Q2 2022 REV Group Inc Earnings Call
Greetings welcome to Rev Group incorporated second quarter, 'twenty 'twenty tail earnings conference call. At this time all participants are in a listen only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance. During the conference. Please press star zero on your telephone.
Pat. Please note. This conference is being recorded I will now.
Now I'll turn the conference over to drew Konop.
Vice President of Investor Relations and corporate development. Thank you you may begin.
Alright, Thank you Sherry good morning, and thanks for joining US earlier today, we issued our second quarter fiscal 2022 results a copy of the release is available on our website at investors Dot group Dot com.
Today's call is being webcast and a slide presentation, which includes a reconciliation of non-GAAP to GAAP financial measures is available on our website.
Please refer now to slide two of that 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've described in our form 8-K filed with the SEC earlier today.
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 if at all.
All references on this call to a quarter or a year are physical quarter or fiscal year, unless otherwise stated.
Joining me today on the call are our president and CEO rod rushing as well as our CFO Mark Schenectady. Please turn now to slide three and I'll turn the call over to Rod.
Thank you drew and good morning to everyone joining us on today's call today I will provide an overview of the quarter's consolidated performance and then move to commercial operating and financial highlights achieved within the quarter before turning it over to Mark for a detailed segment financials.
Second quarter results reflect continued strong order demand and execution in a challenging supply chain environment that has impacted the industrials for the past three quarters.
Growing demand for components and materials combined with lingering labor challenges within our supply base have restricted the availability of key components, such as wiring harnesses Radiator's actuals and others as a result, our businesses that manufacturer purpose build chassis such as fire apparatus and municipal transit buses continue to experience throughput challenges.
And labor inefficiencies related to reward as these components are received.
Our <unk> businesses have also experienced inefficiencies as OEM provided chassis receipts declined throughout the quarter.
While we experienced improved sequential chassis pool allocations in the first quarter several Oems scheduled shutdowns or limited production at their facilities within the second quarter, which adversely impacted the fill rate against these allocations.
He's a chassis are much lower than expected and what is delivered is almost always have a different mix to water production schedule required. This impacts our ambulance school bus and certain recreation businesses throughput and efficiencies.
Second quarter consolidated net sales of $576 million decreased 11% percent versus $644 million in the second quarter of last year. The decrease was driven by lower sales within the fire <unk> emergency and commercial segments, which was partially offset by increased sales within the recreation segment and price realization.
<unk> from the actions that we've taken over the past year completions.
Completions in the fire and emergency segment were challenged by shortages of chassis in key components mentioned earlier recreation supply chain has remained resilient and the segment continued to deliver strong results and execution with record sales against their record backlog.
Consolidated EBITDA of $23 8 million was down $21 7 billion versus the $45 5 million of the prior year.
Current year results were driven by recreation by the Recreation segment, which posted a.
A record $28 $7 million of adjusted EBITDA and a record 11, 9% margin performance. This was largely offset by lower sales labor inefficiencies and inefficient and inflationary pressure within fire <unk> emergency and commercial segments inefficiencies in the quarter were due to lower unit sales and our decision to maintain the directly.
Labor staffing levels required to complete rework and deliver these essential need vehicles to our customers.
Please turn to slide four for highlights of the second quarter.
The backlog of each of our segments is at a record level. We continued to experience strong end market demand for our vehicles. This combined with lower production driven by previously mentioned component and chassis shortages have resulted in record consolidated backlog of $3 $6 billion, an increase of 55% versus the prior year at our current.
Line rates backlogs extend into fiscal year 2024 for several of our businesses.
In April we were pleased to debut the first North American style fully electric fire truck at the fire Department instructors conference.
This new electric powered truck allows departments to drive and pump on electric only and delivers the longest electric only pumping duration in the industry.
The show generated new interest from dealers and customers, our IWAN Ferraro Academy as bargain brands.
Attendees were among the first to see and learn about vector which is now available in each of these brands.
We continued to return cash to our shareholders in the form of dividends and share repurchases within the quarter, we deployed $21 $5 million towards the repurchase of common shares consistent with our balanced use of capital exiting the second quarter. Our leverage ratio was two one times net debt to trailing 12 months EBITDA.
Which is near a low end of our target range.
Our updated free cash flow guidance of $64 million at the midpoint provides ample opportunity opportunity for additional share repurchases tuck in acquisitions or debt reduction after accounting for potential dividend payouts in the second half.
Please turn to slide five.
As you know the supply chain challenges, we referenced in today's earning release and on this call have now existed for several quarters entering the second quarter, we believe that our supply chain would improve in the second half of this fiscal year.
Within the quarter, we did not experience improved supply chain and in certain cases. This situation has worsened.
We have updated our expectations with the current view, there's a supply chain recovery is likely to have been pushed into calendar year 2023.
Our supply chain team is in constant contact with our key suppliers, including having our people onsite and suppliers facilities I am personally communicating with executive management at our OEM partners regarding the allocation in fulfillment of chassis to meet our production plans.
The availability of semiconductors and electronic components that resulted in the Oems temporary closing a portion of their factories are reducing shifts over the past several months as they have reported.
This has resulted in lower than expected chassis received in the second half and planned lower line rates within our ambulance business.
These actions will be aligned with appropriate flexing of cost to match.
Reduced reduced production rates.
We continue to work to find creative solutions to navigate a shortage of critical parts, we have placed labor into our supply base, where necessary efforts are ongoing to improve our multi sourcing and engineering solutions to address sole source components within the second quarter, we put boots on the ground and created a physical presence at key supply tires.
To drive operational intensity needed to fulfill our demand.
Last quarter, we discussed pricing strategies included both board pricing and repricing a portion of our backlog. We continue both enbridge with actions that are designed to align the backlog of new sales with our current and future build costs.
Our pricing our pricing policy process includes continuous review of anticipated board inflation align with our current production lead times by business and by product type and we will continue to move to price it correlate to preserve price costs.
Finally, the Rev Drive business system continues to be deployed across the enterprise. We are undoubtedly we would've had not only been farther along in this process have been working environment, where more stable more predictable and consistent with our pre COVID-19 conditions over the past several quarters, we have placed overweighted focus and efforts on tactical actions and managed.
<unk> materials to achieve throughput and sourcing to mitigate input ryzen.
Despite the near term just rush disruptions, we remain committed to the strategy of our rail drive business system are correct and we will provide long term value creation that we defined in our investor day presentation.
I will now turn it over to Mark for details on our second quarter financial performance Mark.
Thanks, Ryan and good morning, everyone. Please turn to page six of the slide deck as they move to a review of our segment level performance.
Fire and emergency second quarter segment sales were $245 million, a decrease of 20% compared to the prior year. The decrease in net sales was primarily the result of fewer shipments of fire apparatus and ambulance units and unfavorable mix of fire apparatus, partially offset by price realization of units in the back.
Backlog.
<unk> unit starts and completions continue to be impacted by critical part shortages and reduced chassis receipts from our OEM suppliers, resulting in 17% fewer unit shipments in the quarter versus prior year within the fire division sales have been negatively impacted by shortages of key components, including radiators.
Axles and wiring harnesses within the ambulance Division OEM provided chassis deliveries have decreased since our last earnings call in the fourth quarter. Our average chassis received from a key OEM were <unk> 54 per week. During the first quarter receipts were varied between 12 and 18 nine chassis and avid.
<unk> 34 per week.
At the time of our last earnings call. We felt the trend of allocations had improved but indicated the fill rate and timing of receipts was uncertain. Our second quarter chassis receipts average just 10 per week, resulting in lower than expected unit starts completions and sales.
<unk> segment adjusted EBITDA loss was $2 2 million in the second quarter 2022 compared to $21.7 million of EBITDA in the second quarter 'twenty 'twenty. One. The decrease was primarily result of lower volume and inefficiencies related to supply chain disruptions and unfavorable mix.
A fire apparatus and inflationary pressures, partially offset by pricing realization.
The fire business produced fewer aero units and availability of parts, resulting in a greater mix of commercial versus custom units, resulting in a lower average selling price and profitability ambulance production planning remains challenged by uncertainty surrounding chassis receipts requests needed to support our production plans.
We have not been fully allocated and the ultimate receipts have not consistently met allocation by number are tight as Rob noted throughout the second quarter. The F&I segment retained labor to address the significant level of rework associated with erratic components supply and the expectation of improved chassis availability within the ambulance business.
At the end of the second quarter, we lacked chassis to run at full production schedule and beginning in the third quarter. We made the decision to execute furloughs in certain ambulance businesses. The combined impact of the parts shortages and chassis constraints on our production throughput as well as the related labor and efficiencies resulted in a 35 per se.
<unk> year over year decremental margin.
During the quarter, our <unk> production facilities in Pennsylvania, and Virginia completed their final camera unit those planned and facility disposition is in process within the quarter, we received $2 million of cash for the sale of certain assets and are executing the sale of the remaining properties unadjusted second quarter results.
<unk> include $8 2 million of charges related to the wind down of these operations, which includes $7 3 million of restructuring and related charges as well as 900000 of accelerated depreciation on buildings and equipment as it reached its final use date, we have completed the first camera unit any new production facility.
However, the full ramp of production of our <unk> backlog continues to be impacted by supply chain constraints.
Total after need backlog was a record at $1 8 billion, an increase of 63% year over year. The increase in backlog result of strong orders for both fire apparatus and ambulance units as well as price actions taken in the last 12 months, we expect conversion of these orders to sales to remain challenged.
And our expectation for supply chain relief that would allow for accelerated top line growth has been pushed into calendar year 2023.
The midpoint of updated guidance anticipates, we will experience lower chassis fill rates than first half run rate with improved fire apparatus apparatus sales offsetting the sales decline in ambulance. The net result is that we expect third quarter F. In any segment revenue to be approximately flat with the second quarter run rate followed by a small increase.
In the fourth quarter.
Given the cost actions, we are taking to align labor staffing levels to reduce production rates, we expect to convert second half sales I think 30% to 40% incremental margin compared to the first half. This excludes the second half benefit that we expect to realize from the closure of the <unk> facilities.
The slide seven.
Commercial segment sales were $91 million, a decrease of 8% compared to the prior year period. The decrease was primarily related to lower shipments of municipal transit buses, partially offset by increased shipments of terminal trucks and street sweepers and price realization municipal transit bus sales declined 55% versus last.
Year, primarily due to shortages of critical parts, such as destination signed exhaust kits and wiring harnesses that resulted in zero shipments in the month of April .
School bus unit sales were approximately flat versus last year, but revenue was impacted by a mix of lower priced buses sold during a competitive bidding environment in prior year within the specialty group. We are encouraged by increased terminal truck If street sweeper production, which benefited from improvement initiatives designed to increase throughput they're busy.
This study one month record for completed trucks in the quarter and sweeper production exited the quarter at the highest rate of the year.
Commercial segment adjusted EBITDA of $4 4 million decreased 47% versus the prior year. The decrease in EBITDA was primarily a result of lower shipments and mix of the transit bus business unfavorable mix within school buses inefficient things related to supply chain disruptions as well as in play.
Scenario pressures, partially offset by increased shipments of terminal trucks and price realization.
Segment backlog at the end of the second quarter was a record $531 million with increased orders experienced across all product categories. The commercial segment outlook anticipates, a recovery of municipal transit bus shipments as dual sourcing initiatives take hold and improve profitability of school bus sales and a continuation of the improved performance.
Formats within the specialty group, we expect the commercial segment quarterly sales cadence to improve sequentially through the back half any normalized 15% incremental margin.
Turning to slide eight recreation segment sales of $241 million were up 1% versus last year's quarter increased sales were primarily a result of increased class B unit shipments and price realization across all product categories, partially offset by fewer shipments of class a class C and towboat.
Alex Despite supply chain challenges our class B business continues to streamline operations and achieved record unit production lower shipments of class a class C units were primarily related to supply chain constraints, which included shortages of awning windows generators of chassis COVID-19 related.
Absent theism and similar supply chain constraints resulted in lower shipments of campers and total units.
Recreation segment, adjusted EBITDA was $28 7 million up $4 million versus the prior year segment margin of 11, 9% increased 130 basis points versus the prior year and as a segment record the increase in adjusted EBITDA was primarily a result of increased shipments of high margin class B units.
A favorable mix of class, a and class b units and price realization, partially offset by inflationary pressures and inefficiencies related supply chain disruption and labor constraints.
Segment backlog of $1 3 billion increased 39% versus the prior year and was the eighth consecutive record orders continued to be strong across all categories and dealer inventory for our products are being globe. We expect approximately 55% of recreation segment sales to be realized in the second half.
Margins to remain in the low double digits with robust sales of class B and class C units and improved profitability in our total business.
Turning to slide nine.
Net debt as of April 30th with 237 million, including $5 9 million of cash on hand versus $242 million net debt at the end of fiscal first quarter. The decrease in net debt was a result of free cash flow generation within the quarter of 27 million, partially offset by share repurchases.
$21 5 million or one 7 million shares at an average price of $12.84 year to date cash returned to shareholders totaled $52 3 million. We also declared a quarterly cash dividend of five cents per share payable July 15th to shareholders of record on June 30th.
At quarter end, the company maintained ample liquidity with approximately $294 million available under the ABL revolving credit facility.
Trade working capital on April 30th was $365 million compared to $368 million at the end of fiscal 'twenty 'twenty. One. The decrease was primarily the result of increased accounts payable and customer advances, partially offset by increased accounts receivable and inventory.
Our third party chassis inventory, both on balance sheet and within OEM pool decreased $22 million sequentially on a year over year basis, our world chassis inventory is down $32 million.
Year to date cash provided by operating activities was $27 4 million compared to $37 1 million cash provided in the prior year period. The decrease was primarily due to lower net income partially offset by the trade working capital inflow. We spent a total of $4 million of capital expenditures within the quarter.
Today, we updated full year guidance to reflect the continuation of supply chain challenges previously discussed we now expect sales in the range of 2.25 to $2 4 billion a decrease of $100 million at the midpoint adjusted EBITDA expected to be in the range of $100 million to $120 million a decrease of 30.
Million dollars at the midpoint, we expect net income in the range of $14 million to $35 million and adjusted net income in the range of 43% to $62 million. We raised our estimated free cash flow conversion of 120% from a hunting from 90% at the midpoint with free cash flow in the range of $58 million to $70 million we continue.
We believe our leverage ratio combined with our ABL liquidity and strong full year cash conversion positions us for value accretive capital deployment and opportunistic share repurchases.
With that operator, we can turn it over for questions.
Yeah.
Thank you as he would like to ask a question. Please press star one on your telephone keypad.
A confirmation tone will indicate your line and send the question Kim you May Press Star two if he would like to remove your question finally, Q and for participating.
It may be necessary to pick up the handset before pressing the star keys.
Our first question is from Jerry Revich with Goldman Sachs. Please proceed.
Yes, hi, good morning, everyone. I'm wondering if you folks can talk about with the work that you folks have.
Put in dealing with the supply chain environment now.
If you look at what 2023 might look like compared to the exit rate I know, it's too early for guidance, but can you just touch on from a high level standpoint, with the margins improving over the course of this year and what that implies for year over year opportunity for EBITDA growth in <unk> and 'twenty three.
Yeah, I think Jerry where you like you said, we still have uncertainty obviously, we still have a large range in the back half of the year. The 100 to 120. So like like you pointed out it's still uncertain, what's going to transpire here from a supply chain I mean, obviously, we've talked about the actions we've taken that rod quoted around and having people on the ground and managing it.
But at the same time, we are furloughing people as we discuss though we still need to see how the chassis supply is going to get the fill rate is going to play out as well as some of these key component that working on dual sourcing as we pointed out as well, especially around radiators and axles and <unk>.
And wire harnesses.
So it's really too early to give up 43 look as we exit here.
Okay sounds like a number of moving pieces and then in terms of the move to furlough.
Obviously, we're in a really tight labor environment can you just talk about your prospects.
Bringing those folks back once you're able to address the supply situation.
The labor backdrop.
Because of the extended they extended lead times and the third one was the uncertainty around the question you asked around how do you get these folks back I think we've hit the tipping point here, where were we flex our costs, we're going to flex our costs aligned to the throughput we can achieve but we are still going to retain some labor relative to the there the amount of rework we got to do to finish these product of that.
And our team here as much as we can while we await chassis delivery, but we got to the point now where are betting on that on the on the ramp here is not it's not a good business decision. So that's why we're making the move we have to work closely with ever cost reflect the radar, we see being able to build and get throughput.
That's clear and the furloughs, what proportion of the Labor force is impacted.
I appreciate the discussion thank you.
The other three businesses are the ones, where we've looked at backlog pricing and trying to match looking at our backlog the majority of our backlog and when the unit was put in the backlog relative to inflation and then working with our dealer and what end market customers to go attack the cost challenges that we have in our backlog and we've been we havent talked about where we're at with that.
In terms of the magnitude that we've been had a measure of success and recovery against some areas, where we had some costing issues. The forward pricing is really all the above we're doing surcharges were doing list list price increases we've.
We've indexed at some too on the surcharge side. So we're looking at the best way, we can to make sure that we're going to cover the price cost challenges that where they everybody's space right now so we've been pretty broad and how we've done it and we've tried to be consistent across our businesses, but there are mark to market industry industry. There are variations in how we've applied.
The cost increases, but as I said in the prepared comments, we're looking at it daily.
We're looking at forecasting what we think inflation is going to be relative to lead times, and we're making future pricing decisions around.
Making sure that as we do the math around the forward projections of costs versus the build time that we're gonna be the spot we can we can be.
Mitigate the price cost challenges that the industries are facing right now.
And what is your sense.
How these price increases are impacting.
End user demand here and I ask because if im looking at fire <unk> emergency you were talking about demand being being robust.
But implied orders here.
Are the lowest they've been in almost.
Almost six quarters and they had been eroding sequentially. So.
I guess I'm wondering.
Is this a function of end users reacting to higher prices or are we simply talking about some of the outstanding demand for this type of product you know having been satisfied at this point and in demand simply normalizing.
Yeah, I think when you look at the.
When you compare it to probably the more recent quarters.
Both fire and emergency have had some pretty robust.
Order rates are in the last year and a half really coming out of the back end of the 2020 are related to Covid.
And so when you think about for example on a.
Trailing four quarter basis in 2020, aimless orders on an industry basis I think we're almost.
30% higher than the historical average.
For the prior many many years. So there is gonna be some normalization I think as we move forward on order rates relative to historical norms versus these kind of the funding that's been a male available plus the pent up demand I would expect to see a normalizing, but having said that our order rates, while they have on a month to month basis probably.
Probably gone down there they are still relatively strong relative door throughput as these backlogs continue to build and I think they are all also if you go back on the longer view, there are pretty strong relative to historical averages in these industries. So.
There's no question I think the point, you're making around is priced at some point going to be an issue.
That's just that's his logic right there at some point price is going to be become more important because the funds that have been made available probably a desensitized on price a bit, but but right now we're trying to we got to make sure that we price at a level that protects costs.
Equally challenging it when youre looking at lead times being extended because all these material issues, but we were into the detailed into the data to make sure that we're making the right decisions and board projecting impacts and then if situation comes where we have challenges where we're going to aggressively go back out to the backlog to make sure that we protect our business as the best we can.
That makes sense a final question for me on that.
On the RV I'm I'm curious if you can comment at all about demand in the third quarter, you know what what you might've seen during the month of May.
We have heard from some folks who are in the distribution business for it for Rovs that you know, they're canceling some orders or canceling some of the backlog that they played with Oems.
Have you have you heard anything of the sort and and yeah. You know what what's your sense for sustainability of demand there. Thank you.
So the first thing I would say is that when you look at our broadly the expansion we've seen here in the last two years and RB is if you look at the data by end market has been largely a total total market expansion and that in and see but we're not we're under weighted exposure on.
In total as we have a total business as kind of a niche business that does very well, it's a it's a.
A premium type product and we still can see continue to see decent demand in that space. Our other businesses are being business as a niche business and our <unk> business is at H C. The beam market continues to grow we still continue to see orders coming in there in our seed business. Despite some of the some of the comments you made or so.
Around the broader RV market, we continued to see order rates healthy there and our inventories and our dealers are still low.
On the ASI you know a really did not grow throughout this this expansion in the market continued to decline throughout that expansion and we've held shares there are production rates have dropped a little bit we've talked openly about managing that business not to overextend ourselves here, because we were watching the demand in the market not growing we want to make sure we were building the St.
Peak and trough margins as we've talked about many many times and so that business has become pretty healthy for us from a financial standpoint, So I think overall.
With respect to canceled orders, we've had I believe one order cancel and that's really something that is not related to where we are at a point in time, it's something that we have seen through this channel partner on an ongoing basis as more of.
An annual type thing that we actually have some reshuffling. So it wasn't it wasn't a major amount relative to the backlog we have so it really didn't move the needle at all so we haven't we got low inventory in our dealer still we're kind of in a niche product that end markets are still pretty healthy four and we still see order rates in these in these surpassing our ability to deliver so we can continue to grow.
Backlog. So overall, we're we recognize that the that the challenges in army might be ahead of us here, especially when you think about the macro environment, but we haven't seen it in our numbers yet and the conversation with the dealers with low inventories continue to support that we can continue to be pretty successful here for some period of time.
Understood. Thanks for all the detail.
Yes.
Yeah.
As a reminder, the star one on your telephone keypad, if he would like to ask a question. Our next question is from John Joyner with BMO capital markets. Please proceed.
So thank you for taking my question.
Just following up on the the RV.
Syed.
You know like what you mentioned about totals and such but.
Yeah.
I guess, how do you think about.
You and other RV manufacturers are.
In terms of production schedules right because.
If it's okay. So inventories are low for certain products, but.
Totals right on the total side, they're not.
LOE and as floor plans.
Begin to fill up then that would tend to affect other product categories. So do you see that having an effect on your.
Your production schedules as well as the overall industry.
No.
I mean, when you think about inventory builds in the dealer side, we see it build been out by product category. So there's no question that you can just drive down the highway and see the total inventory and dealers has increased and Thats back that's why you're seeing some in Congress as youre seeing but our spin.
Shipping product and until we have a single exposure in <unk> and it's a premium product and inventories in that space are still low and generally people will come to a deal or to buy that total products. So it's not are we continuing to see healthy orders. There are inventories are well below where they they need to be to support dealer demand for the pro.
Today, So we have a pretty healthy backlog there is still so in the total space, specifically because of our low exposure because our niche exposure.
For pretty decent period of time I think we're in a good spot we don't see our perspective is we don't see spillover from total inventories if I understood your question correctly.
Inventory growing in total is affecting a because generally those dealers can be different that are selling your motorized versus your total there is segmentation of the dealer base, but also they they've got to have on their law I'd product to serve that customer that's coming in is someone who is not generally someone comes into by RV, they're going to they're coming in to buy a toll.
<unk> versus <unk>.
Otherwise, it's a different customer so they're there they're not coming in just to buy an RV theyre coming into buy a specific category of RB so they need to have inventory of.
The full offering them to serve their base and John John This is mark.
As well in the in the niche market that we're talking about the B's and C's.
And somewhat in the as we still have a high percentage of what we're producing are already retail sold Disney hit the floor plan requirement right. So it goes right through the dealer to the end customer.
So significant amount of what we're producing still is.
As Rod mentioned, we're not replenishing the dealer inventory its go right to the consumer.
Okay.
Got you. Thank you very much that's helpful. And then maybe just one more.
So you've been restructuring the ethanol business for some time in and I understand some heavy lifting items like rationalizing the footprint inside lately, but.
When you think of I guess, when do you think you'll get to a point, where the ethanol business is close to say normal run rate operations.
Well I honestly believe if you look at if you break it out look at where we're at now versus where we would want to be or even where we were last year. At this time. It is a volume is largely a throughput and a in an inefficiency walk and so if we got the throughput back and we were able to manage the supply chain challenges that we're faced with in their.
Options are considerable I believe this business can can transition back to where it was last second quarter pretty as quickly as it went the other direction. That's our belief because I think we've improved our performance. Despite the challenging environment, we're working in and I think that does that.
When we get to stable supply chain, we will be able to get back on the path to where we were prior to.
This challenge the Decrementals are but that's largely because of the head count we're carrying that we know we based on throughput, we really don't need right now, but we have made a cautious decision for the reasons I mentioned earlier to maintain that head count.
For for rework and whatnot.
In our business. So I believe that we just got to get a more stable predictable environment in the supply chain I think we can convert back to get back on the path that we.
Produced last last spring and also that we committed to at our Investor day, the roadmap that we would get to.
Okay sorry.
That's helpful. And then maybe just one clarification on the supply chain and you may have mentioned this but I I get that it hasn't really gotten any better but are there certain areas, where it has actually gotten worse.
Yeah, So I think the items that we highlighted.
My specific script when you talk about <unk>.
Digital displays in the transit side axles as ethylene that's publicly out there with some of the challenges in wire harnesses I think if you talk to ourselves and our peers that's been a significant challenge.
As well so let's start on the key components that we highlighted the ones that have gotten worse theres all others have gotten better.
Better, but the majority are the key components that we rely on especially chassis as we've highlighted right with a significant core up fitting business as.
As rod referred to so those that was started on our way of saying here is the ones that have got significantly worse and a key component for us that we called out I think just one comment on the chassis I did mentioned this in the prepared comments that we have.
Chassis still rate against allocation problem, and we went through the math of that and those comments, but the other issue that we're seeing that's really impactful to the businesses. When we plan a bill when we do our slotting for production we're building the body and preparing for the delivery of chassis. So when it comes on board, we can marry those and right now we're seeing a lot of variation.
From what we expect to come in versus what's coming in which means we have built bodies or whatnot for chassis that don't match up and that creates tremendous inefficiencies in our business. When we don't have line of sight to what's actually going to arrive as the OEM is battle all the things that they are battling as well. So it's not just not getting the chassis we need the right chassis because we are.
Planning and producing for a certain chassis rival the mix and the variation on that has been pretty significant especially in our ambulance business, that's where we see the most of it. So it's a it's a it's not just good to get the chassis, we got to get the right chassis or we have it drives inefficiencies in a different way in the business.
Okay understood.
Thank you for your time.
Okay. Thanks Matthew.
We have reached end of our question and answer session I would like to turn the conference back over to Raj for closing comments.
Okay. Thank you. So I think in closing I mean, we you can look at the results you can look at the commentary that everybody's sharing around the supply chain challenges those are all real and and but over time.
As you would be I'm confident that we'll work through these things is the underlying thing that I'm really positive about and I believe as I look at the work. The team is doing I looked at the work we're.
Building on our capabilities around the lean projects that we're working in a lean certification developed around materials planning and production planning and the epic certifications that we're launching the plant work. We're doing in terms of closing down facilities are transitioning to new facilities relaying out lines and our.
Many of our businesses in both the RV and the commercial side as well as ambulance Theres a lot of groundwork the work that we've talked about that we needed to do we continue to execute that despite the fact that we're facing pretty significant challenges.
From a from from the supply chain, that's affecting US I would say that you know as I mentioned in the prepared comments, we have not made as much progress in our Rev driver mutation that we would've been a stable environment, but we havent pause we continue to push forward with the belief that the things that we're doing the things we've talked about for since the beginning of our of our time looking at this business.
<unk> are still a great opportunity for us that we just got to be prepared for when the supply chain stabilizes that we're very well positioned to take take advantage of that and we will be so again I. Thank everybody for their for their attendance today I do want to thank our employees as they are doing a great job not only delivering for our customers that also.
Doing the extra work that we need them to do associated with the things I just commented on and want to thank them for what they're doing as well. So I. Appreciate your time and we'll talk to you here in a few few months. Thank you.
Thank you. This does conclude today's conference you may disconnect. Your lines at this time and thank you for your participation.
Yes.
Yeah.
Okay.
Uh huh.
Yeah.
Okay.
Yeah.
Okay.
[music].
Yeah.
Yeah.
Yeah.
Okay.
Okay.
Okay.
Okay.
Okay.
Yeah.
[music].
Okay.
Yeah.
Yeah.
[music].
Yeah.
Yeah.
Yeah.
Yeah.
Yeah.
Yeah.
Okay.