REV Group, Inc. (NYSE:REVG) is a leading designer, manufacturer, and distributor of specialty vehicles and related aftermarket parts and services. The company operates through two segments: Specialty Vehicles and Recreational Vehicles. REV Group's diverse portfolio includes well-established principal vehicle brands, many of which have pioneered their respective specialty vehicle product categories over 50 years ago.

Financials

In the fiscal year 2023, REV Group reported annual net income of $45.3 million, annual revenue of $2.64 billion, annual operating cash flow of $126.5 million, and annual free cash flow of $93.7 million. The company has demonstrated impressive operational execution, driving strong financial performance across its business segments.

During the second quarter of fiscal year 2024, REV Group reported consolidated net sales of $616.9 million, a decrease of 9.4% compared to the prior year quarter. This decline was primarily due to the divestiture of the Collins Bus business, which contributed $46.9 million in net sales in the prior year quarter. Excluding the impact of the Collins divestiture, net sales decreased 2.7% year-over-year, driven by lower sales in the Recreational Vehicles segment, partially offset by higher sales in the Specialty Vehicles segment.

Segment Performance

The Specialty Vehicles segment, which includes the company's fire and emergency, commercial, and municipal transit bus businesses, reported net sales of $437.4 million, an increase of 2.9% compared to the prior year quarter. Excluding the impact of the Collins divestiture, Specialty Vehicles segment net sales increased 16% year-over-year, driven by higher shipments of fire apparatus and ambulance units, as well as favorable price realization.

The Recreational Vehicles segment reported net sales of $179.7 million, a decrease of 30% compared to the prior year quarter. The decrease was primarily due to lower unit shipments of Class A, Class B, and towable RV units, as well as increased discounting, partially offset by increased shipments of Class C units and price realization.

Consolidated adjusted EBITDA for the second quarter of fiscal year 2024 was $37.5 million, a decrease of 10.5% compared to the prior year quarter. Excluding the impact of the Collins divestiture, adjusted EBITDA increased 18.3% year-over-year, driven by improved performance in the Specialty Vehicles segment, partially offset by lower earnings in the Recreational Vehicles segment.

The Specialty Vehicles segment reported adjusted EBITDA of $33.8 million, an increase of 66.5% compared to the prior year quarter. Excluding the impact of the Collins divestiture, Specialty Vehicles segment adjusted EBITDA increased 234.7% year-over-year, primarily due to higher volumes, operational improvements, and increased price realization in the fire and emergency businesses.

The Recreational Vehicles segment reported adjusted EBITDA of $12.1 million, a decrease of 58.4% compared to the prior year quarter. The decrease was primarily due to lower unit volumes, increased discounting, and inflationary pressures, partially offset by price realization and cost reduction actions.

Backlog

As of April 30, 2024, REV Group's consolidated backlog was $4.34 billion, an increase of 12.6% compared to the prior year period. The Specialty Vehicles segment backlog was $4.06 billion, an increase of 21% compared to the prior year period, reflecting strong order intake for fire apparatus and ambulance units, as well as the benefits of pricing actions. The Recreational Vehicles segment backlog was $274.7 million, a decrease of 44.5% compared to the prior year period, primarily due to lower order intake and order cancellations.

Outlook

For the full fiscal year 2024, REV Group provided updated guidance. The company expects consolidated net sales to be in the range of $2.4 billion to $2.5 billion, adjusted EBITDA to be in the range of $151 million to $165 million, and adjusted net income to be in the range of $76 million to $90 million. The updated guidance reflects the continued momentum in the Specialty Vehicles segment, partially offset by greater-than-expected end market weakness in the Recreational Vehicles segment.

Liquidity

REV Group's liquidity position remains strong, with $280.3 million of available capacity under its $550 million revolving credit facility as of April 30, 2024. During the second quarter, the company returned $308.5 million to shareholders through share repurchases and regular and special dividends, utilizing the proceeds from the sale of the Collins Bus business.

Conclusion

The company's strategic initiatives, including the optimization of its manufacturing footprint, product simplification, and the continued execution of operational improvements, have been instrumental in driving the strong financial performance across its Specialty Vehicles segment. While the Recreational Vehicles segment faces near-term challenges, REV Group remains focused on managing costs and aligning production with market demand.

Overall, REV Group's diverse portfolio of specialty vehicle brands, strong operational execution, and disciplined capital allocation have positioned the company for continued success. The company's focus on driving operational efficiencies, capitalizing on favorable market dynamics in the Specialty Vehicles segment, and managing the cyclical nature of the Recreational Vehicles segment should enable REV Group to deliver sustainable long-term value for its shareholders.