REV Group, Inc. (REVG) Q3 2025 Earnings Call Transcript
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Overview
The earnings call reveals strong financial performance with record EBITDA margins and robust cash flow, despite some uncertainties like tariff impacts and a temporary sales dip. Management's optimistic guidance and strategic investments, including facility expansions and potential M&A, suggest positive future growth. The market's reaction is likely positive due to the raised revenue and EBITDA guidance, strong shareholder returns, and strategic operational improvements. The market cap indicates a moderate reaction, resulting in a predicted stock price increase of 2% to 8% over the next two weeks.
Key Financial Performance
Consolidated net sales $644.9 million in Q3 2025, compared to $579.4 million in Q3 2024, representing a 20.5% increase year-over-year (excluding the $44.2 million impact of the ENC transit bus business divested in 2024). The increase was driven by higher net sales in the Specialty Vehicles and Recreational Vehicles segments.
Consolidated adjusted EBITDA $64.1 million in Q3 2025, compared to $45.2 million in Q3 2024, representing a 66.1% increase year-over-year (excluding the $6.6 million impact of the ENC bus business). This was driven by commercial and operational performance in the Specialty Vehicles segment.
Specialty Vehicles segment sales $483.3 million in Q3 2025, an 11.8% increase compared to the prior year. Excluding the $44.2 million impact of the divested municipal transit bus business, sales increased 24.6% year-over-year. The increase was driven by higher unit production, favorable mix of fire apparatus and ambulance units, and price realization.
Specialty Vehicles adjusted EBITDA $64.6 million in Q3 2025, a $20.3 million increase compared to the prior year. Excluding the $6.6 million impact of the divested bus business, adjusted EBITDA increased 71.4% year-over-year. The increase was due to increased unit sales, favorable unit mix, and price realization, partially offset by inflationary pressures.
Recreational Vehicles segment sales $161.7 million in Q3 2025, a 9.7% increase compared to the prior year. The increase was driven by higher shipments in Class A and Class C categories and pricing actions, partially offset by fewer shipments and increased dealer assistance on Class B van models.
Recreational Vehicles adjusted EBITDA $8.1 million in Q3 2025, a 13.8% decrease compared to the prior year. The decrease was due to increased dealer assistance on Class B van models, tariff impacts on imported luxury vans, and inflationary pressures, partially offset by higher shipments of motorized units and pricing actions.
Trade working capital $191.6 million as of July 31, 2025, a decrease of $56.6 million compared to $248.2 million at the end of fiscal 2024. The decrease was due to lower inventory balances, increased customer advances, and timing of accounts payable, partially offset by timing of accounts receivable.
Cash from operating activities $60.3 million in Q3 2025, with $164.7 million year-to-date. This reflects strong cash generation and operational efficiency.
Net debt $54 million as of July 31, 2025, including $36 million of cash on hand. This reflects a strong financial position and reduced leverage.
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Operating Highlights
Fire and Ambulance Units: Fire unit shipments increased by 11% and ambulance unit shipments increased by 7% compared to Q3 2024. Investments in facilities and workforce training have improved production timelines and quality.
RV Portfolio: Streamlined RV portfolio now focuses on motorized RVs (Class A, B, and C). The portfolio is positioned for growth with strong dealer networks and innovative designs.
Facility Expansion: A $20 million investment in Spartan Emergency Response in South Dakota will expand fire apparatus production capacity by 40%, adding 56,000 square feet and creating 50 new jobs.
Operational Efficiencies: Lean manufacturing, workforce training, and process innovation have improved manufacturing throughput, quality, and efficiency. This has led to reduced cycle times and better delivery performance.
Financial Flexibility: Strong cash flow and balance sheet allow for reinvestment in business, share repurchases, and maintaining dividends. Free cash flow guidance raised to $140-$150 million.
Divestiture of Lance Camper: Sale of Lance Camper business to focus on motorized RVs. This strategic shift aligns with the company’s focus on premium motorhomes and operational resilience.
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Risk or Challenges
Tariff-related headwinds: The company expects $5 million to $7 million of tariff-related headwinds in the fourth quarter, impacting the Specialty Vehicles segment. Tariffs on imported luxury vans are also affecting the Recreational Vehicles segment, leading to increased costs and reduced profitability.
Macroeconomic uncertainty: Macroeconomic uncertainty is weighing on retail demand in the Recreational Vehicles segment, leading to soft end-market demand and cautious dealer behavior in replacing retail sales with new orders.
Inflationary pressures: Inflationary pressures are partially offsetting gains in unit sales and price realization, impacting profitability in both the Specialty Vehicles and Recreational Vehicles segments.
Supply chain challenges: While the company has made progress in mitigating supply chain issues, challenges remain, particularly in managing inventory levels and ensuring timely production.
Dealer assistance costs: Increased dealer assistance on Class B van models is negatively impacting the profitability of the Recreational Vehicles segment.
Economic uncertainty in RV market: The RV market is experiencing variable demand patterns due to economic uncertainty, affecting production alignment and cost structure.
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Guidance & Outlook
Fiscal 2025 Revenue Guidance: The company has raised its full-year revenue guidance to a range of $2.4 billion to $2.45 billion, reflecting a $50 million increase from the prior outlook. This represents a 10% increase compared to fiscal 2024's $2.2 billion in pro forma net sales.
Specialty Vehicles Segment Revenue Growth: Full-year revenue growth in the Specialty Vehicles segment is expected to be in the mid-teens compared to the 2024 pro forma revenue base of $1.56 billion.
Recreational Vehicles Segment Revenue Guidance: Revenue for the Recreational Vehicles segment is expected to be in the range of $625 million to $650 million for fiscal 2025.
Adjusted EBITDA Guidance: Full-year adjusted EBITDA guidance has been raised to a range of $220 million to $230 million, up from the previous range of $200 million to $220 million. This reflects a 55% increase compared to fiscal 2024's pro forma adjusted EBITDA of $145.2 million.
Net Income Guidance: Net income guidance has been updated to a range of $95 million to $108 million, with adjusted net income expected to be in the range of $127 million to $138 million.
Free Cash Flow Guidance: Full-year free cash flow guidance has been raised to a range of $140 million to $150 million, up from the previous range of $100 million to $120 million.
Capital Expenditures: Full-year capital expenditure guidance remains unchanged at $45 million to $50 million.
Interest Expense: Interest expense for fiscal 2025 is expected to remain in the range of $24 million to $26 million.
Specialty Vehicles Segment Backlog: The backlog for the Specialty Vehicles segment is $4.3 billion, with efforts to reduce delivery times and increase throughput. The segment expects low single-digit sequential revenue growth in Q4 2025 and mid-teens revenue growth year-over-year.
Recreational Vehicles Segment Backlog: The backlog for the Recreational Vehicles segment is $224 million, with Q4 2025 performance expected to be approximately flat compared to Q3 2025.
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Shareholder Return Plan
Dividend Payment: In the quarter, we also paid cash dividends totaling $3 million. Year-to-date, cash returned to shareholders through share repurchases and regular cash dividends is $117.6 million. In addition, we declared a quarterly cash dividend of $0.06 per share payable on October 10 to shareholders of record on September 26.
Share Repurchase: Year-to-date, cash returned to shareholders through share repurchases and regular cash dividends is $117.6 million.
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Key Q&A
Q:In the fiscal third quarter, you were basically at record EBITDA margins. Were those in line with your expectations? Are you ahead of schedule to meet the 10% to 12% goals for 2027?
A:Mark Skonieczny stated that the company is on the trajectory laid out for intermediate targets and is pleased with the progression. They are delivering ahead of pace from a throughput perspective and feel good about their projections.
Q:Looking at fiscal '26, will the first quarter get off to a slow start since most of it was before any tariffs? Will it improve later in the year?
A:Amy Campbell explained that the full effect of tariffs will be seen in the fourth quarter. For the first quarter of fiscal '26, sales are expected to go down 10% to 15% due to fewer working and shipping days, with typical decrementals of 15% to 20%. Incrementals for Specialty Vehicles will align with 20% to 25% in the first half of the year and revert to 30% to 40% later.
Q:What are the pricing and margin expectations for the fire and ambulance business for fiscal '28? Are you effectively pricing in tariffs and inflation?
A:Amy Campbell stated that they are offsetting inflation costs through periodic price increases and resourcing components. They have not increased prices specifically for tariffs but are continually evaluating and taking targeted price increases where appropriate.
Q:Are the 232 tariffs on steel and aluminum impacting you? Is the expected drag from tariffs materially different from last quarter?
A:Mark Skonieczny confirmed that the $5 million to $7 million impact in Q4 will carry into next year, aligning with the previously provided annualized $20 million guidance. They are working with their supply base to minimize impacts and feel comfortable with their previous guidance.
Q:Have you increased prices as a result of these tariffs? How are you managing these costs?
A:Mark Skonieczny stated that they are not increasing prices specifically for tariffs but are focusing on productivity improvements, cost structure reductions, and efficiency to offset costs. Pricing remains a lever they can use if necessary.
Q:Regarding the fire business, does the South Dakota facility increase capacity by 40% for the entire fire business or specific lines? When will it become operational?
A:Mark Skonieczny explained that the capacity increase is specific to the South Dakota facility and includes custom vehicles and the S-180 line. The facility will be operational in phases, with some capacity coming online by the end of '26 and full materialization in '27.
Q:As lead times for fire units are coming down, how do you view the sustainability of demand?
A:Mark Skonieczny stated that they expect backlog normalization by the end of '27. They aim to lead in delivery time and quality, which will be key as the market normalizes. Despite current heightened lead times, they are preparing to execute efficiently as demand stabilizes.
Q:Specialty Vehicle backlog was down 4% sequentially. Are you seeing price declines for new orders?
A:Amy Campbell clarified that the 4% decline refers to months to deliver the backlog, not units. The backlog in dollars is flat, with book-to-bill at 1. Pricing will continue to convert as they ship through the backlog, and they are on track to meet intermediate targets.
Q:How do you view price competition in the market as competitors improve capacity and throughput?
A:Mark Skonieczny stated that they are not seeing significant price competition currently. They focus on being competitive in price and lead time, with a goal to deliver the best quality products in the shortest lead time.
Q:What are your plans for capital deployment given strong free cash flow and low net debt?
A:Mark Skonieczny mentioned prioritizing internal investments for capacity and efficiency improvements, while also being opportunistic with M&A. They aim for disciplined, accretive acquisitions that align with their portfolio.
Q:Are there opportunities for M&A in the current environment?
A:Mark Skonieczny stated that opportunities in their space are limited, but they remain disciplined and opportunistic when evaluating potential acquisitions.
Q:Review of Unclear Management Responses
A:Management avoided providing specific guidance for fiscal '26 and beyond, particularly regarding throughput improvements and capital deployment details. They also used vague language when discussing M&A opportunities, stating only that they would be opportunistic and disciplined without elaborating on specific plans or targets.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
Camper divestiture
Camper work
Class coach
Coach Holiday
Congressman Governor
Dakota investment
Dakota leader
Development today
ENC
Europe Slide
Fleetwood Coach
Governor mission
Group Results
Holiday Rambler
Indiana RVs
Leader Senator
Majority Leader
Midwest Class
Recreational Vehicles
South Dakota
Specialty Vehicles
Vehicles segment
capability
class
community
customer satisfaction
delivery
expansion
fire ambulance
fire apparatus
flexibility
investment facility
quality customer
responder
segment Recreational
workforce
REVG Transcript
REV Group, Inc. (REVG) Q4 2025 Earnings Call Transcript
Positive12-10
The earnings call indicates strong financial performance with increased revenue and EBITDA, raised guidance, and significant shareholder returns. The Specialty Vehicles segment shows robust growth, and despite mixed demand in RV classes, the company is investing in capacity and efficiency. The Q&A reveals some lack of detail but overall positive sentiment, with no major risks identified. The raised guidance and strong cash flow further support a positive outlook. Given the market cap, a 2% to 8% stock price increase is likely.
REV Group, Inc. (REVG) Q3 2025 Earnings Call Transcript
Positive9-3
The earnings call reveals strong financial performance with record EBITDA margins and robust cash flow, despite some uncertainties like tariff impacts and a temporary sales dip. Management's optimistic guidance and strategic investments, including facility expansions and potential M&A, suggest positive future growth. The market's reaction is likely positive due to the raised revenue and EBITDA guidance, strong shareholder returns, and strategic operational improvements. The market cap indicates a moderate reaction, resulting in a predicted stock price increase of 2% to 8% over the next two weeks.
REV Group, Inc. (REVG) Q2 2025 Earnings Call Transcript
Unknown6-4
The earnings call presented a mixed outlook: strong financial performance with increased sales and EBITDA, a healthy backlog, and share repurchases positively impact sentiment. However, concerns about tariffs, unclear management responses, and a decrease in recreational vehicle sales balance these positives. The market cap indicates moderate sensitivity to news. Overall, the sentiment is neutral, with potential for minor fluctuations within -2% to 2% over the next two weeks.
REV Group, Inc. (NYSE:REVG) Q1 2025 Earnings Call Transcript
Unknown3-6
The earnings call presents mixed signals. Positive aspects include the dividend increase, share repurchase program, and optimistic guidance for fiscal 2025. However, challenges like inflationary pressures, a decline in recreational vehicle sales, and uncertainties around tariffs and economic conditions balance these positives. The Q&A section reveals concerns about tariffs and inflation, with management's responses indicating uncertainty. Given the company's small market cap, the stock may experience some volatility, but overall, the sentiment remains neutral due to the mixed nature of the financial and strategic outlook.
REVG Slides
REVG Report
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