REV Group Inc Q1 2025 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Mike Shlisky - D. A. Davidson & Co. - Analyst : Hi, good morning. Thanks for taking my question, and sorry the background noise. So first, Mark, I want to make sure I understood some of your tariff discussion during your remarks there. You said the components that you get from Canada and Mexico are just 2% of costs, and most of what you do is assembled within the United States. But you still can't say whether tariffs will be a big issue going forward? I'm not sure I understood why tariffs -- how it could be an issue for you, I suppose, other than the very broad macro? Maybe just give us a little more detail as to what the possible tariff impacts are as you're seeing them today.

Question: Mike Shlisky - D. A. Davidson & Co. - Analyst : Okay, great. Thanks for that. Moving on to the RV group, I'm still surprised to hear -- look, everything went pretty well, it sounds like, at the Tampa show. There are some more shows, I think, coming up on the calendar. But one of the bigger ones here in Tampa did go okay. Then you mentioned that you want to see actual retail sales get better before you think about increasing your outlook for '25 in that group. I'm surprised. I mean, I guess wouldn't you want to see wholesale sales get better? Wouldn't that be enough to increase the guidance there? Or am I just missing that this is basically a bill-to-order business anyway? I'm just trying to figure out like what is still missing to feel better about what's going on in that group.

Question: Mike Shlisky - D. A. Davidson & Co. - Analyst : Okay, okay. Maybe one last one from me, and it's just a bit on the pricing in fire emergencies. I guess, maybe there's a two-part question here. I mean, in the past, you've talked about being [mid to mid-single-digit] pricing to '25, maybe even to '26. That's the orders you booked recently. But then I just want to make sure I understand if the prices go up from some of your raw materials or some of your assemblies from tariffs, you have the ability to go back and tweak the pricing based on things that are kind of out of your control.

Question: Mike Shlisky - D. A. Davidson & Co. - Analyst : Okay. Thank you so much. I'll pass it along.

Question: Mig Dobre - Robert W. Baird & Co., Inc. - Analyst : Thank you. Good morning. I want to pick up on that comment there. When you look at your business here, you obviously have a sizable amount of backlog, and I'm talking about specialty vehicles here. And it sounds like there's no kind of a real repricing mechanism, I guess, for what's in the backlog, but you've provided some buffer for inflation. So I'm curious as to that buffer, how you calculated it. Is it normal inflation? Is it something that's maybe more like in terms of what we've seen over the past few years? How much of a cushion do you have here? Because I think this is one of the debates that are being held out there, right? Where you have a lot of backlog, that's a good thing, but that may also be a bad thing if we're going to start to see yet another pulse of inflation here because of tariffs going forward. So how comfortable can we get with the backlog? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MARCH 05, 2025 / 3:00PM, REVG.N - Q1 2025 REV Group Inc Earnings Call And I guess my follow up to this is, in terms of new orders coming in, do you get to the point where you sort of say, look, I've got I've got enough risk in the backlog that I currently have. I don't really need to add more to it, given that you're not really going to be shipping these incoming orders until two to three years out. So how do you evaluate the risk on the new orders that you're taking in now?

Question: Mig Dobre - Robert W. Baird & Co., Inc. - Analyst : But you're a sophisticated buyer of chassis. You have good knowledge on that. And I guess I'm trying to understand when you look --

Question: Mig Dobre - Robert W. Baird & Co., Inc. - Analyst : But on fire, how do we deal with that?

Question: Mig Dobre - Robert W. Baird & Co., Inc. - Analyst : Okay. I do want to ask a question about the quarter itself and guidance. Your EBITDA came in above consensus, but I'm curious if that was also the case relative to your internal budget. When I'm looking at last year, for instance, similarly, you posted a somewhat similar EBITDA beat relative to where the consensus was at the time. And you ended up raising a full-year guidance by $5 million. You chose not to do that this time. So maybe, I'm curious, how did a quarter go relative to your expectation? And the fact that we're keeping EBITDA unchanged, is that a function of factoring in some additional uncertainty, or are there other elements that we need to be aware of?

Question: Mig Dobre - Robert W. Baird & Co., Inc. - Analyst : Understood. My final question, just on specialty vehicles, order intake, and you talked about demand being resilient on fire. So I guess, we heard you guys talk in the past about order moderation at a point in time, because obviously, the backlog extended and demand has been really strong. Are you sort of at the point where you can see demand being stronger for longer? Are you seeing any benefit from maybe investment following the West Coast wildfires? How does that impact your business? And again, how should investors think about the tenure of orders for the rest of fiscal '25 here, given what you've seen in Q1? Thank you.

Question: Mig Dobre - Robert W. Baird & Co., Inc. - Analyst : All right. Best of luck. Thanks. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MARCH 05, 2025 / 3:00PM, REVG.N - Q1 2025 REV Group Inc Earnings Call

Question: Jerry Revich - Goldman Sachs & Co. LLC - Analyst : Yes, hi. Good morning, everyone. I'm wondering if we could just continue the conversation that you just had with Mig. When we look at the above-trend orders, Amy, that you spoke to in fire, how would you attribute that to the company's potentially higher market share in this cycle versus just elevated industry demand? Can you just break that out for us? Where do you think your share is on fire versus history, and industry units versus history based on the metrics you track?

Question: Jerry Revich - Goldman Sachs & Co. LLC - Analyst : Fair enough. Can we have a similar conversation on ambulances? You mentioned a couple of quarters ago that orders were starting to slow towards historical levels. Can you just update us on where industry levels stand and if you want to weigh in on market share on that product line directionally?

Question: Jerry Revich - Goldman Sachs & Co. LLC - Analyst : Okay. But does that comment stand from a couple of quarters ago that you're probably still above normal in that category?

Question: Jerry Revich - Goldman Sachs & Co. LLC - Analyst : Okay, super. And then just separately, just to follow up on the tariff conversation just on the scenario that there's higher direct exposure than we think, and if our bill of goods moves up, let's say five points higher, would you folks in that scenario consider passing through a surcharge? Obviously, pretty wide range of outcomes and what can happen in the industry. So just curious, how do you think about that potential tail risk and the company's response in that scenario? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MARCH 05, 2025 / 3:00PM, REVG.N - Q1 2025 REV Group Inc Earnings Call

Question: Jerry Revich - Goldman Sachs & Co. LLC - Analyst : Super. Thanks, Mark. Thanks, Amy.

Question: Angel Castillo - Morgan Stanley & Co. LLC - Analyst : Hi. Good morning, and thanks for taking my question. Just wanted to go back to maybe some of the discussion. As you're thinking about potential kind of announcements of price increases here, what are you seeing in terms of the customer price elasticity? Obviously, you mentioned some of the normalization in volumes. But given the uncertainty and what seems to have been pretty strong orders here in the first quarter, I guess, one, do you expect that maybe there was any kind of pull forward of those orders to try to get ahead of any incremental pass-through of inflation, and/or what are you hearing from customers in terms of that price elasticity and desire to order beyond 2027, 2028?

Question: Angel Castillo - Morgan Stanley & Co. LLC - Analyst : That's very helpful. Thank you. And then I wanted to switch over to maybe capital allocation. You noted resuming your buyback, but also kind of a continuation of strong levels of kind of repurchases here in fiscal 2Q to date. Could you talk about your kind of anticipation of this going forward? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MARCH 05, 2025 / 3:00PM, REVG.N - Q1 2025 REV Group Inc Earnings Call And as you've kind of started to develop your M&A pipeline or bolt-down opportunities, can you just give us an update there? Any, I guess, pipeline opportunities moving closer to timing wise to being done earlier? Or just how should we think about the broader capital allocation dynamic here?

Question: Angel Castillo - Morgan Stanley & Co. LLC - Analyst : Very helpful. Thank you.