REVG - REV Group Inc. Reports Third Quarter Results

• Third quarter net sales of $594.8 million compared to $593.3 million in the prior year quarter
• Third quarter net income of $9.5 million compared to net income of $23.7 million in the prior year quarter
• Third quarter Adjusted EBITDA ¹ of $29.5 million compared to $41.6 million in the prior year quarter
• Third quarter Adjusted Net Income ¹ of $14.3 million compared to $24.5 million in the prior year quarter
• End of third quarter $3.9 billion record backlog
• Repurchased approximately 2.1 million of its common shares for $24.1 million
• Updates full-year fiscal 2022 outlook to net sales of $2.25 to $2.35 billion, net income of $14 to $25 million, Adjusted Net Income of $44 to $54 million, Adjusted EBITDA of $100 to $110 million

REV Group, Inc. (NYSE: REVG), a manufacturer of industry-leading specialty vehicles, today reported results for the three months ended July 31, 2022 (“third quarter 2022”). Consolidated net sales in the third quarter 2022 were $594.8 million, representing an increase of 0.3% compared to $593.3 million for the three months ended July 31, 2021 (“third quarter 2021”). The increase in consolidated net sales was primarily due to higher net sales in the Recreation segment, and pricing actions enacted over the past year, partially offset by a decrease in net sales in the Fire and Emergency (“F&E”) segment.

The company’s third quarter 2022 net income was $9.5 million, or $0.16 per diluted share, which included $2.3 million of restructuring charges within the F&E segment. Adjusted Net Income for the third quarter 2022 was $14.3 million, or $0.24 per diluted share, compared to Adjusted Net Income of $24.5 million, or $0.37 per diluted share, in the third quarter 2021. Adjusted EBITDA in the third quarter 2022 was $29.5 million, compared to $41.6 million in the third quarter 2021. The decrease in Adjusted EBITDA during the quarter was primarily due to lower contribution from the F&E and Commercial segments, partially offset by increased Recreation segment Adjusted EBITDA.

“We delivered sequential margin improvement in the third quarter with demand for our vehicles remaining strong. We continue to take actions to offset inflationary pressures and remain focused on operational disciplines to drive margin expansion across our businesses,” REV Group Inc. President and CEO Rod Rushing said. “The mid-point of updated guidance anticipates continued margin momentum on revenue that remains constrained by the supply chain. I would like to thank our employees for their dedication and hard work as they continue to navigate today’s challenging environment.”

REV Group Third Quarter Segment Highlights

Fire & Emergency Segment

F&E segment net sales were $230.1 million in the third quarter 2022, a decrease of $39.4 million, or 14.6%, from $269.5 million in the third quarter 2021. The decrease in net sales compared to the prior year quarter was primarily due to decreased shipments of fire apparatus and ambulance units related to supply chain disruption and labor constraints, partially offset by price realization. Decreased shipments of fire apparatus were primarily the result of shortages of key components such as radiators, axles, and wiring harnesses. Decreased shipments of ambulances were primarily the result of the timing of OEM supplied chassis receipts and component shortages. F&E segment backlog at the end of the third quarter 2022 was $2,163.1 million, an increase of $933.6 million compared to $1,229.5 million at the end of the third quarter 2021. The increase was primarily the result of continued demand and strong order intake for fire apparatus and ambulance units, pricing actions, and lower shipments against backlog.

F&E segment Adjusted EBITDA was $1.0 million in the third quarter 2022, a decrease of $14.8 million, or 93.7% from $15.8 million in the third quarter 2021. Profitability within the segment was impacted by lower sales volume, inefficiencies related to supply chain disruption, and inflationary pressures, partially offset by price realization.

Commercial Segment

Commercial segment net sales were $111.0 million in the third quarter 2022, a decrease of $0.3 million, or 0.3%, from $111.3 million in the third quarter 2021. The decrease in net sales compared to the prior year quarter was primarily due to lower shipments of school buses and municipal transit buses, partially offset by increased shipments of terminal trucks and street sweepers, and price realization. Decreased shipments of school buses and municipal transit buses were primarily the result of shortages of key components such as HVAC subsystems and wiring harnesses, and labor constraints. Commercial segment backlog at the end of the third quarter 2022 was $530.7 million, an increase of $218.7 million compared to $312.0 million at the end of the third quarter 2021. The increase was primarily the result of increased orders for school buses, terminal trucks, and street sweepers, and pricing actions.

Commercial segment Adjusted EBITDA was $6.8 million in the third quarter 2022, a decrease of $2.9 million, or 29.9%, from $9.7 million in the third quarter 2021. Lower profitability in the quarter was primarily the result of lower shipments of school buses, lower shipments and an unfavorable mix of municipal transit buses, inefficiencies related to labor constraints and supply chain disruptions, and inflationary pressures, partially offset by increased shipments and improved profitability of terminal trucks, and price realization.

Recreation Segment

Recreation segment net sales were $254.1 million in the third quarter 2022, an increase of $41.6 million, or 19.6%, from $212.5 million in the third quarter 2021. The increase in net sales compared to the prior year quarter was primarily due to price realization, and favorable mix, partially offset by lower line rates and unit shipments related to supply chain disruption and labor constraints in certain businesses. Backlog at the end of the third quarter 2022 was $1,242.9 million, an increase of $85.9 million compared to $1,157.0 million at the end of the third quarter 2021. The increase was primarily the result of strong order intake in several product categories, and pricing actions.

Recreation segment Adjusted EBITDA was $29.8 million in the third quarter 2022, an increase of $5.7 million, or 23.7%, from $24.1 million in the third quarter 2021. The increase was primarily due to price realization and favorable mix, partially offset by inefficiencies related to supply chain disruptions and labor constraints in certain businesses, and inflationary pressures.

Working Capital, Liquidity, and Capital Allocation

Cash and cash equivalents totaled $14.8 million as of July 31, 2022. Net debt ² was $235.2 million, and the company had $287.1 million available under its ABL revolving credit facility as of July 31, 2022, a decrease of $2.9 million as compared to the October 31, 2021 availability of $290.0 million. During the third quarter 2022, the company repurchased approximately 2.1 million of its common shares for $24.1 million at an average purchase price of $11.16 per share. Trade working capital ³ for the company as of July 31, 2022 was $353.4 million, compared to $368.2 million as of October 31, 2021. The decrease was primarily due to an increase in accounts payable and customer advances, partially offset by an increase in accounts receivable and inventory. Capital expenditures in the third quarter 2022 were $7.4 million compared to $5.3 million in the third quarter 2021.

Updated Fiscal Year 2022 Outlook

Quarterly Dividend

The company’s board of directors declared a quarterly cash dividend in the amount of $0.05 per share of common stock, payable on October 14, 2022, to shareholders of record on September 30, 2022, which equates to a rate of $0.20 per share of common stock on an annualized basis.

Conference Call

A conference call to discuss the company’s fiscal year 2022 third quarter financial results is scheduled for September 7, 2022, at 10:00 a.m. ET. A supplemental slide deck will be available on the REV Group, Inc. investor relations website. The call will be webcast simultaneously over the Internet. To access the webcast, listeners can go to http://investors.revgroup.com/investor-events-and-presentations/events at least 15 minutes prior to the event and follow instructions for listening to the webcast. An audio replay of the call and related question and answer session will be available for 12 months at this website.

About REV Group

REV Group (REVG) companies are leading designers and manufacturers of specialty vehicles and related aftermarket parts and services. We serve a diversified customer base, primarily in the United States, through three segments: Fire & Emergency, Commercial, and Recreation. We provide customized vehicle solutions for applications, including essential needs for public services (ambulances, fire apparatus, school buses, and transit buses), commercial infrastructure (terminal trucks and industrial sweepers) and consumer leisure (recreational vehicles). Our diverse portfolio is made up of well-established principal vehicle brands, including many of the most recognizable names within their industry. Several of our brands pioneered their specialty vehicle product categories and date back more than 50 years. REV Group trades on the NYSE under the symbol REVG. Investors-REVG

Note Regarding Non-GAAP Measures

The company reports its financial results in accordance with U.S. generally accepted accounting principles (“GAAP”). However, management believes that the evaluation of our ongoing operating results may be enhanced by a presentation of Adjusted EBITDA and Adjusted Net Income, which are non-GAAP financial measures. Adjusted EBITDA represents net income before interest expense, income taxes, depreciation and amortization and loss on early extinguishment of debt, as adjusted for certain non-recurring, one-time and other adjustments which we believe are not indicative of our underlying operating performance. Adjusted Net Income represents net income as adjusted for certain after-tax, non-recurring, one-time and other adjustments, which we believe are not indicative of our underlying operating performance, as well as non-cash intangible asset amortization and stock-based compensation. Free Cash Flow is calculated as net cash from operating activities minus capital expenditures.

The company believes that the use of Adjusted EBITDA, Adjusted Net Income and Free Cash Flow provide additional meaningful methods of evaluating certain aspects of its operating performance from period to period on a basis that may not be otherwise apparent under GAAP when used in addition to, and not in lieu of, GAAP measures. A reconciliation of Adjusted EBITDA and Adjusted Net Income to the most closely comparable financial measures calculated in accordance with GAAP is included in the financial appendix of this news release.

Cautionary Statement About Forward-Looking Statements

This news release contains statements that the company believes to be “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. This news release includes statements that express our opinions, expectations, beliefs, plans, objectives, assumptions or projections regarding future events or future results and therefore are, or may be deemed to be, “forward-looking statements.” These forward-looking statements can generally be identified by the use of forward-looking terminology, including the terms “believes,” “estimates,” “anticipates,” “expects,” “strives,” “goal,” “seeks,” “projects,” “intends,” “forecasts,” “plans,” “may,” “will” or “should” or, in each case, their negative or other variations or comparable terminology. They appear in a number of places throughout this news release and include statements regarding our intentions, beliefs, goals or current expectations concerning, among other things, our results of operations, financial condition, liquidity, prospects, growth, strategies and the industries in which we operate, including REV Group’s outlook for the full fiscal year 2022.

Our forward-looking statements are subject to risks and uncertainties, including those highlighted under “Risk Factors” and “Cautionary Statement on Forward-Looking Statements” in the company’s annual report on Form 10-K, and in the company’s subsequent quarterly reports on Form 10-Q, together with the company’s other filings with the SEC, which risks and uncertainties may cause actual results to differ materially from those projected or implied by the forward-looking statement. Forward-looking statements are based on current expectations and assumptions and currently available data and are neither predictions nor guarantees of future events or performance. You should not place undue reliance on forward-looking statements, which only speak as of the date hereof. The company does not undertake to update or revise any forward-looking statements after they are made, whether as a result of new information, future events, or otherwise, expect as required by applicable law.