REV Group(US:REVG)2021-09-08 18:23Financial Data and Key Metrics Changes - Third quarter net sales were $593 million, an increase of 1.9% year-over-year, with approximately $65 million of revenues slipping out of the quarter due to supply chain challenges [13][12][10] - Adjusted EBITDA for the third quarter was $41.6 million, with an adjusted EBITDA margin of 7%, increasing 330 basis points compared to the previous year [17][10] - The company adjusted its full-year revenue guidance down by $150 million to a range of $2.3 billion to $2.45 billion, reflecting a growth of approximately 4% year-over-year [74] Business Line Data and Key Metrics Changes - Fire & Emergency segment sales were $270 million, a decrease of 12% year-over-year, primarily due to fewer shipments of fire apparatus and ambulance units [42] - Commercial segment sales increased by 21% to $111 million, driven by increased specialty group sales and municipal transit buses [52] - Recreation segment sales were $213 million, up 16% year-over-year, attributed to increased unit shipments of Class B, Class C, and towable products [62] Market Data and Key Metrics Changes - The company reported a consolidated backlog of $2.7 billion, marking the seventh consecutive record backlog, with strong order intake across all segments [19][26] - The Fire & Emergency segment backlog increased by 18% year-over-year, driven by strong orders for fire apparatus and ambulance units [48] - The Recreation segment backlog increased by 250% year-over-year, reflecting continued strong order intake across all RV categories [66] Company Strategy and Development Direction - The company is focused on operational excellence and has certified numerous employees in various operational roles, aiming to deliver ongoing cost savings [20][21] - The company is investing in electrification and has announced new electric vehicle products, including a fully electric fire truck and all-electric school buses [30][32] - The company anticipates growth opportunities from recent infrastructure bills that include significant funding for electric vehicles and public transportation [27][29] Management's Comments on Operating Environment and Future Outlook - Management acknowledged ongoing challenges from supply chain disruptions and labor shortages but noted strong end-market demand for vehicles [77][78] - The company remains optimistic about its ability to maintain a positive price-cost equation despite inflationary pressures [88][89] - Management expressed confidence in the company's strategic growth initiatives and the ability to return capital to shareholders [79][25] Other Important Information - The company announced a new $150 million share repurchase program and reinstated its annual dividend of $0.05 per share [25][70] - The company reported a net debt of $240.8 million, significantly reduced from $330 million at the end of the previous fiscal year [69] Q&A Session Summary Question: Clarification on fourth quarter sales expectations - Management confirmed that fourth quarter sales are expected to be similar to the third quarter, with some impacts from the Fire & Emergency segment and a potential uptick in recreation [85] Question: Runrate for Fire & Emergency business and backlog conversion - Management indicated that the backlog is primarily slated for fiscal 2022 deliveries, with no current expectations for backlog to extend into fiscal 2023 [90] Question: Conviction on starts not being canceled - Management reassured that the delays are not lost sales and emphasized that the industry is experiencing similar challenges, maintaining confidence in backlog conversion [100][101] Question: Structural chassis issues and supplier relationships - Management acknowledged ongoing chassis supply issues due to the pandemic and semiconductor shortages, emphasizing daily communication with OEMs to address these challenges [110][111] Question: Impact of operational efficiencies on productivity - Management noted that while it is difficult to quantify the impact of operational changes due to current instability, they are seeing solid contribution margins and cash conversion despite challenges [116] Question: Margin targets for 2023 and backlog impact - Management stated that while they are not providing specific guidance for 2022, they remain confident in achieving their 2023 margin targets, contingent on improving throughput and supply chain visibility [122][123]