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Presentation

REV Group, Inc. beats earnings expectations. Reported EPS is $0.796, expectations were $0.49.

Operator: Good day, and welcome to the Rev Group Fourth Quarter Earnings Conference Call. All participants will be in a listen-only mode. Please note this event is being recorded. I would now like to turn the conference over to Drew Konop. Please go ahead, sir.

Drew Konop: Good morning, and thank you for joining us. Earlier today, we issued our fourth quarter and full year fiscal 2024 results. A copy of the release is available on our website at investors.revgroup.com. This morning, we will discuss our fourth quarter and full year results, our fiscal 2025 outlook, and then transition the call to our investor day presentation, opening the call to questions from analysts and investors. Today’s call is being webcast, and a slide presentation titled Fiscal Fourth Quarter 2024 Results, which includes a reconciliation of non-GAAP to GAAP financial measures, is available on the website. Please refer now to slide two of the presentation. Our remarks and answers will include forward-looking statements which are subject to risks that could cause actual results to differ from those expressed or implied by such forward-looking statements.

These risks include, among others, matters that we have described in our Form 8-Ks and Form 10-Ks filed with the SEC earlier today and other filings that we make with the SEC. We disclaim any obligation to update these forward-looking statements, which may not be updated until our next quarterly earnings conference call. All references on the call today to a quarter or year are our fiscal quarter or fiscal year unless otherwise stated. Joining me on the call today is our President and CEO, Mark Skonieczny, and our CFO, Amy Campbell. Please turn to Slide three, and I’ll turn the call over to Mark.

Mark Skonieczny: Thank you, Drew, and good morning to everyone joining us on today’s call. This morning, I will discuss our fiscal 2024 consolidated results before highlighting select accomplishments as we exited the year, then move on to our consolidated fourth quarter financial performance. I will then turn it over to Amy to discuss our segment financials and our fiscal 2025 outlook before we transition the call to the Investor Day discussion and a refreshed capital allocation framework. Full-year consolidated net sales decreased $258 million or 9.8% versus the prior year. Fiscal 2023 included full-year results for Collins Bus, which was divested at the end of the first quarter of 2024. Collins contributed $147 million in revenue during the last three quarters of 2023.

Adjusting for the $147 million of revenue Collins generated in the last three quarters of 2023, net sales decreased $111 million or 4.4% year-over-year. Lower net sales were primarily related to our cyclical recreation vehicle and terminal truck businesses, which experienced $257 million and $161 million full-year sales reductions respectively on a year-on-year basis due to challenged market conditions that we have discussed on previous calls. Partially offsetting these impacts was a $281 million or 23% year-over-year increase in net sales within the fire and emergency groups that benefited from production ramps that drove throughput increases and price realization. Full-year consolidated adjusted EBITDA of $162.8 million increased $6.2 million or 4% year-over-year despite lower sales.

Adjusting for $32.8 million of earnings Collins contributed during the last three quarters of 2023, adjusted EBITDA increased by $39 million or 31.5%. Programs aimed at improving operating efficiencies across the enterprise and favorable price realization within the specialty vehicles businesses resulted in an impressive 180 basis point year-on-year margin expansion when considering the sale of Collins. Disciplined cost management within the recreational vehicle segment enabled the segment to maintain a 19% decremental margin on a 28% sales decline and hold six. Turning to slide four, throughout the year we achieved a meaningful increase in our fire and emergency production rates exceeding pre-pandemic levels of throughput. This improvement is a direct result of our focus on operational excellence with lean initiatives that streamline workflows, reduced inefficiencies, and improved production schedules.

Our cumulative internal efforts have driven a significant improvement, especially in vehicle results and positions us well for sustained operational performance. Increased throughput has also contributed to expanded adjusted realization and operational leverage. Our enhanced profitability also reflects disciplined cost management and strategic pricing actions, which led to a seven-year high in adjusted EBITDA margins in both the fire and ambulance groups. These results demonstrate our ability to drive both growth and efficiency, creating lasting value for our stakeholders. Specialty Vehicles segment adjusted EBITDA in the fourth quarter of 11.4% provides a solid foundation for the achievement of the updated intermediate targets that Amy will present shortly.

Post-pandemic, the emergency vehicles industry benefited from several favorable macro trends that increased demand for our products and has resulted in Rev Group exiting fiscal 2024 with a robust 2.5-year overall emergency vehicle backlog of units based on fourth-quarter production rates. Key demand drivers include the natural replacement cycle of aging vehicles, federal stimulus funding that bolstered municipal budgets, rising real estate values and general tax bases, as well as population growth and urban sprawl. Our record high $4.2 billion specialty vehicles backlog provides a rare level of demand certainty and production planning visibility, setting us apart from industrial manufacturing peers who face greater variability in their order pipelines.

In addition, within the fourth quarter, we completed the previously announced wind-down of the Eldorado National California or ENC municipal transit bus business. Upon completion of all units within the backlog, we announced the sale of ENC on October 18th for a sale price of approximately $52 million before transaction costs to Rebus Inc. ENC has a long history with five decades in the mass transit industry, and we are pleased the brand is set to continue. I want to thank all of our customers as well as the ENC employees and dealers for their support throughout this transition. With the wind-down and sale of both Collins and ENC, we successfully exited both of our bus businesses in 2024, resulting in a more streamlined and focused organization which will drive value going forward while also creating an opportunity to return capital to shareholders.

I was pleased to announce that David Dahlke was appointed to the Board of Directors in the fourth quarter. David serves as Chairman of the Board and Chief Executive Officer of American Axle Manufacturing, a global tier-one automotive supplier headquartered in Detroit, Michigan. He has served on his board since 2009 and currently serves on the boards of Meritor Mutual Holdings and the National Association of Manufacturers. He is also a member of the Stellantis Supplier Advisory Council. We believe his significant knowledge and industry insights will further Rev Group’s operational and performance imperatives. Finally, today we are announcing that our board is authorizing a new $250 million share repurchase program and a 20% quarterly cash dividend increase.

These actions underscore confidence in the company’s financial strength and long-term growth prospects while demonstrating a focused strategy of returning capital to shareholders. The share repurchase program replaces the current program, expires in 24 months, and provides management flexibility to manage the capital structure effectively. Meanwhile, the dividend increase reflects a sustained commitment to rewarding shareholders with a growing income stream. Together, these initiatives highlight the company’s dedication to creating shareholder value, aligning capital allocation with investor interest. Please turn to page five of the slide deck as I move to review our fourth quarter consolidated financial results. Fourth-quarter segment sales were $597.9 million.

As a reminder, the prior year’s quarter included $54.2 million in net sales attributed to Collins Bus. Excluding the impact of the Collins divestiture, net sales decreased $41.2 million or 6.4% compared to the prior year quarter. As I previously mentioned, our cyclical recreation and terminal truck businesses navigated through challenged markets in the fourth quarter. As we exit the year, we anticipate that these markets remain challenged through the first half of our 2025 fiscal year. Furthermore, the wind-down and sale of the ENC municipal transit bus business, which was completed early in the fourth quarter this year, created additional year-on-year revenue comparison headwinds in the quarter. These headwinds were partially offset by continued sequential and year-on-year momentum that delivered strong performance in the fire and ambulance groups.

Consolidated adjusted EBITDA of $49.6 million decreased $4.4 million. Excluding the impact of Collins Bus, which generated $13.4 million in the prior year quarter that did not recur this year, adjusted EBITDA increased $9 million or 22.2%. This was largely due to strong performance within the fire group driven by efficiency gains, price realization, and a favorable product mix that more than offset lower performance within the recreational vehicle segment. With that, please turn to Slide six, and I’ll turn the call over to Amy for detailed segment financials.

Amy Campbell: Fourth-quarter Specialty Vehicles segment sales were about $440 million, a decrease of $38.9 million compared to the prior year. As Mark mentioned, the prior year’s quarter included $54.2 million of net sales attributed to Collins Bus. Excluding the impact of the Collins divestiture, net sales increased $15.3 million or 3.6% compared to the prior year quarter. This increase in net sales was primarily due to increased sales of fire apparatus and ambulance units, along with favorable price realization, and partially offset by lower sales of municipal transit buses, terminal trucks, and industrial sweepers. Segment adjusted EBITDA of $50.2 million increased $6.9 million. The prior year’s quarter included $13.4 million of adjusted EBITDA attributed to Collins.

Excluding the impact of the Collins divestiture, adjusted EBITDA increased $20.3 million or 68% compared to the prior year quarter. The increase in earnings was primarily due to increased sales of fire apparatus and ambulances, price realization, operational efficiencies, and higher contribution from the municipal bus business. Partially offset by lower sales of terminal trucks and industrial sweepers and inflationary pressures. Segment profitability increased sequentially throughout the year, achieving an adjusted EBITDA margin of 11.4% Ex Collins, this represents a 440 basis point improvement versus the prior year quarter, and is the highest segment margin performance since our IPO in 2017. Segment performance was aided by a favorable mix of fire apparatus shipments within the quarter, that benefited from having higher content.

We believe fourth-quarter margin performance provides a strong indication of the segment’s potential for double-digit margins and improved profitability as we progress through fiscal 2025. As Mark mentioned, this specialty vehicle segment’s backlog of $4.2 billion is also a record. Adjusting for the removal of $388 million of bus backlog that was included in the prior year’s backlog but by exiting the bus business, no longer exists, backlog grew 13.3% versus the prior year. The increase was primarily related to solid industry demand for fire apparatus and ambulances as well as pricing actions and partially offset by increased production rates. At the fourth-quarter production rate, the overall legacy fire and emergency backlog is in the range of two to three years depending on the unit type and brand.

As we will detail shortly, it is our goal to reduce our lead times over the next three years and exit fiscal 2027 in a steady state of demand with lead times that are closer to pre-pandemic levels. We believe a reduction in lead times results from both increased throughput at our plants along with the normalization of demand in the market. The fiscal 2025 outlook provided today demonstrated by the Specialty Vehicles segment, we anticipate full-year revenue to grow in the high single to low double digits as compared to a $1.56 billion pro forma revenue base. The pro forma basis for sales excludes $164 million of divested bus revenue that was reported within the segment in fiscal 2024 but will not recur going forward. Revenue growth will be driven primarily by the fire and emergency businesses, which are expected to benefit from an increased mix of higher content units and price realization as well as low single-digit unit volume growth resulting from fiscal 2024 ramp rates.

These impacts are expected to convert incremental revenue at an incremental margin of 30% to 40% in fiscal…

Drew Konop: …from a pro forma adjusted EBITDA base…

Amy Campbell: …of $136.8 million, which excludes $17.6 million of fiscal 2024 earnings related to the divested bus businesses that will not recur. For modeling purposes, we expect greater than usual seasonality in the quarter, with an approximate 20% decline in revenue as compared to the fourth quarter of 2024, due to the favorable mix of higher-priced fire apparatus delivered in the fourth quarter that will not repeat in the first quarter. This mix impact is expected to result in a sequential detrimental margin of approximately 25% quarter over quarter. Turning to slide seven, recreational vehicle segment sales of $158 million decreased 26.5% versus last year’s fourth quarter. Lower sales were primarily the result of a decline in unit volume related to end market conditions and increased retail assistance.

Year shipments in the Class A, Class B, and Towable categories were partially offset by a favorable mix of Class C units. Despite a decline in segment shipments, we believe that our motorized branch shipments have outperformed their respective product categories throughout the year. Adjusted EBITDA of $8.1 million was a decrease of $11 million versus the prior year. The decrease was primarily a result of lower unit volume, increased retail assistance, and inflationary pressures partially offset by actions taken to better align fixed and variable costs with end market demand. Segment backlog was $292 million at year-end, a 24% decline versus the prior year. The decrease is attributable to a challenging retail environment and dealer destocking throughout 2024.

After several challenging quarters of order intake and cancellations over the past few years, we are pleased to note that the segment’s fourth-quarter net orders were the highest dollar total since the second quarter of fiscal 2022, and resulted in a revenue book-to-bill of 1.3 times. We are encouraged that order patterns early in the fiscal first quarter continued to remain favorable. Within the fiscal 2025 guidance provided today, we fiscal 2024. After typical first-quarter seasonality, we anticipate gradual market improvement to begin in the second half of the fiscal year, which assumes dealer inventories within motorized categories will stabilize and overall market conditions will improve. Turning to slide eight, trade working capital on October 31, 2024, was $248.2 million, a decrease of $70.3 million compared to $318.5 million at the end of fiscal 2023.

The decrease was primarily related to the divestitures of Collins and ENC. Full-year cash flow from operating activities was $53.4 million, and adjusted free cash flow was $102.2 million. We spent $5.3 million on capital expenditures within the fourth quarter and a total of $27.6 million for the full year, which included CapEx investments aimed to deliver organic growth, lower manufacturing costs, and invest in our IT systems. Net debt as of October 31 was $60.4 million, including $24.6 million of cash on hand. As Mark previously mentioned, the Board authorized a new share repurchase program of $250 million, which expires in 24 months and replaces the prior program. In addition, we declared a quarterly cash dividend of $0.06 per share, a 20% increase payable January 10th to shareholders of record on December 26th.

At quarter’s end, the company maintained ample liquidity for strategic initiatives with approximately $350 million available under our ABL revolving credit facility. Turning to slide nine, we provide a 2025 fiscal full-year outlook which builds upon the exit rate momentum delivered by the Specialty Vehicles segment. As I mentioned, we expect high single to low double-digit growth on the 2024 pro forma $1.56 billion revenue base, which excludes sales from the divested bus businesses. Net sales in the recreational vehicle segment are expected to be roughly flat year-over-year. Consolidated top-line guidance is $2.3 billion to $2.4 billion, or mid-single-digit growth at the midpoint versus fiscal 2024’s pro forma of $2.2 billion net sales. Adjusted EBITDA guidance is $192 million to $220 million, an increase of 48% at the midpoint versus fiscal 2024’s pro forma $145.2 million adjusted EBITDA.

We anticipate sequential improvements in consolidated revenue, adjusted EBITDA, and adjusted EBITDA margin throughout the year, with the first half consolidated revenue expected to be approximately 45% of the full-year guidance and first-half consolidated adjusted EBITDA expected to be approximately 40% of the full-year guidance. Full-year net income is expected to be $98 million to $125 million, and adjusted net income is expected to be $116 million to $140 million. Free cash flow is expected to be in the range of $90 million to $110 million, anticipating a reduction in overall inventory to partially offset the expected impact of lower net customer advances as we ship units from the backlog. Full-year capital expenditure is estimated to be in the range of $30 million to $35 million, with investments in our businesses to increase throughput and lower manufacturing costs.

Expected interest expense in the range of $18 million to $20 million considers a seasonal use of cash in the first quarter that typically impacts the full-year average debt level as well as interest payments on customer advances. I would like now to turn it back over to Drew for an introduction to our virtual investor day presentation. Please refer to the Investor Day presentation on our website. After this presentation, we will then open it up for Q&A for both sell-side analysts and investors.

Drew Konop: Thank you, Amy. In April of 2021, we introduced our first intermediate financial targets under our prior organizational structure that included three segments: fire and emergency, commercial, and recreation. Following the announcement in January 2024 of our plans to exit the bus manufacturing business, we reorganized our operating structure into two segments: Specialty Vehicles and Recreational Vehicles. Today we are providing intermediate financial targets under this new segmentation. In addition to providing a view of the earnings potential of the current portfolio of businesses, we’ll provide targets for a three-year accumulated free cash flow as well as an updated capital allocation framework aimed at delivering shareholder value.

As Amy mentioned, at the conclusion of our prepared remarks, we will open the line to questions from our research coverage analysts, as well as investors. If you prefer, you can message me directly in the chat box labeled “ask a question” at the bottom of the webcast, and I will moderate online questions. Please turn to Slide three, and I will turn the call over to Mark to begin.

Mark Skonieczny: Thank you, Drew. I’ll begin with a brief overview of Rev Group for those that may be less familiar with the company and our journey. Founded through an initial private equity acquisition in 2006, Rev has grown into a leading diversified specialty vehicles manufacturer with approximately 5,700 employees and a portfolio of 20 distinctive brands. This expansion was driven by strategic acquisitions of established businesses across the United States, allowing the company to build a diverse portfolio and manufacturing footprint, leveraging a broad base of regional expertise, dealer networks, and customer relationships. Over the past four years, we have been on a journey of transforming these businesses to scale operations, unlock manufacturing efficiencies, strengthen our presence in key markets, and broaden capabilities to drive and meet diverse customer needs.

Today, we are recognized as a market leader known for delivering quality, innovation, and specialized solutions across an extensive portfolio of specialty vehicles. Turning to Slide four, during the 2021 Investor Day, we unveiled the RevDrive business system as a framework designed to drive excellence across all aspects of our organization, from operational efficiency and innovation to customer satisfaction and employee development. By leveraging a structured set of tools, processes, and performance metrics, our operating system ensures consistent execution of our strategic priorities, fostering sustainable growth and profitability. It empowers teams at all levels to focus on continuous improvement, problem-solving, and value delivery, creating measurable benefits for customers, employees, shareholders, and communities alike.

This disciplined approach aligns our entire organization toward achieving world-class results while reinforcing our commitment to being a trusted leader in our industries. The application of the RevDrive tenets has served us well over the past four years as we faced challenges overcome during and following the pandemic, along with tailwinds that provide opportunities to deliver improved financial performance over the immediate and long term. As we emerge from a pandemic over the last few years, we experienced strong market demand for fire and emergency vehicles while demand for recreational vehicles softened. In both demand environments, we focused our efforts on optimizing efficiencies and building stronger operational capabilities. The segments remain disciplined and concentrate on enhancing margins and maximizing each dollar earned.

Within the fire and ambulance businesses, we added rigor to the operating cadence of the plants with KPIs to track new vehicle starts against completions, creating more balanced production lines and improving stability. As we achieved the billing manufacturing, we then executed targeted production ramps on a plant-by-plant basis to further increase line rates. Within the cyclical end markets such as RV, we benefited from a decision to limit overinvestment capacity during peak demand and have managed our cost structure to align with lower industry volumes over the past two years. Looking deeper into the drivers of operational improvements, our teams have scrutinized production processes, looking for any inefficiencies that could be minimized or eliminated.

Enhanced efficiency from OpEx projects led to reduced operating costs and leaner, more streamlined manufacturing processes that supported enhanced profitability. Fortifying the supply chain also played a critical role in enhancing efficiency, creating a more stable production cadence. By developing strong relationships with suppliers, multi-sourcing key components, and focusing on inventory management, we ensured materials and components were more readily available when needed on a line. As a result, production accelerated, cycle times improved, and we have created a more responsive environment capable of reducing backlog as we remain committed to providing reduced delivery times. To enhance margins and drive efficiency, our businesses have enacted a comprehensive margin improvement strategy centered on product simplification and standardization, SKU rationalization, and process optimization.

This approach aims to reduce complexity, streamline production, and boost efficiency while ensuring the brands retain their unique identities and continue to meet customer specifications. By simplifying the upfront processes, we are reducing complexity across design, engineering, and production. This could be a brand-specific focus or targeted cross-brand commoditization where foundational elements and core features can be shared across brands to minimize design and manufacturing variations, thus decreasing costs, inventory, and time to market. While we drive toward greater commoditization, we remain committed to each brand’s product identity and we will retain the distinct design elements and specialized options to preserve its unique market placement and customer appeal.

Using an 80-20 approach to the portfolio, our businesses are identifying and reducing product options and configurations that provide limited value to customers but create manufacturing complexity. By streamlining the product lineup, engineering time can be significantly reduced, allowing teams to focus on high-value features and innovations. Simplified product configurations will also minimize manufacturing time and complexity and enable a more efficient supply chain strategy, lowering procurement costs while reducing lead times. Converging designs across product lines will enable a shift toward more standardized manufacturing practices. This supports the implementation of repeatable standard work, enabling consistent production quality and reducing production variability.

Standardization will also reduce SKUs and inventory requirements, improving cash flow and ultimately driving efficiency in manufacturing and supply chain processes. Daily application of the continuous improvement mindset through lean manufacturing principles is key to our strategy. Our businesses are focused on eliminating waste, improving workflow, and enhancing productivity at every stage of production. By promoting lean methodologies, employees are empowered to identify and act on areas for improvement, ensuring sustainable gains in efficiency and quality over time. In addition to operational improvements, we implemented a pricing strategy to reflect both the growing backlogs and the increasing cost of materials and labor. Through carefully calibrated price adjustments, we align pricing with expected market conditions, adding value to our backlog without straining our customer base.

The pricing adjustments not only protected margins but also reinforced the value proposition for the Rev portfolio of vehicles in both the critical first responders, porting industries as well as the consumer-facing recreational vehicle market where premium brand differentiation creates an opportunity for higher margins. Turning to Slide five. Over the past four years and since our 2021 Investor Day, Rev Group has achieved remarkable growth. Market capitalization has increased by 212% from $498 million to $1.55 billion, while adjusted EBITDA had compounded an annual growth rate of just over 24% since fiscal 2020. We generated strong adjusted free cash flow totaling $263 million over the trailing three years, strategically used it to return cash to shareholders, strengthen our balance sheet, and enhance financial flexibility for future growth opportunities and returns of capital to shareholders.

Leverage decreased from the pandemic’s peak of over six times net debt to trailing twelve-month adjusted EBITDA and 4.9 times as we exited fiscal 2020 to under 0.4 times as we exited fiscal 2024. These extraordinary accomplishments occurred even in the face of modest consolidated revenue growth, underscoring our strategic focus on improved operational efficiencies, pricing strategies, and disciplined financial management. A focused application of the RevDrive principles and our strategic choices have contributed to a 380 basis point adjusted EBITDA margin increase since 2020. Significant improvement that didn’t rely on revenue growth but was achieved through our focus on operational excellence, process improvements, and disciplined pricing strategies.

I’ve touched on demand, and one item that jumps out on this slide is the growth of backlog fueled by ongoing replacement and upgrades of aged fleets. Robust tax receipts and federal stimulus, urban sprawl that results in new firehouses and EMS facilities, and population growth that increases demand for equipment. Municipalities and contractors are increasingly prioritizing investments in emergency vehicles to meet safety standards and ensure quick, effective response times. These backlogs represent both a challenge and an opportunity. For Rev, the increased demand provides a stable base of future revenue. But it also calls for careful planning to meet client timelines and to maintain quality. Our focus has been to reduce these backlogs, and by improving throughput by 30% through fiscal years 2023 and 2024, we have demonstrated our ability to increase production while retaining our reliability as a partner and commitment to our customers.

Beyond operational and pricing strategies, we have maintained exceptional financial discipline through diligent cash management practices. Rev has generated an impressive $263 million adjusted free cash flow that allowed us to pay down $269 million in debt over the past three years while continuing to invest in our business and return cash to our shareholders. By reducing debt, we have significantly strengthened the balance sheet, decreased financial risk, and allowed ourselves more freedom and flexibility to direct future cash flow towards strategic initiatives and shareholder returns rather than debt servicing. Looking ahead, we are focused on maintaining a strategic edge and building on the successes we have demonstrated over the past four years.

With a stable foundation of operational improvements, effective price realization, and a strong balance sheet, the company is in an excellent position to continue leading in the specialty vehicles industry and driving shareholder value. Turning to Slide six, I would like to reflect on some key milestones that further the company’s position to deliver value to our stakeholders. Rev Group has undergone significant transformation recently, marked by a transition in C-suite and segment leadership, a refreshed Board of Directors with four new directors replacing legacy members, increased public float and liquidity, and a portfolio simplification and organizational restructuring. These changes signal our commitment to driving strategic realignment, enhancing governance, and delivering shareholder returns.

Amy Campbell: First…

Mark Skonieczny: I am pleased to have announced the addition of Amy Campbell to the team as CFO earlier this year. Amy is an experienced and highly respected finance executive with broad financial, operational, and public company experience within manufacturing industries. Her financial acumen, strategic vision, and strong communication skills have benefited the team, shaped the targets we are delivering today, and will further our progress toward their achievement. Steve Zemanski joined Rev Group just over a year ago as General Counsel and Corporate Secretary. Steve’s background in corporate governance and M&A experience were integral to board reconstitution, several governance additions, and reorganization we will discuss shortly.

I would also like to mention the presence of our specialty vehicles and recreational vehicles segments, Mike Vernek and Mike Lanciotti. Each brings exceptional value to our team through their extensive industry knowledge and proven leadership expertise. Their deep understanding of industry dynamics, trends, and challenges enables them to make informed strategic decisions that drive our businesses forward. Recent updates to our corporate governance framework introduced significant benefits that align Rev more closely with best practices and shareholder interests. A refreshed Board of Directors brings diverse expertise in finance, human capital, and operational management, which enhances the Board’s ability to provide well-rounded oversight and strategic guidance across critical areas.

Strong finance expertise brings valuable insights into capital allocation, risk management, and financial planning, which can directly support strategic decision-making around investments, M&A activity, and cash management. This financial acumen was especially valuable earlier in fiscal 2024 when the use of proceeds from our exit of school bus manufacturing was returned to shareholders in the form of special dividends and share repurchases. We will continue to rely on this expertise in future decisions aimed at maximizing long-term shareholder value. In addition, a promise in human capital has been and will be essential in supporting a positive culture and effective succession planning approach and employee engagement. Finally, operational expertise offers practical insights on efficiency, supply chain optimization, and quality control, helping us make informed decisions on operational priorities.

This is especially valuable for identifying bottlenecks, refining production methods, and implementing lean practices, all of which are crucial for driving higher throughput. Additionally, this operational expertise helps us align strategic decisions with a practical hands-on approach to cost control and productivity, ultimately supporting profitability improvements. The combined experiences and skillfulness of the Board ensure it can better assess and guide management on scalable solutions that enhance both short-term performance and long-term operational resilience. In addition to the Board Director’s composition, Rev is proposing to enhance its governance policies in this year’s proxy vote by removing the supermajority voting requirements from our charter.

This change simplifies governance and makes it easier for shareholders to effect change when necessary. By empowering shareholders with more straightforward voting rights, we will increase accountability and foster a more direct relationship with our investor base, aligning management actions more closely with shareholder interests.

Amy Campbell: Moreover…

Mark Skonieczny: …the Board has updated executive compensation to include performance-based shares and annual grants. One addition within the new structure is the inclusion of relative return on invested capital or ROIC to align management incentives clearly with those of our shareholders. We believe ROIC is a robust measure of management’s effectiveness in generating returns on the company’s investments, encouraging executives to focus on disciplined capital allocation and profitable growth. Earlier, Drew mentioned that we have streamlined operations by accessing non-core businesses and restructured our operating model from three segments to two. This consolidation allows for a sharper focus on core businesses, improving operational alignment and aligning resources more effectively.

The proceeds from these transactions were used to return a substantial amount of cash to shareholders, reinforcing our focus on value creation and shareholder returns. Together, these changes position the company for more agile and focused growth. Moving to Slide seven, Rev Group presents a compelling investment opportunity through its well-diversified portfolio of products aligned with favorable macroeconomic trends. Among others, we are positioned to benefit from population growth, an aging demographic, and expanding urban sprawl, being uniquely suited to meet the rising demand for mission-critical vehicles related to essential services across municipal markets. These tailwinds enhance Rev’s revenue potential and sustainability as our vehicles directly address the evolving needs of communities and municipalities within critical infrastructure.

We have experienced strong order volumes driven by pent-up demand and the need for fleet upgrades within a substantial installed base of vehicles. This robust demand environment is expected to support top-line growth and margin expansion over the long term as customers seek to modernize and expand fleets to meet current and future demands. With a strong balance sheet and a disciplined approach to capital allocation, we are well-positioned to continue to provide attractive returns to shareholders through a combination of organic growth, dividends, share repurchases, and acquisitions when and if the opportunity to deliver accretive returns through M&A arises. We will make these decisions with a focus on delivering consolidated ROIC returns greater than 15%, which we believe over time will continue to drive value for our shareholders.

Please turn to page eight, and I’ll turn the call over to Amy to present our updated targets.

Amy Campbell: Thank you, Mark. Let’s start by taking a look at the targets we set at the 2021 Investor Day and our progress against those goals. After emerging from the pandemic’s impacts, which were challenging for industrial manufacturers and arguably delayed our progress toward our original targets by a year, Rev has achieved outstanding financial performance, exceeding its fiscal goals across key metrics including adjusted EBITDA and free cash flow. The strong performance reflects effective operational strategies, disciplined cost management, and a focus on effective pricing discipline, which combined have allowed Rev to surpass expectations and deliver substantial value for shareholders. Consolidated performance was driven by both the specialty vehicles and recreational vehicle segments meeting or exceeding their respective margin targets and posting impressive results.

The legacy fire and emergency segment, which is more than 90% of the specialty vehicle segment, had an adjusted EBITDA margin target of 7% to 8%, and the specialty vehicle segment delivered an exceptional 8.9% margin in fiscal 2024, reflecting increased demand for emergency vehicles and improvements in production efficiency and margin performance. Similarly, the recreational vehicle segment, aiming for an 8% to 10% target range, achieved an average of 9.5% adjusted EBITDA margin over the past four years, demonstrating sustainable performance across a cyclical demand cycle in a highly discretionary consumer-facing industry. These achievements underscore Rev’s operational strength and ability to deliver in both stable and challenging market conditions.

By capitalizing on demand trends, enhancing production processes, and maintaining rigorous financial discipline, we have positioned ourselves well for continued growth and profitability in the future. Now let’s turn to Slide nine. I’m excited to share our updated intermediate financial targets for fiscal 2027 and our vision for sustainable growth. Over the next three years, we’re committed to ambitious goals that are intended to enhance our market position and deliver solid returns to our shareholders. Let’s start with our top-line targets for 2027. We are targeting 6% to 8% net sales growth annually. Note that this growth is on top of a pro forma base restated for the exit of bus manufacturing that occurred in fiscal 2024. Adjusted EBITDA margin is targeted to reach a consolidated range of 10% to 12% by fiscal 2027.

In addition, over the next three years, we are targeting cumulative free cash flow generation exceeding $350 million. This level of cash generation will enable us to invest in our businesses, return cash to shareholders in the form of share repurchases and dividends, and make investments in high-impact future growth opportunities. Finally, our target for ROIC is to exceed 15% throughout the forecast period, a level we believe is achievable with a continued focus on asset efficiency, disciplined capital allocation, and strong operational performance across our segments. This target reflects our commitment to not only grow but to do so profitably and sustainably. Beyond the consolidated target, today we are also updating our intermediate adjusted EBITDA margin targets for each of our segments.

We expect to build upon the momentum demonstrated by the specialty vehicles segment over the past years, with a three-year target range of 14% to 16%. In addition, we expect the mid-cycle recreational vehicle segment will be in the range of 7% to 9%. The targets we are sharing today reflect our assumption of normalization to mid-cycle demand in our cyclical end markets such as recreational vehicles by 2027. As we embark on this journey, let’s look at our starting point in 2024 on slide ten, and our path to double-digit adjusted EBITDA margins by 2027. We ended fiscal 2024 with net sales and adjusted EBITDA of approximately $2.4 billion and $163 million respectively, including the performance of the divested Collins Bus and ENC businesses, which were both divested in fiscal 2024.

In fiscal 2024, these businesses contributed $163.6 million of revenue and $17.6 million of adjusted EBITDA. Excluding these sales and earnings, which will not recur in the future, net sales and adjusted EBITDA were $2.2 billion and $145.2 million respectively, on a pro forma basis in fiscal 2024. Our growth trajectory and operational improvements set our sights on significant advances over the next three years. The anticipated 6% to 8% annual revenue growth off of the 2024 pro forma basis will be driven by volume increases, price realization, and an expectation of normalization to mid-cycle demand in our cyclical end markets of recreational vehicles and terminal trucks. Accounting for corporate expenses of approximately 1.5% of net sales, we expect consolidated adjusted EBITDA margin to be in the range of 10% to 12% in fiscal 2027.

At the indicative revenue shown on the slide of $2.75 billion, which anticipates mid-cycle demand in the Recreational Vehicle segment, this would result in adjusted EBITDA in the range of $310 million. Based on pro forma fiscal 2024 adjusted EBITDA of $145.2 million, achieving these targets would deliver annual compounded earnings growth of over 25% through the next three fiscal years. Turning to slide eleven, I will write more before proceeding to the balance sheet and a refreshed capital allocation framework.

Mark Skonieczny: Over 90% of…

Amy Campbell: …to be delivered by fire and emergency products over the next three years. Rev Group is a market-leading manufacturer of fire chassis, fire apparatus, and ambulances, serving as a trusted supplier for municipalities and emergency response organizations across North America. With a large installed base, the segment benefits from a steady, reliable replacement demand cycle driven by the need to maintain up-to-date, safe, and effective emergency vehicles. The replacement cycle for vehicles is typically five to seven years for ambulances, fourteen to sixteen years for fire trucks, and twenty to thirty years for aerial ladder trucks, ensuring consistent replacement demand over time. The demand for these products is primarily backed by stable funding sources, including municipal tax receipts and federal stimulus support, which reinforce the resilience of our customer base and provide Rev a reliable and consistent revenue stream.

Turning to Slide twelve, I’ll provide some color behind our three-year revenue targets for the Specialty Vehicles segment. Over the next three years, we anticipate steady revenue growth across the segment, supported by a combination of robust backlogs and the realization of strategic pricing actions already taken. The fire business, which has a 2.5 to 3-year overall backlog, is projected to provide low single-digit volume growth plus mid-single-digit price realization annually through fiscal 2027. Meanwhile, the ambulance business, with a two-year overall backlog, is positioned for similar growth in units and price realization. Finally, the segment’s terminal trucks and street sweepers are targeted to begin substantial 30% revenue growth for these businesses over the three-year period.

Please turn to Slide thirteen. The low single-digit unit volume growth in fire and emergency that I mentioned is expected to result from opportunities to incrementally increase throughput within the existing footprint. We plan to continue OpEx programs aimed at streamlining production while supplementing our primary workforce with additional team members dedicated to areas such as paint and fabrication, that offer opportunities to accelerate throughput. We expect that these volume increases will convert at what we consider a normalized contribution margin of 15%. Compounding the impact of these increases over the next three years, we anticipate that unit volume growth will add 100 basis points to the segment margin by 2027. Next, in response to rising input costs in the post-pandemic period, we implemented strategic pricing actions.

By closely monitoring raw material and labor trends, we were able to make timely and data-driven decisions to offset inflationary pressures. Much of the price related to the 2022 and 2023 fiscal year will continue to be realized over the next three years. Combined with aggressive sourcing activity, including input cost clawback actions and DAVE, we expect our net price cost profile will add 300 to 400 basis points to the segment’s bottom line by 2027. Finally, earlier Mark discussed several operational improvement programs being deployed across the enterprise. Strategic initiatives aim to drive sustainable margin improvement while maintaining the high quality of our vehicles and the integrity of our brands. By reducing complexity, enhancing operational efficiency, and fostering a culture of continuous improvement, our businesses are positioned to optimize cost, improve profitability, and ensure long-term competitiveness.

A robust pipeline of lean projects, the combination of designs, and the standardization of products are expected to reduce costs and result in an additional 100 to 200 basis points of targeted segment margin. Turning to slide fourteen, I would like to provide some additional perspective on the long-term opportunity and sustainability of sales and earnings within the Specialty Vehicles segment. As you can see on the slide, and as we discussed earlier, the demand environment from 2020 to 2023 drove. Across the industry, above-trend orders for fire apparatus and emergency vehicles resulted in growing backlogs and concluded with Rev’s fire and emergency businesses exiting fiscal 2024 with an overall two to three-year backlog, which is two to four times the backlog we had pre-pandemic, depending on brand and model.

We believe that orders for new equipment have started to normalize and are starting to return to long-term trend levels, which will likely result in the backlog also normalizing over the next few years. However, to emphasize the strength of the backlog and the visibility it provides to our three-year production plan, if industry demand were to be below historical levels for the next three years, the current backlog will provide visibility for increased sales and earnings growth through fiscal 2027 while maintaining a plus one-year backlog as we enter fiscal 2027. Over the long term, the segment’s financial performance is expected to continue to be supported by ongoing replacement of a large installed fleet, healthy normalized backlog, and ongoing operational initiatives that will continue to benefit margins.

If this scenario were to play out, we would anticipate entering fiscal 2028 under a steady state of industry demand that offers GDP plus sales growth and opportunity for growth above market through commercial excellence efforts targeted at share gains and innovation. Additionally, we believe that after fiscal 2027, disciplined cost management and operational improvements can provide a foundation for annual margin expansion of approximately 30 to 50 basis points, providing ongoing opportunities for healthy shareholder returns. To summarize, we believe that when the industry emerges from this period of above-trend demand, the Specialty Vehicles segment’s long-term earnings outlook remains bright. Turning to Slide fifteen, the recreational vehicle segment is known for producing RVs under several well-recognized and trusted brands.

You may note on this slide that the profile of product categories in the recreational vehicle segment is different than the overall RV industry. While industry shipments have typically been comprised of close to 90% towables, our segment produces predominantly motorized units, which account for over 95% of the segment sales and earnings in fiscal 2024. Among our brands, Class C units lead and benefit from the Renegade brand reputation, the secular consumer shift to this category as more buyers seek an ideal mix of size, safety, comfort, and durability. Our line of iconic brands in the classic Class A motorhomes follow with 33% of total sales, offering larger luxurious options for extended travel, while the more compact Class B sprinter van units cater to consumers seeking a more nimble and efficient RV experience, comprising 21% of the RV segment revenues.

The remainder of the segment is composed of Lance Towable units and campers, which although a smaller part of our segment lineup, represent the largest product category in the overall RV industry. The mix of RV offerings within our portfolio enables the segment to appeal to diverse consumer preferences and meet the demands of a broad market and dealer base. Turning to Slide sixteen, the RV industry is inherently cyclical, with demand often influenced by broader economic conditions, such as consumer confidence, interest rates, and fuel costs. Our business is no different, and the segment’s profitability typically follows these cycles closely. To understand the performance of the segment across the different industry demand cycles, we have charted its performance over the past seven years here on this slide.

In times of economic expansion, relatively low interest rates, and strong consumer spending, the recreational vehicle segment experiences higher sales volume and greater profitability. Conversely, economic slowdowns, rising interest rates, and reduced discretionary spending affect sales and profitability. You can see from this chart that sales and profitability have tended to follow a relatively linear path through the cycles. Beginning in the fourth quarter of fiscal 2023, the RV industry and our segment have faced a notable decline in sales after experiencing a surge in demand during the pandemic years when heightened interest in outdoor travel drove record sales. The drop has been attributed to rising interest rates, inflationary pressures, and tighter consumer budgets, which have impacted discretionary spending on large purchases like RVs. Dealer inventory levels have also adjusted as dealers reduced inventories and manufacturers scaled back production to match softer demand, creating a more cautious market environment.

Over the intermediate term, RV industry experts view the market outlook optimistically, with demand expected to gradually stabilize as economic conditions improve. Moderate recovery is anticipated as interest rates potentially ease and consumer confidence strengthens. To manage these market fluctuations, we will continue to adjust, aiming to maintain margin stability. Additionally, we remain focused on improving operational efficiencies and controlling costs during slower periods, positioning the segment for profitability as demand rebounds in the next market cycle. In the near term, our fiscal 2025 outlook anticipates a market environment similar to the second half of fiscal 2024. Over the intermediate term, our outlook and today’s targets contemplate the segment will participate in an industry that trends toward mid-cycle demand by fiscal 2027.

Please turn to Slide seventeen. We adhere to a disciplined capital allocation philosophy, operational resilience, and shareholder returns. This approach guides every investment decision, assuring that we deploy capital strategically to maximize our returns on investment while maintaining financial strength. We prioritize reinvesting in core areas that drive growth and competitive advantage and target expansion within high-potential markets. As we look at organic growth opportunities, we will continue to explore upgrades and advancements in manufacturing technology to deliver product innovations while remaining focused on simplification and standardization. Alongside these internal investments, we are committed to making acquisitions that align with our strategic vision and financial goals.

We believe that a net debt ratio of 1.5 to 2.5 times is appropriate for a company with Rev’s characteristics; this is a ratio that we would target over time, not immediately. Furthermore, we believe that we have the flexibility to increase debt opportunistically for the right accretive acquisitions. As a part of our commitment to delivering shareholder value, we aim to consistently return capital to shareholders through dividends and share repurchases. As Mark highlighted, we returned over $300 million of cash to shareholders in the form of special and regular cash dividends and share repurchases in fiscal 2024 alone.

Mark Skonieczny: And today, we announced that the Board has approved…

Amy Campbell: …a 20% increase to our quarterly dividend and replaced the existing share repurchase program with an authorization for a new $250 million…

Mark Skonieczny: …which expires in 24 months…

Amy Campbell: …and provides management flexibility to manage the capital structure effectively. While returning capital to shareholders through dividends and share repurchases is a key part of our capital allocation strategy…

Mark Skonieczny: …we also believe that for long-term growth…

Amy Campbell: …a contributor to our overall growth strategy will likely include acquisitions. When evaluating potential acquisitions, we will apply a set of rigorous criteria designed to ensure any new investment aligns with our strategic vision, financial goals, and commitment to long-term value creation. First and foremost, we prioritize opportunities that strengthen our core businesses or leverage our existing capabilities. Acquisitions that can provide access to attractive markets, particularly those with favorable macroeconomic trends and demand drivers, are also key considerations, as these support both current and future revenue growth. Ultimately, our disciplined capital allocation framework will allow us to remain agile, competitive, and well-positioned to capitalize on growth opportunities while safeguarding the company’s financial health and providing consistent, sustainable value to shareholders.

With that, please turn to Slide eighteen, and I will turn it back to Mark for closing thoughts.

Mark Skonieczny: Thank you, Amy. In summary, we are proud of the work accomplished by the team and believe Rev Group is well-positioned for continued success, leveraging powerful macro tailwinds. As a market leader with a large installed fleet, we expect to continue to benefit from consistent replacement demand supported by a robust dealer network and strong customer relationships that reinforce our leadership positions. The targets we laid out today show our commitment to achieving strong profitability, boosted by operational efficiencies and a disciplined approach to working capital management. Our $4.5 billion backlog is attractive among industrial manufacturers, is largely backed by municipal tax receipts, and offers significant value accretion opportunity, providing a pathway for growth and margin expansion over the next several years.

With a strong return on invested capital and a flexible balance sheet, we look to accelerate our growth strategy and leverage the financial and operational foundations that we are building. Additionally, a disciplined capital allocation approach by returning excess capital when appropriate. Together, these attributes create a strong foundation for long-term and sustained growth, profitability, and market leadership in the years ahead. We appreciate your interest and participation in the call today, and with that, I’ll turn it back to the operator for questions.

Operator: We’ll now begin the question and answer session. And your first question today will come from Mig Dobre with Baird. Please go ahead.

Mig Dobre: Thank you for taking the question, Mark and Amy. Congratulations to you and the Rev Group team. I guess, where I would like to start, Mark, is to get some of your thoughts on where the company is from an operating standpoint. I remember when we were having a similar conversation three years ago, you really talked a lot about simplification. You talked a lot about some of the in-plant operating improvements and the heavy lifting that sort of had to be done. The way I interpret your presentation today is you’re essentially saying that what had to be done, the heavy lifting is basically behind you, and now you’re switching to a more normalized operating environment. If I’m wrong about that, please correct me. Tell us what’s still left to be done.

And the follow-up to this is, if you’re now in a more normalized kind of operating mode, is it fair to say that you are to the point that you can pivot towards M&A a little more aggressively than you’ve been able to do in the past?

Mark Skonieczny: Yeah. I think, Mig, we ended the year right where we expected, and I’ve been consistent in saying we still have work to do on the fire side. And, I’ve been saying that’s more of the end of our Q2 of 2025. And, you know, to be clear, we go to work every day looking for opportunities across our whole enterprise. As we said in the prepared remarks, there are opportunities in all of our facilities. We’re never stopping looking for efficiency. So I don’t think we’ll ever get to a stabilization phase like you’re talking about because we’re always inquisitive in making sure that we’re addressing inefficiencies as best we can. But I still think we’re on that journey where by the end of Q2, you know, fire will be where ambulance currently is, which I think is consistent. So we’re executing to that plan. And so I would say it’s still going where we expected, and the plan is executing as we thought.

Mig Dobre: And on the bandwidth question for M&A, is this something that you’re contemplating still one to two years down the line, or is this something that in your mind can be a little more imminent than that?

Mark Skonieczny: Well, obviously, we have the flexibility given the share repurchase that we put up in our capital allocation strategy. We continue to look for opportunities. So if the right opportunity came to us, we’d look at that. So we’re constantly looking. I think in the past, I’ve said, you know, we’re gonna delay hunting. You know, we are looking for opportunities. There just hasn’t been anything currently that has crossed my desk that, you know, we’re interested in. But, ultimately, you know, if something came up tomorrow, those are things we’d be looking at. So I think we have optionality given our debt level and our availability.

Mig Dobre: Yeah. That part is understood. What does the right opportunity look like? And I’m not just talking about the financial profile here, although, you know, maybe it’d be helpful to understand how you think about that. I’m thinking more in terms of fit because, you know, when I’m looking at ambulance, when I’m looking at fire, it seems like, you know, from what I can tell, the opportunity is pretty limited given the concentration in the industry at this point. So what would you be considering potentially adding to the portfolio?

Mark Skonieczny: Yeah. I think something that would fit into the specialty vehicle space. So, you know, we’ve often talked about, you know, there’d be something that refuse, utilities, you know, sort of those nature of opportunities that, you know, build on a chassis, build bodies on the chassis, some of the things that are right in our wheelhouse would fit into some of the things that we would benefit from a simplification effort we put into our operations where we could buy stuff and get synergies by some of the things that we’ve gone through in our existing businesses. So it’d be something tangential in the specialty vehicle. I don’t think we are right now would be looking outside of a specialty vehicle space and enter a new arena.

Mig Dobre: That’s helpful. And maybe last question, and I’ll get back in the queue. When you look at your existing portfolio, you’ve obviously done quite a bit of surgery in 2024. Do you see additional room to adjust, to divest, or do anything else there? Thank you.

Mark Skonieczny: Yeah. We constantly look at that. I think we’ve proven that, you know, we did that with the bus businesses, so we’re constantly assessing our portfolio. So if there are opportunities and for the right value and it creates shareholder value, we’d look at other opportunities as well. So we’re constantly looking at every day we come to work saying we have to earn our right to be within the portfolio, and that’s sort of what we march to every day.

Operator: And your next question today will come from Mike Shlisky with D.A. Davidson. Please go ahead.

Mike Shlisky: Good morning. Thanks for taking my questions here.

Mark Skonieczny: Hey, morning, Mike.

Mike Shlisky: The very strong book-to-bill in recreation certainly looks good in the quarter, and it sounds like the additions there may be kind of hitting the bottom. But with order trends, like you noted, it was a bit surprising you’re assuming a flat year and not at least a little bit of growth here in 2025 in the recreation business. Here’s a couple of just kind of puts and takes as to what you’re seeing in that business for 2025 and given the order that you’ve already seen so far, why we would not see growth there? Or maybe it’s just that, you know, December is the wrong time to start talking about growth, and we’ll see how it goes in the spring.

Mark Skonieczny: Yeah. I think it is, Mike, and we tend to be saying this every quarter, but it’s really gonna be reliant on what we see in Tampa, you know, at the Tampa show, which is the large consumer show. And so we are seeing orders, but dealers are still hesitant to release the orders for production. So we talk to our dealers on a monthly basis and ask which units are gonna come out of backlog. Obviously, we have an uptick normally in November, December as people stock for the Tampa show. And then we’ll see more releases. And I think that’s consistent with our VIA, which is saying more in the spring, which would be in our second quarter, which I said, we’ve highlighted that in the prepared remarks. It’s really a second-half story because the first quarter, as you know, is our second quarter. So we’ll start seeing in the spring if consistent with what RVIA is saying. And some of our competitors as well in the space.

Mike Shlisky: Okay. Stupid. The other ones that you’ve outlined here look very solid. Can you comment on some of the risks that you’re just keeping in mind as you go forward over the next couple of years? One that came into my mind was the event of tariffs. I wasn’t sure if fire vehicles were exempt from tariff impacts or less impacted than, let’s say, automobiles or other kinds of trucks. Just some thoughts about what you are watching to make sure that you can follow through on all these projections here.

Amy Campbell: Yeah. I mean, you know, I would say if we look at the risks over the next few years, Mike, you know, certainly inflation that could come from a number of things, you know, some type of global disruption, something that would disrupt supply chains, globally or domestically. Access to labor, you know, all would have impacts. I think we’ve shown that we can get through those. You know, we’ve done a lot over the last few years to improve the robustness of our supply chain versus where we were back, say, in 2022. We’ve multisourced over a hundred different of our top components to make that supply chain more resilient in case there would be any disruptions to it. But I would say broadly, if you look at our tier-one suppliers, less than 2% of our commodities, of our supply base is outside of the US.

And so while it can create challenges, I think broadly speaking, we’re fairly well protected from those. But wouldn’t step back from, you know, I think that is a potential risk to the, you know, to any outlook we put out as we disclose in our 10-K.

Mike Shlisky: Okay. Great. I want to follow up also on one of Mig’s questions. If I got your comments right, Mark, are you trying to express when you talk about M&A candidates and what your plan is for M&A, that the business system that you’ve kind of implemented over the last year or two at Rev Group is one that you could maybe find an outside company and implement the same business system and improve a more challenged candidate? Or are you trying to buy someone that’s kind of already up and running smoothly and doesn’t need that kind of help? I guess, we’ll kind of get a sense for how confident you are in your business plan and what that might mean for an acquired company, or is it just not gonna be necessary?

Mark Skonieczny: Yeah. I think there’d be incremental synergies. So, you know, we’ve talked about if the right opportunity came up, you know, we’re not gonna buy a broken business by any means. But we’re looking for accretive opportunities, which may include some of the synergy capture that we have, but I think we’re well-positioned now across our footprint as well to integrate new companies, but also to add on incrementals in the organization that we’ve stood up has that mindset of simplification, driving the efficiencies, which could, I think, incrementally improve the synergy capture opportunity on a potential acquisition. And we’ve always kept that in mind. It just wasn’t internal, but are we gonna be a company that can stand up in an M&A target at any time and seamlessly bring those into our fold.

Mike Shlisky: Okay. Maybe one last quick one for me, and I’ll pass it along. During the quarter, did your facilities in Northern Florida experience any hurricane impacts or other issues from weather? Was that not a factor?

Mark Skonieczny: It wasn’t significant. We had a couple of down days, but we were able to make them up through the weekends. As you know, we only roll one four ten, so we were very conscious of that and made sure that people were safe and were able to stay at home on a couple of days that were warnings, but ultimately, we did not incur any facility damage or, thankfully, no people were impacted personally from that. So we felt good from that perspective.

Mike Shlisky: Great. Thanks so much. I’ll pass it along, and best of luck.

Amy Campbell: Thanks, Mike.

Operator: And your next question today will come from Angel Castillo with Morgan Stanley. Please go ahead.

Angel Castillo: Hi, good morning, and thanks for taking my question. Just wanted to start out maybe on the free cash flow front. The guidance, I understand that it’s greater than $350 million, but I guess when you compare that to what’s kind of implied on an EBITDA basis, it seems to show kind of conversion that’s below what I guess I would have expected or what you’ve kind of done historically. So can you just talk about maybe as you think about EBITDA and margins continue to expand, why your free cash flow wouldn’t expand at a similar clip? Maybe what the kind of puts and takes and bridge there would be.

Amy Campbell: Yeah. I would say where we’ve gotten to, even where we’ve gotten to in the management of networking capital, Angel, you know, we started to see we had a buildup of customer deposits. Those are starting to decline, which is negatively impacting net working capital. And over the next three years, I think we’ll optimize where inventory reductions are, and so we’ll see less cash flow come from inventory reductions as we get towards the end of the 2027 time period. So, you know, I think we’ve largely targeted about 50% adjusted EBITDA to free cash flow conversion, what we said is greater than $350 million. It’s not too far off for that guide.

Angel Castillo: Okay. So that’s 50% is kind of what you’d view as normalized once we get past this period?

Amy Campbell: Correct. And yep.

Angel Castillo: Okay. Perfect. That’s helpful. And then maybe just to kind of build off of that, and I apologize you’ve just given us fiscal year 2025 through 2027 targets, but I was hoping to talk a little bit longer term. You know, you noted that we’re seeing clearly a lot of benefit right now to the specialty front from whether it’s IJ or a number of other kind of government stimulus plus replacement cycles. So as you get to the normalization of your backlog and call it fiscal year 2028 and beyond, can you just remind us from a historical standpoint, what does that look like once the replacement cycle is over? Is there typically a bit of a lull? You know, you kind of expect a pause. Or it sounds like from your slides, you’d expect maybe a continued steady growth from there, but just given the strong clip in the kind of, you know, orders that we’ve seen, would there be an anticipation of a bit of slowdown before we get to kind of a normalized type of, you know, volumes, margins?

What is kind of fun when they were saying what’s the main cycle for specialty?

Amy Campbell: What we tried to convey there is as we get through these next three years and see, you know, backlog starts to normalize at one to one and a half years, which would even be a little bit above what I would say pre-pandemic levels. We would expect top-line sales to grow from that point on, you know, at GDP plus, you know, we would certainly target to drive, you know, market share gains with that. And then we think with that and the ability to continue to drive productivity improvements, we could get 30 to 50 bps of EBITDA margin enhancement year on year. So really, I think what I would say there is to get to one and a one and a half years of backlog in that scenario, which is really just, you know, to be a scenario to play out, that would have orders over the next couple of years would have to be below trend level for the backlog to come down.

If the backlog stayed at trend levels, we would be still at two to three years of backlog in 2028. And so that scenario is to say if we saw below trend for the next couple of years, which we, you know, we don’t know kind of what the next few years will play out for us in terms of orders. We’d still be in three years with one to one and a half years’ worth of backlog and then growing at kind of a GDP plus rate from there. We would not expect a lull. And that’s kind of the message we’re trying to get across in that slide we showed today.

Angel Castillo: And maybe just to kind of fine-tune that, I guess, is that what you’ve seen historically? Or as you think about kind of the, you know, that normalization again, just kind of from a GDP plus, given the replacement cycles being so long in nature, you know, a pumper is kind of fourteen, sixteen years. I just want to understand, like, is that then what the age of vehicles and historically what you’ve seen in terms of normalizing to that kind of GDP plus?

Amy Campbell: Yeah. I mean, I think there’s if you go back twenty years, I don’t know if there’s a normal period we could exactly duplicate what we experienced over the last couple of years, but it would be aligned, I think, broadly speaking, with what demand over the last twenty years would show.

Angel Castillo: Got it. Thank you. And then maybe just one last one for me. The fiscal year 2025 EBITDA range, it seems to be wider than normal. The $190 to $220. Can you just help us understand the two bookends? Like, what is kind of contemplated at the $190 level versus the $220 across two segments?

Amy Campbell: Yeah. I’d have to go back and see if that is wider. But, you know, certainly, there’s always, you know, there’s always a range there. I’d say on the top end, do we see recreation recover more quickly than we’ve built in the guide and in the forecast? Are we able to claw back any inflationary pressures we know that we have in 2025? Are we able to get some additional productivity improvements beyond what we’ve built into the guide? So there is some additional throughput as well. We continue to drive throughput improvements, kind of going back to Mig’s question. We’ve got low single digits, but we’ll certainly, you know, be doing whatever we can to continue to drive throughput increases and lower delivery times. And then I would say on the low end would be probably largely just any, you know, shocks to the supply chain, unexpected inflation, you know, any unexpected, weaker demand, especially for recreation than what we’ve built in.

Angel Castillo: Very helpful. Thank you.

Operator: And your next question today will come from Jerry Revich with Goldman Sachs. Please go ahead. Jerry, your line may be muted. Moving on. And our next question today will come from Mig Dobre with Baird. Please go ahead.

Mig Dobre: Hey, thanks for the follow-up. Just two quick ones for me. On the specialty vehicles margin bridge that you’ve given us on slide thirteen, the 300 to 400 basis points of price cost, do you view that as permanent? So, you know, the 14% to 16% margin in fiscal 2027, is that a structurally higher margin? And I guess the way I’d like to ask the question, the 300 to 400 bps of price cost, is that just a function of a one-time benefit that you currently have in a backlog just because of how unusual maybe, like, the pricing environment has been over the past couple of years? Or do you think that’s structurally sustainable longer term?

Amy Campbell: Well, I would say that we think the 14% to 16% is structurally sustainable over the long term. And, you know, what we guided was we believe as we exit 2027, there’s additional 30 to 50 bps annually to grow at the consolidated margin level from there, but also at the specialty vehicle margin level. I would say. So that is a structurally higher margin that we exit 2027 at. Yes.

Mig Dobre: And that 300, 400 bps, right, that’s a function of both the pricing that we have in the backlog and we largely know what that pricing benefit is, offset by our inflationary assumption, which is 2.5% to 3% a year over the next three years.

Mig Dobre: Helpful. Thanks. And lastly, on the buyback authorization, how do you or rather what’s the approach here in terms of how you deploy this capital? Are you sort of being programmatic, just kind of being consistently in the market? Or is this more of a function of being opportunistic depending on what the stock does and so on?

Amy Campbell: Yeah. I think the buyback gives management a lot of flexibility for how we’re in the market buying back shares. And, you know, I’m not gonna give any specifics of what our plans are there, but, you know, we certainly, as we talked about, expect to deliver over $350 million free cash flow over the next three years. The next two years, the Board has authorized $250 million for share buyback. We can use some of our balance sheet flexibility to do that. And we can accelerate or slow that share buyback based on what makes sense and based on other capital allocation priorities that may come up.

Mig Dobre: Appreciate it. Thank you.

Amy Campbell: Thanks, Mig.

Operator: Again, if you have a question, Seeing no further questions, this will conclude our question and answer session as well as the conference call. Thank you for attending today’s presentation.