Business Overview
REV Group (REVG) is a leading designer, manufacturer, and distributor of a diverse portfolio of specialty and recreational vehicles, catering to a wide range of commercial, municipal, and consumer markets. With a rich history spanning over four decades, the company has established itself as a trusted brand, known for its commitment to innovation, quality, and customer satisfaction.
Founded in 1971, REV Group has grown from a small local manufacturer to one of the largest specialty vehicle manufacturers in North America. Through a series of strategic acquisitions and organic growth, the company has built an impressive lineup of well-recognized brands, including E-ONE, KME, Ferrara, Spartan Emergency Response, American Emergency Vehicles, Leader Emergency Vehicles, Horton Emergency Vehicles, REV Group Orlando, Capacity, and LayMor in the Specialty Vehicles segment, as well as REV Recreation Group, Renegade, Midwest, Lance, and Goldshield Fiberglass in the Recreational Vehicles segment. This diversified product offering has allowed REV Group to capitalize on various market trends and maintain a competitive edge in an ever-evolving industry.
At the heart of REV Group's success is its focus on delivering mission-critical vehicles that serve the essential needs of its customers. The Specialty Vehicles segment caters to the fire, ambulance, and terminal truck markets, providing customized solutions that prioritize safety, efficiency, and reliability. Meanwhile, the Recreational Vehicles segment has carved out a strong position in the RV industry, offering a range of Class A, Class B, and Class C motorhomes, as well as towable travel trailers and truck campers.
Financial Performance
REV Group's financial performance has been marked by a delicate balance of growth and profitability. In the company's most recent quarter, it reported revenue of $525.1 million and net income of $18.2 million. The company's operating cash flow for the quarter was -$13.1 million, with free cash flow at -$18.0 million. Year-over-year, revenue decreased 10.4% compared to the prior year quarter, primarily due to the divestiture of the Bus Manufacturing Businesses in fiscal 2024. However, excluding the impact of the divestitures, revenue increased 3.1% year-over-year.
Financials
In 2018, the company faced challenges related to tariffs and supply chain disruptions, which impacted its financial performance. To address these issues, REV Group implemented a multi-sourcing strategy for key components and worked to strengthen its supply chain. These efforts helped the company navigate the tariff environment and improve its ability to meet customer demand. More recently, in 2024, REV Group made the strategic decision to exit the bus manufacturing business, selling its Collins Bus subsidiary and discontinuing manufacturing operations at its ENC facility. This move was aimed at optimizing the company's portfolio and creating a more focused operating structure aligned with its core markets.
Despite the revenue decline, REV Group reported record adjusted EBITDA of $36.8 million in the first quarter of fiscal 2025, which was a $6.3 million increase excluding the impact of divested bus businesses. The specialty vehicles segment was a standout performer, with adjusted EBITDA of $35.2 million, representing a segment first quarter record and an increase of $9 million versus the prior year. The segment's adjusted EBITDA margin of 9.5% was also a record for the first quarter.
Liquidity
REV Group maintains a solid financial position with a debt-to-equity ratio of 0.3997 and $31.6 million in cash on hand. As of January 31, 2025, the company had $262.9 million available on its $550 million revolving credit facility. The current ratio stands at 1.933, while the quick ratio is 0.549, indicating adequate liquidity to meet short-term obligations.
The company's strong backlog, which stood at $4.5 billion as of the most recent quarter, provides visibility into future revenue streams and allows for effective production planning and resource allocation. Additionally, the company's disciplined approach to capital allocation, which includes a balanced mix of organic growth, strategic acquisitions, share repurchases, and dividends, is designed to deliver long-term value to its shareholders.
Challenges and Strategic Initiatives
One of the key drivers of REV Group's long-term success has been its commitment to innovation. The company continuously invests in research and development to stay ahead of industry trends, introducing new product features and technologies that cater to the evolving needs of its customers. This focus on innovation has allowed REV Group to maintain its position as a market leader, consistently delivering high-quality vehicles that meet the demanding requirements of its clientele.
The specialty vehicles industry, which includes products like fire apparatus and ambulances, has seen relatively stable demand with annual industry sales around 4,000-6,000 units in recent years. The recreational vehicle industry has been more volatile, experiencing periods of strong growth followed by softening demand. REV Group's diversified portfolio allows it to navigate these market dynamics effectively.
Innovation and Market Position
Looking ahead, REV Group remains well-positioned to capitalize on the growing demand for specialty and recreational vehicles. The company's strong backlog provides visibility into future revenue streams and allows for effective production planning and resource allocation. Additionally, the company's disciplined approach to capital allocation, which includes a balanced mix of organic growth, strategic acquisitions, share repurchases, and dividends, is designed to deliver long-term value to its shareholders.
The Specialty Vehicles segment reported net sales of $370.20 million for the three months ended January 31, 2025, a decrease of 11.3% compared to the prior year quarter. However, excluding the impact of the discontinued Bus Manufacturing Businesses, net sales increased by 8.7% to $446.80 million. This increase was primarily driven by higher shipments of fire apparatus, a favorable mix of ambulance units, and price realization, partially offset by lower terminal truck shipments.
Adjusted EBITDA for the Specialty Vehicles segment increased by 34.4% to $35.20 million for the three months ended January 31, 2025, compared to the prior year quarter. Excluding the impact of the Bus Manufacturing Businesses, Adjusted EBITDA increased by 116.0% to $45.10 million. The improvement was mainly attributable to higher sales volume of fire apparatus due to throughput improvements, a favorable mix of ambulance units, and price realization, partially offset by inflationary pressures and lower contribution from the terminal trucks business.
As of January 31, 2025, the Specialty Vehicles segment's backlog, excluding the impact of the Bus Manufacturing Businesses, increased by $446.20 million compared to the prior year quarter. This increase was primarily the result of continued demand and order intake for fire apparatus and ambulance units, as well as pricing actions, partially offset by lower order intake for terminal truck units.
The Recreational Vehicles segment serves the RV market through several well-established brands, including American Coach, Fleetwood RV, Holiday Rambler, Renegade RV, Midwest Automotive Designs, and Lance Camper. Net sales for this segment decreased by 8.5% to $155.00 million for the three months ended January 31, 2025, compared to the prior year quarter. The decrease was primarily due to lower unit shipments and increased dealer assistance, partially offset by pricing actions.
Adjusted EBITDA for the Recreational Vehicles segment decreased by 20.7% to $9.20 million for the three months ended January 31, 2025, compared to the prior year quarter. The decrease was mainly attributed to lower unit shipments, increased dealer assistance, and inflationary pressures, partially offset by productivity and cost reduction initiatives.
As of January 31, 2025, the Recreational Vehicles segment's backlog decreased by $112.20 million compared to the prior year quarter. This decline was primarily the result of lower order intake in certain categories, unit shipments against backlog, and order cancelations.
Future Outlook
REV Group is reaffirming its fiscal 2025 outlook, which includes high single to low double digit revenue growth in the specialty vehicle segment versus a 2024 pro forma revenue base of $1.56 billion, excluding the divested bus businesses. The recreational vehicle segment net sales are expected to be roughly flat year-over-year. Consolidated top-line guidance is in the range of $2.3 billion to $2.4 billion, or mid-single digit growth at the midpoint versus fiscal 2025 pro forma of $2.2 billion in net sales. Adjusted EBITDA guidance remains $190 million to $220 million, an increase of 48% at the midpoint versus 2025's pro forma $145.2 million of adjusted EBITDA.
However, REV Group is not without its challenges. The company operates in a highly competitive industry, facing rivalry from both established players and emerging disruptors. Additionally, the company is subject to various regulatory and environmental requirements, which can impact its operations and profitability. Nonetheless, REV Group's management team has demonstrated a proven track record of navigating these challenges and positioning the company for sustained success.
In conclusion, REV Group's long-standing history, diversified product portfolio, commitment to innovation, and strategic execution have positioned the company as a formidable player in the specialty and recreational vehicle markets. The company's strong performance in the first quarter of fiscal 2025, particularly in the specialty vehicles segment, demonstrates its ability to execute on its strategic initiatives and drive profitability. As the industry continues to evolve, REV Group remains well-equipped to capitalize on emerging trends and deliver value to its shareholders, customers, and the communities it serves.