REV Group(US:REVG)2021-06-08 20:02Financial Data and Key Metrics Changes - The company reported second quarter net sales of $644 million, an 18% increase compared to the same quarter last year, with organic sales growth of 26% when excluding divested shuttle businesses [9][10] - Adjusted EBITDA for the quarter was $45.5 million, with an adjusted EBITDA margin of 7.1%, marking the best second quarter adjusted EBITDA results since the company's IPO in 2017 [7][11] - Year-to-date cash conversion improved to 82%, with a target of over 90% free cash flow conversion on adjusted net income [14][50] Business Line Data and Key Metrics Changes - Fire & Emergency segment sales were $308 million, a 6% increase year-over-year, driven by higher shipments of fire apparatus and price realization [31] - Recreation segment sales surged 190% to $238 million, attributed to increased unit shipments across all categories and lower discounts [42] - Commercial segment sales decreased by 31% to $98 million, primarily due to the divestiture of shuttle bus businesses, but adjusted EBITDA increased by 4% to $8.3 million [37][39] Market Data and Key Metrics Changes - The company exited the second quarter with a record backlog of $2.3 billion, with a book-to-bill ratio of 1.5 [10] - The Fire & Emergency backlog was $1.1 billion, down 1% year-over-year, while the Recreation segment backlog increased to $941 million, marking the fourth consecutive quarterly record [35][45] - The commercial segment backlog was $303 million, reflecting strong order intake, including improved orders for school buses [40] Company Strategy and Development Direction - The company is focused on operational excellence, reducing complexity, and improving efficiencies to enhance performance and expand margins [15][22] - There is a commitment to electrification of the commercial vehicle fleet, with several announcements regarding electric vehicle technologies and partnerships [23][24] - The company has restructured its capital to a new $550 million revolver, allowing for flexibility in pursuing financial objectives and returning cash to shareholders [12][13] Management's Comments on Operating Environment and Future Outlook - Management acknowledged ongoing challenges in supply chain and labor constraints but expressed confidence in mitigating these impacts through operational improvements [7][11] - The company expects continued margin improvement in the long term, despite facing supply chain disruptions [11] - Management reiterated guidance for fiscal year 2021, expecting sales between $2.45 billion and $2.6 billion, with adjusted EBITDA raised to a range of $145 million to $160 million [51][52] Other Important Information - The board reinstated the quarterly dividend, reflecting confidence in the company's long-term financial outlook [14][50] - The company is actively evaluating capacity expansion in response to strong demand, particularly in the RV segment [64] Q&A Session Summary Question: Are customers placing orders early for 2022 due to supply chain concerns? - Management noted some early orders in the RV segment but did not see broad movements related to supply chain issues [63] Question: Are there plans to expand capacity in the RV segment? - Management is evaluating facilities to optimize margins and prepare for potential market slowdowns while currently seeing strong demand [64] Question: What is the margin differential for Class A products? - Class A margins are expected to be in the mid-single digits, while other segments perform at double-digit margins [71] Question: How did the quarter shape the updated guidance? - The guidance increase reflects strong throughput and improved performance, particularly in the Recreation segment [73][76] Question: What is the outlook for fiscal 2023 targets? - Management remains confident in achieving fiscal 2023 targets, with potential adjustments as the year progresses [78] Question: Can you discuss the supply chain management approach compared to previous management? - Management highlighted significant changes in procurement and supply chain strategies, leading to better management of current shortages [83][86] Question: How is the company managing price-cost dynamics? - The company has been able to offset inflation through price realization and purchasing initiatives, with a focus on maintaining positive price-cost relationships [90][102]