Q1 2025 Summary
Published Mar 5, 2025, 10:27 PM UTC- REV Group is actively repurchasing shares, believing the stock is an attractive investment, and plans to continue share buybacks as part of its capital allocation strategy. This demonstrates confidence in the company's long-term value and could enhance shareholder value.
- Demand for REV Group's specialty vehicles, such as fire trucks and ambulances, remains strong and above long-term trends, providing a stable revenue base. Notably, orders in the first quarter came in higher than expected, indicating resilient market demand.
- REV Group has limited direct exposure to tariffs (only 2% direct exposure) and has strategies in place to mitigate potential impacts. The company has historically managed to remain price/cost positive even during challenging times like COVID, suggesting effective cost management and margin protection.
- Uncertainty around the impact of tariffs and inflation on costs and margins, with management acknowledging that potential exposure is difficult to quantify due to the fluid situation, which may adversely affect future financial performance. ,
- Demand in key segments like ambulances and fire trucks is normalizing or declining from peak levels, potentially leading to lower sales growth in these areas. Management noted that ambulance demand is normalizing and industry demand for fire trucks has come off peaks. , ,
- Management did not raise full-year guidance despite better-than-expected quarterly results, indicating caution due to uncertainties such as potential cost increases, inflationary pressures, and demand uncertainties, especially in the RV segment. ,
| Metric | YoY Change | Reason |
|---|---|---|
Total Revenue | Q1 2025: $525.1M vs Q1 2024: $586.0M (~–10%) | Total Revenue declined by roughly 10% YoY primarily due to lower consolidated net sales, which were affected by the divestiture of the Bus Manufacturing Businesses and reduced unit shipments compared to prior periods where one‐time benefits (e.g., the Collins sale impact) were present. |
Operating Income | Q1 2025: $28.0M vs Q1 2024: –$6.5M (turnaround) | Operating Income improved dramatically from a loss of $6.5M to a profit of $28.0M YoY. This turnaround is driven by significantly lower operating expenses—including the absence of $12.6M in impairment charges—and improved cost management which enhanced gross profit margins, contrasting with earlier negative results. |
Net Income | Q1 2025: $18.2M vs Q1 2024: $182.7M (~–90%) | Net Income dropped by approximately 90% YoY as the one-time $257.5M gain from the Collins sale recorded in Q1 2024 did not recur in Q1 2025, compounded by lower net sales and adjusted tax impacts that were favorable only in the prior period. |
Earnings Per Share | Q1 2025: $0.35 vs Q1 2024: $3.09 (–88%+ drop) | EPS fell sharply by over 88% YoY primarily because the significant boost from the one-time gain on the Collins sale in Q1 2024 inflated EPS, while the improved operating performance in Q1 2025 was not enough to offset the absence of that gain and resulted in a much lower net income per share. |
Cash Flow | Q1 2025: Net change of $7.0M (current period provided) | Cash Flow dynamics shifted in Q1 2025, where a net change of $7.0M resulted from a combination of a –$42.0M working capital adjustment partially offset by $4.9M in capital expenditures. In previous periods, large one-time cash inflows (e.g., from the Collins sale) positively impacted cash flow, a benefit that was not present in Q1 2025. |
| Metric | Period | Previous Guidance | Current Guidance | Change |
|---|---|---|---|---|
Net Sales | FY 2025 | $2.3 billion to $2.4 billion | $2.3 billion to $2.4 billion | no change |
Adjusted EBITDA | FY 2025 | $190 million to $220 million | $190 million to $220 million | no change |
Specialty Vehicles Segment Revenue Growth | FY 2025 | High single to low double-digit revenue growth vs. a 2024 pro forma base of $1.56 billion | Expected high-single to low-double-digit revenue growth vs. a 2024 pro forma base of $1.56 billion | no change |
Recreational Vehicles Segment Guidance | FY 2025 | Roughly flat year-over-year | Roughly flat year over year | no change |
Specialty Vehicle Segment Margin Conversion | FY 2025 | no prior guidance | Organic net sales expected to convert at an incremental margin of approximately 40% on a full-year basis | no prior guidance |
Specialty Vehicle Segment EBITDA Seasonality | FY 2025 | no prior guidance | Approximately 40% to 45% in H1 and 55% to 60% in H2 | no prior guidance |
| Topic | Previous Mentions | Current Period | Trend |
|---|---|---|---|
Capital Allocation and Share Buybacks | Discussed in Q4 2024 with emphasis on disciplined capital allocation and the initiation of a $250 million repurchase program. Also highlighted in Q2 2024 with active share repurchases. | In Q1 2025, the company reiterated its commitment to share buybacks—reporting repurchases of 425,000 shares for $13.8 million and additional actions under a new $250 million authorization. | Consistent focus with bullish sentiment on returning capital to shareholders. |
Specialty Vehicles Demand and Operational Performance | Consistently highlighted in Q2 2024 , Q3 2024 , and Q4 2024 with record backlogs and operational improvements across fire apparatus and ambulances. | Q1 2025 reported resilient demand, a record adjusted EBITDA of $35.2 million, improved supply chain management, and enhanced production processes. | Strong and steady growth with improving operational metrics; very bullish. |
Fire & Emergency Segment Growth and Pricing Power | Detailed in Q2 2024 , Q3 2024 , and Q4 2024 with robust sales growth, record backlogs, and strategic price increases. | Q1 2025 underscored a record $4.2 billion backlog, mid-single-digit price increases, and strong year-over-year sales growth. | Persistently strong performance and pricing power, supporting future upside; bullish. |
Tariff and Inflation Impact on Costs and Margins | Addressed in Q4 2024 with focus on multi-sourcing and mitigating inflation-related headwinds and noted through discussions in Q2/Q3 regarding inflationary pressures. | Q1 2025 provided a detailed view on limited tariff exposure (2–5% on key components) and proactive strategies such as surcharges and alternative sourcing to manage inflation. | Ongoing risk management with a cautious yet proactive approach; sentiment remains tempered. |
Recreational Vehicles (RV) Segment Challenges and Discounting | Highlighted as a significant challenge in Q2 2024 and Q3 2024 with notable declines in sales, heavy discounting, and dealer destocking. Also detailed in Q4 2024 with a 26.5% drop in sales and increased discounting. | In Q1 2025, challenges persist due to soft end‐market demand and dealer destocking, though lower-than-expected discounting (especially in Class A coaches and Specialty Vehicles) slightly eased the performance issues. | Persistent headwinds with only modest improvements in discounting; generally bearish. |
Terminal Trucks Business Performance Weakness | Consistently reported as weak in Q2 2024 with a 59% drop in sales , in Q3 2024 with soft industry demand and lower shipments , and in Q4 2024 with a significant sales reduction and identification of a $161 million yearly drop. | Q1 2025 continued to note lower terminal truck sales and subdued demand, contributing to overall segment headwinds. | Steady underperformance with expectations of long-term recovery; currently bearish. |
Operational Efficiency and EBITDA Margin Improvement | Improvement initiatives noted in Q2 2024 , further progress highlighted in Q3 2024 , and significant margin gains featured in Q4 2024 with a 440 basis point improvement. | Q1 2025 reported record adjusted EBITDA margins (9.5% in Specialty Vehicles) and robust efficiency gains across segments, supported by streamlined production and cost controls. | Consistently improving efficiency and margins; very bullish for future profitability. |
Guidance and Forecast Uncertainty | Forecasts were updated in Q2 2024 , refined in Q3 2024 , and detailed in Q4 2024 with comprehensive fiscal 2025 guidance including revenue, EBITDA, and net income ranges. | In Q1 2025 the company reaffirmed its fiscal guidance—$2.3–$2.4 billion in revenue and $190–$220 million in adjusted EBITDA—while underscoring uncertainties from tariffs and inflation. | Steady outlook with cautious acknowledgment of macro risks; maintains a balanced, optimistic tone. |
Supply Chain Disruptions and Shocks | Mitigation efforts and multi-sourcing were emphasized in Q2 2024 and further elaborated in Q4 2024 as part of supply chain resilience improvements. | Q1 2025 discussed enhanced mitigation strategies, including continued multi-sourcing and proactive monitoring to manage potential supply chain shocks effectively. | Improved resiliency with proactive measures reducing risk; a positive development. |
Wind-down of ENC Municipal Transit Bus Business | Progress detailed in Q2 2024 and Q3 2024 with discussions around winding down production and restructuring, culminating in the Q4 2024 exit with a $52 million sale. | Q1 2025 briefly noted the completion of the exit from ENC’s municipal transit bus business, highlighting its positive impact on streamlining operations. | Successfully executed exit, allowing focus on core segments; positive strategic move. |
Capacity Expansion without Significant Capital Expenditure | Explored as a potential strategy in Q2 2024 and discussed in Q3 2024 regarding adding shifts and incremental line expansions, particularly for the ambulance business. | Not mentioned in Q1 2025. | Topic not discussed in the current period, suggesting it may have been deprioritized or already addressed. |
-
Tariff Impact
Q: Will tariffs be a big issue for REV Group?
A: Management stated that direct exposure to tariffs is limited, with only 2% of costs from Canada and Mexico and 5% direct exposure to aluminum and steel. Most purchases are domestically sourced, and they feel better about their supply base after strengthening it over the past years. However, the situation is fluid, and they will assess the exposure as it develops. -
Backlog Risk from Inflation
Q: How comfortable are you with backlog given potential inflation?
A: Management acknowledged that while they have limited direct exposure to tariffs, it's too early to quantify the full implications. They have built buffers into pricing to protect against unknown inflation. In ambulances, contracts allow for cost pass-through, and in fire, most chassis are purpose-built, reducing exposure to commercial chassis tariffs. -
Guidance and Q1 Performance
Q: Why not raise guidance after beating Q1 expectations?
A: The first quarter outperformed expectations due to higher wholesale orders and lower discounting. However, considering known and unknown risks around inflation and tariffs, management feels the current guidance range is appropriate. They expect more clarity on tariff impacts in the next few months. -
Price Increases and Cost Pass-Through
Q: Can you pass on cost increases from tariffs to customers?
A: Management expects mid-single-digit price increases in Specialty Vehicles for the next several years. They can pass through inflationary costs on products like recreation vehicles, terminal trucks, and street sweepers. For ambulances and some fire trucks, they have mechanisms to pass through cost increases. While fixed-bid contracts have limited repricing ability, they've been strategic in pricing to allow for some inflation. -
Specialty Vehicles Demand Trends
Q: Are you seeing stronger demand in Specialty Vehicles?
A: Orders in the first quarter were higher than expected. While orders have come down from peaks, they remain above long-term trends. It's too early to tell if demand will stay elevated, but management continues to focus on increasing throughput to meet customer needs. -
Capital Allocation Plans
Q: How will you allocate capital going forward?
A: Management resumed share buybacks in the first quarter and believes the stock is an attractive investment. They anticipate continuing buybacks and are actively building their M&A pipeline, though they will be disciplined and strategic in any acquisitions.