projects from fiscal 2022 [62] Q&A Session Summary Question: Free cash flow outlook for the year - Management indicated that inventory management and customer advances will impact free cash flow, with expectations for a slightly down year due to these factors [66][67] Question: Earnings cadence for fiscal '23 - Management expects a more normalized environment in the second half of fiscal '23, with improvements in throughput and chassis supply anticipated [68][69] Question: Inventory replenishment desire among dealerships - Management noted that dealer inventories remain low, but products continue to move through the channel, indicating a cautious approach to inventory management [71][74] Question: Segment-level EBITDA guidance for '23 - Management provided insights on expected EBITDA growth across segments, with a focus on improving throughput in F&E and Commercial while facing downward pressure in Recreation [80][81] Question: Pricing power in a deflationary environment - Management expressed confidence in maintaining pricing power, particularly in the Recreation segment, while also addressing older units in backlog for margin expansion [88][90] Question: Normalized backlog expectations for Recreation - Management anticipates a return to a more normalized backlog of six to seven months, down from the current two-year backlog [96] Question: Guidance for '23 and revenue expectations for '24 - Management refrained from providing '24 guidance but emphasized managing for margin expansion and maintaining performance despite potential revenue declines [99][100]