REV Group Inc Q3 2025 Earnings Call Transcript

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

Question: Michael Shlisky - D.A. Davidson & Co - Analyst : Yes. Hi. Good morning and thanks for taking my questions here. In the fiscal third quarter, you were basically at record EBITDA margins. I'm curious, were those in line with the expectations and do you feel like the company is ahead of schedule to meet that 10% to 12% goals you got for 2027. You're essentially already there this quarter with almost no contribution from recreation yet. So just curious are you headed towards the high end here by '27 or just your overall thoughts on that cadence here?

Question: Michael Shlisky - D.A. Davidson & Co - Analyst : Great. And maybe a more near-term margin question. Looking at fiscal '26, you just said about the fourth quarter incrementals, does it got up to a slow start in the first quarter since most of first quarter was before any tariffs. We just do have election day at that time. Will it go off to a somewhat slower start and then maybe get better a little later on the year as things adjust over the prior year?

Question: Michael Shlisky - D.A. Davidson & Co - Analyst : Great. And then one last one for me on the fire apparatus business. What you did book in the third quarter here, just give us a sense as to the pricing and the margin expectations for, I guess, what's now 2028 on those vehicles? Do you feel like you're still effectively pricing in the tariffs and inflation that are taking us today and you're confident on making sure those get realized by fiscal '28. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. SEPTEMBER 03, 2025 / 2:00PM, REVG.N - Q3 2025 REV Group Inc Earnings Call

Question: Mircea Dobre - Robert W. Baird & Co. Incorporated - Analyst : Hey, good morning, guys. On this tariff discussion, I appreciate all the color here. One of your much, much larger peers in machinery updated us last week talking about an incremental headwind from the 232 tariffs on steel and aluminum, I think that was primarily related to steel and aluminum content in various components that were coming in from abroad. I'm curious if this is impacting you as well. As far as I can tell from your comments, it doesn't seem like the expected drag from tariffs is materially different from last quarter. But I'm just looking to make sure that we have some clarity on that.

Question: Mircea Dobre - Robert W. Baird & Co. Incorporated - Analyst : Yeah. And just to put a finer point here, Mark. I mean, it doesn't sound from what Amy said that you've increased prices as a result of these tariffs. Do you feel comfortable with your ability to manage these costs from a supplier or shift in your purchasing. Is that really the solution here as we think into fiscal '26? Or the better way to think about all of this says, hey, this is an incremental cost that is sort of permanent. It would just be now baked into my cost base and from there on out into fiscal '27 and beyond, we just build off that base rather than offset these costs?

Question: Mircea Dobre - Robert W. Baird & Co. Incorporated - Analyst : Okay. Then my follow-up, I want to talk a little bit about fire. And if I heard your comment correctly, the facility in South Dakota increases capacity by 40%. Is that a comment for the fire business as a whole? Or is this just a specific line like the S-180 or something like that? And then in terms of the facility, how should we think about when it will become operational? When it will reach it's like full production run rate?

Question: Mircea Dobre - Robert W. Baird & Co. Incorporated - Analyst : Last question for me. Sticking with fire here. I understand that your delivery timelines are coming down by two months, I guess that's great news. But maybe the biggest question I'm hearing from investors relates really to the sustainability of demand here. Things have been pretty good thus far. So I'm curious as lead times are coming down, how do you think about kind of the push-pull here in terms of lower lead times, maybe being stimulative for demand at the same time recognizing that we've had a lot of order intake for you and your peers over the past three years. So what's your best guess on the path going forward, especially since you are increasing capacity? Thank you.

Question: Angel Castillo - Morgan Stanley - Analyst : Hi. Good morning, and congrats again on another strong quarter here. I just wanted to ask a little bit more on the pricing and the outlook here for the backlog. I just wanted to make sure I understood this. Well, I thought I heard you say that specialty vehicle backlog was down in terms of units about 4% sequentially. And I believe, I guess, the backlog, given that it contracted a little bit on a sequential basis, can you just help me understand what does that mean for what you're kind of pricing new orders at for 2028? I guess I would have just expected that 4% decline in units to be more than offset by several years of kind of higher price increases. So from a sequential basis of what you're taking in new orders, are you seeing any price declines on those kind of new orders? Or is that just reflective of maybe order intake. Just if you could kind of help us understand that a little bit more on why we're not necessarily seeing that unit decline in the backlog offset by use of price.

Question: Angel Castillo - Morgan Stanley - Analyst : That's very helpful. Thank you for the clarification. And maybe just on that line more broader in terms of the industry, I think one of your biggest competitors also talked about driving some kind of efficiency in their production rate. As you think about the normalization of order intakes out to 2028, how are you seeing the level of price competition in the market for those orders as you're seeing competitors potentially also look to improve some of their capacity and throughput and efficiency. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. SEPTEMBER 03, 2025 / 2:00PM, REVG.N - Q3 2025 REV Group Inc Earnings Call

Question: Angel Castillo - Morgan Stanley - Analyst : And maybe just if I could, just one last quick one. You talked about the increase in capacity from Spartan. I guess, your throughput initiatives beyond the fourth quarter in fiscal year '26, how much more should we expect in terms of potential improvements in either '26 to '27 based on what you're implementing?

Question: Mircea Dobre - Robert W. Baird & Co. Incorporated - Analyst : Yeah. Thank you guys for taking it. I just couldn't help myself. The free cash flow has just been my view pretty remarkable. I mean, you've done almost $2.75 year-to-date. You might do $3 or maybe even more for the full year. And your net debt is close to nothing. And I'm curious here as the business continues to build, we'll hear about how you think about fiscal '26, I guess, in a few months, but presumably, cash generation continues here. How do you think about capital deployment at this point because you paused your share buybacks and I guess to some extent, I understand that, but what are you seeing in terms of other opportunities to deploy this cash that you're generating?

Question: Mircea Dobre - Robert W. Baird & Co. Incorporated - Analyst : No. For sure, understood. But are you seeing those kinds of opportunities out there? Are they available or are we in an environment in which maybe that's not something that investors should be expecting in terms of you completing deals anytime soon. That's it for me. Thank you.