REV Group Inc at Morgan Stanley Laguna Conference Transcript

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

Question: Angel Castillo - Morgan Stanley - Analyst : Perfect. No, that's a great place to start. And you mentioned maybe where you talked about specialty vehicles, that's particularly the F&E business, that's been very much core in an area that you're a market leader within. So maybe just start there. As we think about, had great performance over the last few quarters and great trajectory into that double-digit margin place, so I just want to unpack that, what you're seeing a little bit more, maybe at a high level, how are you seeing demand unfold? I think that's an area, particularly within fire apparatus is where the backlogs are out two, three years. So are you seeing that slowdown in terms of how much you're still receiving orders versus the last couple of years? 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 12, 2024 / 7:15PM, REVG.N - REV Group Inc at Morgan Stanley Laguna Conference

Question: Angel Castillo - Morgan Stanley - Analyst : Yeah. No, absolutely. And maybe to that point, can you just talk about where aged fleets after, I guess, this wave that we've had, will that get the replacement cycle and the aged fleets in a better place? Or is there still pockets where you see that, again, as we get into '27, '28, people are just saying, I don't need to put the order in today, but I will do eventually replacement around '27, '28, so what's the shape of that?

Question: Angel Castillo - Morgan Stanley - Analyst : Yeah. And maybe just to continue on the backlog dynamics. I think one very interesting part of the narrative for REV Group is just how -- what that backlog ultimately means, right? It's not just purely volume, it's also the fact that you're able to get better price, better margin on some of that product that's down over the next few years. Can you just describe that? How are you seeing perhaps your ability to continue to drive incremental pricing on those incremental orders? 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 12, 2024 / 7:15PM, REVG.N - REV Group Inc at Morgan Stanley Laguna Conference

Question: Angel Castillo - Morgan Stanley - Analyst : And that's a good segue, I guess, as we think about the margins, so you've already achieved your double-digit target, right? But what's maybe as we get through to -- let's fast forward to 2026 or so, what do you see as the normalized or structural margin of this business longer term? Because as we see it today, it seems like the backlog alone has just a continued step-up in margin through the next few years.

Question: Angel Castillo - Morgan Stanley - Analyst : Yeah. No, and that's actually perfect because I wanted to ask you about simplification, right? Because I think that's something that's maybe a little bit of a heavier lift and maybe almost take the baton from the pricing as we get to the back of the backlog or the end of the backlog in terms of really seeing the benefits of every aspect of your strategy around simplification. So if you could just unpack that a little bit more? What investments or changes you need to make to your business? And how quickly can we start seeing that flow through in terms of the P&L, in terms of the margin?

Question: Angel Castillo - Morgan Stanley - Analyst : That's very helpful. And I think to your point, I think one of the -- when I look back at a fire truck, right, the amount of customization, I'm always blown away by just the amount of the options that you guys have. But just as you think about the preference or the amount of loyalty that the customer has for the brand, and you guys, I think, have that that differentiates you versus the other top competitors is you have multiple brands, right? So can you talk about maybe the ability to drive some of the simplification or maybe the reductivity from customers to having more standardization in the product as they've gotten used to like a brand for a particular reason?

Question: Angel Castillo - Morgan Stanley - Analyst : And can you talk about maybe the flip side of this? Because one, obviously, you're doing a lot in terms of initiatives to reduce that cost and the standardized things. But on the flip side, you also have a lot of demand for this product, right? So the desire perhaps to increase capacity or to try to get more throughput, can you talk about maybe what investments need to go into that? Or do you feel like you need to make any investments around capacity, throughput, labor, and maybe quantify those if it is possible?

Question: Angel Castillo - Morgan Stanley - Analyst : Perfect. And you talked about lead times. So maybe just an update on how you see the supply chain. Are there any pockets that you're still working on? Maybe also fold into that, your dual sourcing strategies that you started to implement during COVID, learnings from that. And how much of that have we already seen in the P&L versus how much of that might be incremental on top of pricing on top of everything?

Question: Angel Castillo - Morgan Stanley - Analyst : That's very helpful. And if there's no questions on the audience, Amy, I would love to pivot a little bit to the recreational side, right? I think that's been a little bit more of a challenge, maybe some COVID overhang there. There was a little bit of a stepdown this last quarter. Can you just give us the latest to what -- how you seeing that? And maybe speak to the near-term dynamic as well as the medium and longer term, how you see that business evolving and how quickly we can get back to what was actually pretty attractive margins in that?

Question: Angel Castillo - Morgan Stanley - Analyst : And maybe just from a broader industry perspective, are you seeing others in the industry also start to feel like they're in a better place and not perhaps do as much discounting or put pressure on the pricing side? Or is there maybe, from a broader industry perspective or a competitive standpoint, maybe a little bit more challenges that others were -- you might be in a better place.

Question: Angel Castillo - Morgan Stanley - Analyst : In terms of the model year '25, what's the latest, I think you talked about it a little bit on the conference call, but just in terms of the willingness or the desire to take on some of the newer products.

Question: Angel Castillo - Morgan Stanley - Analyst : Perfect. Well, we look forward to hearing more about those then. I wanted to switch maybe to the -- from a portfolio perspective. So you mentioned at the beginning, the Collins, the A&C shift. Where are we in terms of Rev Group's portfolio transformation? Is there more pruning or places where either you want to get out eventually or potentially do small tuck-ins in terms of bolstering the portfolio?

Question: Angel Castillo - Morgan Stanley - Analyst : Perfect. And I guess maybe -- yes, so we'll definitely get more color, I guess, in December. I'm trying to think about it from the perspective of the business was perhaps created as a little bit more of a role of strategy and a number of pieces together. As we think about areas that you might be interested in, you mentioned some of the metrics that maybe you're focused on. From areas of business, is there the potential to look into, or the willingness to look into adjacencies or areas that maybe there's some cross -- maybe not necessarily cross-selling, but perhaps some ability to implement things across from a cost or operational. How are you thinking about this opportunity? 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 12, 2024 / 7:15PM, REVG.N - REV Group Inc at Morgan Stanley Laguna Conference

Question: Angel Castillo - Morgan Stanley - Analyst : Got it. And maybe not to go back to, I guess, the specialty business. You mentioned terminal, you mentioned a couple of the other assets that you have there. So the terminal trucks have been under a little bit of pressure, but it sounds like that's stabilizing somewhat. So I wanted to touch on that. Like, I guess, how do you see that asset continue to perform from here? And then also the core nature of that over time?

Question: Angel Castillo - Morgan Stanley - Analyst : Got it. Is that mid-single digits the way you see that longer term? Or do you -- is that more reflective of the online that we've seen?

Question: Angel Castillo - Morgan Stanley - Analyst : Perfect. I do want to check in and see if anybody in the audience has any questions. If not, I just wanted to touch base, maybe more from -- again, I know you're going to touch base on some of this in December, but in terms of dividend strategy and shareholder returns, we'd like to ask, I guess, how is -- at least the current thinking on that?

Question: Angel Castillo - Morgan Stanley - Analyst : Yeah. That makes sense. I tried. (laughter) Maybe just to close that, one final question. Just we get -- particularly on the commercial vehicle side, a lot of questions around electrification, how that's playing into areas that perhaps might get penetrated sooner. How do you think about that within your business in terms of both investments that you might be making as well as the ability of electrification to penetrate both RVs and specialty vehicles to a better degree.

Question: Angel Castillo - Morgan Stanley - Analyst : Perfect. Well, that brings us the end then. So, again, Amy, Drew, I appreciate the time. So thank you.