REV Group Inc.’s supply-chain and labor worries eased a bit early this year, helping the company’s fire equipment division ship its highest number of units in 15 months during January and setting up the broader fire and emergency group to return to profitability this spring.
REV Group executives have, like many of their manufacturing peers, been wrestling with staffing and material shortages for several quarters and have struggled to meet strong demand for their commercial and fire and emergency (F&E) products. The company’s backlog for the latter group grew to $2.7 billion during its fiscal first quarter, which was an increase of 62% from a year earlier. On the flip side, sales by the group, which also includes ambulances, fell more than 3% year over year to $229 million in the first quarter, which contributed to a $2 million EBITDA loss versus a $1.8 million profit in the prior-year period.
CFO and Interim President and CEO Mark Skonieczny said earlier this month his team has been making progress both on simplifying some designs so that they can be used by multiple brands and on engineering changes that, among other things, are speeding up cab and body fabrication times. Regarding supply chain issues in the company’s F&E and commercial groups, he added, teams have completed more than a quarter of their first round of projects to source parts from a greater number of suppliers.
Another silver lining for REV Group: Fire customers aren’t bailing on orders. During a conference call with analysts after reporting earnings, Skonieczny was asked about clients’ reactions to the company’s much larger backlog—which is now more than double what it was during the summer of 2021.
“Our focus here is how quickly we can get the units out,” Skonieczny responded, noting that other manufacturers also are still dealing with longer lead times. “I don't think it's impacting our market share and the bidding is pretty consistent with what we've seen in the past."
REV Group as a whole posted a net loss of $13.5 million on revenues of $584 million in the three months ended Jan. 31. Adjusted EBITDA was $21.3 million, a $3 million increase from last year’s fiscal Q1, helped by a strong quarter from the company’s recreation group, which produced $24.3 million in adjusted EBITDA on net sales of $226 million.
Shares of REV Group (Ticker: REVG) closed March 21 at $11.83. They are essentially flat over the past six months, leaving the company’s market capitalization at about $700 million.