In a sign of the boom times—and the challenges that go along with them—specialty vehicle maker REV Group Inc. and its 30 brands reported record revenue and backlog for the second quarter, yet the company missed some key targets.
“Our fiscal second quarter results were below our expectations and were impacted by a number of factors,” said Tim Sullivan, CEO of REV Group. “In particular, cost inflation across many of the commodities and services we buy was significant in the quarter and due to the length of our backlogs we were not able to mitigate these increases.”
- Net sales of $608.9 million, representing growth of 11.7% compared to the prior year quarter
- Second quarter net income of $7.4 million, an increase of 9.2%
- Second quarter Adjusted EBITDA of $34.1 million, a decrease of 9.2%; and
- Total backlog of $1,270.5 million as of April 30, an increase of 2.3% sequentially and 15.3% compared to the prior year end.
REV Group estimated the cost inflation will have an approximate $19 million impact on our current fiscal year. Additionally, production and sales at several business units were adversely impacted by the availability of chassis, the company said. Finally, margins were impacted by lower-than-expected sales of certain higher-content product categories including custom fire apparatus, large commercial buses, and Class A RVs.
“Longer term, in response to these factors, we have taken mitigating action across our business to drive targeted margin expansion,” Sullivan continued.
These include the implementation of price increases and surcharges to offset material and service cost increases for all new orders to go along with a series of significant cost and spending reduction actions including: supply chain actions, consolidations of certain facilities, and reductions in overhead headcount and spending, the company reported.
Among the segment highlights:
Fire & Emergency (“F&E”) segment net sales were $252 million for the second quarter 2018, up 15.1%. The increase was primarily driven by results from the Ferrara acquisition completed in April 2017, as well as an increase in ambulance unit volumes. F&E backlog at the end of the second quart was up 7.4%. F&E Adjusted EBITDA was $21.8 million in the second quarter 2018, a decline of 10.7%
Commercial segment net sales for the second quarter were $158 million, down 1%. This decline was due primarily to a decrease in transit bus and school bus units sold compared to the prior year period, partially offset by increases in shuttle bus, sweeper and mobility van units. Commercial backlog at the end of the second quarter was $397.2 million, an increase of 8.4%. Commercial segment Adjusted EBITDA was $9.5 million in the second quarter compared to $14.7 million in the second quarter last year.
The Recreation segment grew net sales to $198.8 million in the second quarter, an increase of 19.5%. Recreation segment sales growth was the result of strong performance from the recent Lance acquisition and the acquisition of Midwest in April 2017 (Class B and Towables product categories), an increase in Class C unit volume, and an increase in sales at the company’s molded fiberglass business. Class A unit volume declined compared to the prior year period due to a reduction in the number of models produced and the timing of new model year introductions which were targeted to occur later in this fiscal year. Excluding the impact of net sales from acquired companies, Recreation segment net sales decreased 7.1%.