Q2 2024 REV Group Inc Earnings Call
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Speaker Change: Greetings welcome to Rev Group, Inc. Fiscal second quarter 'twenty 'twenty four earnings conference call. At this time all participants are in a listen only mode. A question and answer session will follow the formal pizza tieszen if anyone should require operator assistance during the conference. Please press star two.
Operator: Greetings. Welcome to Rev Group Inc.'s fiscal second quarter 2024 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 keypad. Please note this conference is being recorded. I will now turn the conference over to Drew Konop, Vice President of Investor Relations. Thank you. You may begin.
Speaker Change: Zero on your telephone keypad. Please note. This conference is being recorded I will now turn the conference over to drew cannot Vice President Investor Relations. Thank you you may begin.
Drew Konop: Good morning, and thanks for joining us. Earlier today, we issued our second quarter fiscal 2024 results. A copy of the release is available on our website at investors.revgroup.com. Today's call is being webcast, and the slide presentation, which includes the reconciliation of non-GAAP to GAAP financial measures, is available on our website. Please refer now to Slide 2 of that presentation. Our remarks and answers will include forward-looking statements, which are subject to risk, that can cause actual results to differ from those expressed or implied by such forward-looking statements.
Speaker Change: Good morning, and thanks for joining US earlier today, we issued our second quarter fiscal 2024 results a copy of the release is available on our website.
Speaker Change: <unk> Dot group Dot com.
Speaker Change: 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.
Speaker Change: Please refer now to slide two of that presentation.
Speaker Change: 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 today and other filings we make with the SEC.
Speaker Change: 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.
Drew Konop: These risks include, among others, matters that we've described in our Form 8K file today and other filings that we make with the SEC. We just 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. Joining me on the call today is our President and CEO, Mark Skonieczny.
Speaker Change: All references on this call to a quarter or year are to our fiscal quarter and fiscal year unless otherwise stated.
Speaker Change: Joining me on the call today is our president and CEO, Mark <unk> and etch needs as well as our CFO Amy Campbell. Please turn now to slide three and I'll turn the call over to Mark.
Mark: Thank you drew and good morning to everyone joining us on today's call.
Mark A. Skonieczny: Thank you, Drew, and good morning to everyone joining us on today's call. Today I will provide an overview of the commercial, operating, and strategic highlights achieved within the corridor, then move on to the corridor's financial performance. Before I begin, I am pleased to introduce Amy Campbell as CFO and welcome her to the Rev Team. As you know, this role remained unfilled for many months as we searched for the right person that had the appropriate mix of financial and operational experience to lead the finance organization as well as contribute to the advancement of the operating agenda within the business.
Mark: Today I'll provide an overview of the commercial operating and strategic highlights achieved within the quarter that moved to the quarters financial performance.
Mark A. Skonieczny: Amy is an experienced and highly effective finance executive. She spent 23 years with Caterpillar, which included several divisional CFO roles, Vice President of Investor Relations, and Chief Audit Officer. Prior to Rev Group, she served as CFO of ASC Engineering Solutions and CFO for Brand Safeway's Commercial Industrial Division. I am thrilled she's joining our leadership team and look forward to the positive impact that she will bring to Rev.
Mark: Before I begin I am pleased to introduce Amy Campbell, our CFO and welcome her to the Rev team as you know in this role remain unfilled for many months as we search for the right person or had the appropriate mix of financial and operational experience to lead the finance organization as well as contribute to the advancement of the operating agenda.
Mark: In the business.
<unk> is an experienced a highly effective finance executive she had a 23 year tenure with caterpillar, which included several divisional CFO roles, Vice President Investor Relations and Chief Audit officer prior to the Rev Group. She served as CFO of ASC Engineering solutions and CFO for a brand safe.
unknown: Place commercial industrial Division I am thrilled she is joining our leadership team and look forward to the positive impact that she'll bring to Rev.
unknown: Now turning to the other highlights within the quarter. We are pleased to have delivered another strong quarter of operating results and remain focused on enacting initiatives that drive throughput and efficiency improvements across our manufacturing sites I would like to thank all of the dedicated employees at work to build operational momentum and improve its financial performance.
Mark A. Skonieczny: Now turning to the other highlights in the quarter, we are pleased to have delivered another strong quarter of operating results and remain focused on enacting initiatives that drive throughput and efficiency improvements across our manufacturing sites. I would like to thank all the dedicated employees that have worked to build operational momentum and improve financial performance. In the second quarter, this was exemplified by the fire and emergency team.
Speaker Change: Formats within the second quarter. This was exemplified by the fire <unk> emergency team with strong backlogs extend up to two and a half years. These businesses have the visibility and opportunity to drive significant shareholder value through.
Mark A. Skonieczny: With strong backlogs that extend up to two and a half years, these businesses have the visibility and opportunity to drive significant shareholder value. Throughput initiatives put in place over the past 18 months are taking hold with increased line rates and improved labor efficiencies, resulting in higher unit shipments and price realization as we work through our backlogs. The result of these efforts was a five and a half year quarterly high in adjusted EBITDA margin in the legacy fire and emergency business.
Speaker Change: They are important initiatives put in place over the past 18 months are taking hold with increased line rates and improved labor efficiencies, resulting in higher unit shipments and price realization as we work through our backlog and the results of these efforts with a five five year quarterly high and adjusted EBITDA margin in the legacy fire and emerge.
Speaker Change: <unk> business margins improved 380 basis points versus the prior quarter and 480 basis points versus the prior year demonstrating that each unit shipped today is worth more than the unit shipped previously.
Mark A. Skonieczny: Margins improved 320 basis points versus the prior quarter and 480 basis points versus the prior year, demonstrating that each unit shipped today is worth more than the unit shipped previously. We exited the corridor with a robust $4.3 billion backlog. We continue to experience strong order intake for our fire apparatus and ambulances with a combined quarterly unit book to bill ratio of 1.1 times, slightly ahead of our full year expectation of a 1 to 1 ratio.
Speaker Change: We exited the quarter with a robust four $3 billion backlog, we continue to experience strong order intake for our fire apparatus and analysts with a combined quarterly unit book to Bill ratio of one one times slightly ahead of our full year expectation of a one to one ratio.
Mark A. Skonieczny: Price actions and a higher mix of fire apparatus resulted in a revenue book-to-bill ratio of 1.6 times within the quarter. We attribute the sustained level of demand to the quality of our products, municipal budgets backed by increased tax receipts and federal stimulus, ongoing replacement demand, and emergency infrastructure build-out related to population growth and urban sprawl.
Speaker Change: These actions have a higher mix of fire apparatus resulted in revenue book to Bill ratio of one six times within the quarter, we attribute the sustained level of demand for the quality of our products municipal budgets backed by increased tax receipts and federal stimulus ongoing replacement demand and emergency infrastructure.
Speaker Change: Build out related to population growth and urban sprawl.
Mark A. Skonieczny: To meet the unprecedented demand and maximize return on the backlog, we remain focused on increasing production, advancing the development of centers of excellence, optimizing our manufacturing footprint, and product simplification. An example of our success is the integration of the Spartan businesses that were acquired in 2020. Over the past four years, the Spartan chassis plant has doubled its production to meet sister plant and other OEM demand. We have also expanded the Spartan S180 program, which provides a fire apparatus that can be delivered in as little as 180 days.
To meet the unprecedented demand and maximize the return on the backlog, we remain focused on increasing production and advancing the development of our centers of excellence optimizing our manufacturing footprint and product simplification and example of our success is the integration of the <unk> businesses that were acquired in 2020.
Speaker Change: Over the past four years, the Spartan chassis plant has doubled its production to meet sister plants. Another OEM demand. We have also expanded the Spartan <unk> hundred 80 program, which provides a fire apparatus that can be delivered and as low as 180 days today. We offer this program across several brands providing more customers.
Mark A. Skonieczny: Today we offer this program across several brands, providing more customers and dealers the opportunity to purchase a semi-custom truck delivered within a shortened lead time. This is a competitive advantage that is supporting increased order intake for the RevFire brand. Within the recreational vehicle segment, overall industry demand for motorized RVs, which accounts for more than 90% of our RV segment, remains depressed.
Speaker Change: Dealers the opportunity to purchase a semi custom trucks delivered within a short lead time. This is a competitive advantage that are supporting increased order intake for the Rev. Firebrands.
Speaker Change: Within the recreational vehicle segment overall industry demand for our motorized rvs, which accounts for more than 90% of our RV segment remained suppressed based on recent industry data new motorized wholesale unit shipments calendar year to date through April were down 22% year over year, we believe that higher.
Mark A. Skonieczny: Based on recent industry data, new motorized wholesale unit shipments calendar year to date through April, we're down 22% year over year. We believe that higher interest rates and negative equity trade-in values for units purchased during COVID continue to impact consumer buying. However, industry retail sales of agent inventory and the destocking that has occurred over the past year indicate that the health of dealer inventories is improving heading into model year 25 introduction.
Speaker Change: Interest rates are negative equity trading and value for our unit purchased during COVID-19 continue to impact consumer buying decisions.
Speaker Change: However, industry retail sales of aged inventory and the destocking that occurred over the past year indicate that the health of dealer inventories is improving heading into model year 'twenty five introductions specific to the products and channels in which we participate year to date model year 'twenty five orders have been softer than we anticipated as dealers have been.
Mark A. Skonieczny: Specific to the products and channels in which we participate, year-to-date Model Year 25 orders have been softer than we anticipated, as dealers have been hesitant to place new orders given increased floor plan costs and market uncertainty.
Speaker Change: Since placed new orders given increased floorplan cost and market uncertainty.
Mark A. Skonieczny: Despite the industry backdrop and reduced 25-mile-a-year orders, we exited the quarter with a healthy five- and six-month backlog at current production rates with our Class B and C businesses, while our Class A and FOMO businesses remain at post-COVID low levels of backlog. As we enter the back half of our fiscal year, we remain confident in our ability to deliver on our existing Class B and C backlogs and maintain flexibility to manage costs across all product categories in response to market dynamics. We continue to simplify the operational footprint of our businesses, focusing resources on core business.
Spite the industry backdrop, and reduced 25 model year orders, we exited the quarter with a healthy five to six month backlog at current production rates with our class B and C businesses, while our class and <unk> businesses remain at post Covid low levels of backlog as we enter the back half of our fiscal year, we remain confident in our bill.
Speaker Change: <unk> deliberate on our existing class P&C backlogs and maintain flexibility to manage cost across all product categories in response to market dynamics.
Speaker Change: We continue to simplify the operational footprint of our businesses focusing resources on our core businesses in support of this strategy within the quarter, we exited our direct fire and ambulance sales and customer service operation in Florida with the sale of the fire Regional Technical Center, our RTC in Ocala.
Mark A. Skonieczny: In support of this strategy, within the quarter, we exited our direct fire and ambulance sales and customer service operation in Florida with the sale of the Fire Regional Technical Center, or RTC, in Ocala. We selected an experienced partner that has represented RevFire Brands for over a decade as a purchaser of the business and believe they will continue to capitalize on the significant opportunity presented within the Florida market. In addition, the wind-down of our E&C municipal transit bus business remains on track.
Speaker Change: We selected an experienced partner that is represented Revpar brands for over a decade as the purchaser of the business and believe they will continue to capitalize on the significant opportunity presented within the Florida market with the sale of the RTC and we have no remaining company all dealerships within our fire business.
Speaker Change: In addition, the wind down of our E&C Municipal Transit bus business remains on track I would like to acknowledge the efforts of the team at EMC as well as our suppliers and channel partners, who have remained committed to completed units within our backlog on schedule. We expect the wind down substantially all manufacturing operations to be completed and.
Mark A. Skonieczny: I would like to acknowledge the efforts of the team at E&C as well as our suppliers and channel partners who have remained committed to completed units within our backlog on schedule. We expect the wind-down of substantially all manufacturing operations to be completed in the fourth fiscal quarter. Within a quarter, we returned a total of $308.5 million to shareholders in the form of share repurchases and regular and special dividends. As a reminder, the Collins Plus transaction closed at the end of the first quarter, providing cash proceeds of $308 million, a portion of which was used to pay down our ABL credit facility to zero at the end of the first quarter.
Speaker Change: In our fourth fiscal quarter.
Speaker Change: Within the quarter, we returned a total of $308 5 million to shareholders in the form of share repurchases and regular and special dividends. As a reminder, the Collins bus transaction closed at the end of the first quarter, providing cash proceeds of $308 million a portion of which was used to pay down our <unk>.
Speaker Change: Our credit facility to zero at the end of the first quarter and the second quarter. We returned to essentially all of the proceeds to shareholders approximately $179 million was used to pay a $3 special dividend. In addition to our regularly quarterly dividend the remainder of the proceeds from the sale of Collins was used to participate in a secondary offering of <unk>.
Mark A. Skonieczny: In the second quarter, we returned essentially all the proceeds to shareholders. Approximately $179 million was used to pay a $3 special dividend in addition to our regularly quarterly dividend. The remainder of the proceeds from the sale of Collins were used to participate in a secondary offering of our then-largest shareholder, AIP, by purchasing $8 million of Rev Group common shares for approximately $126 million. The secondary offering reduced AIP's ownership interest to approximately 19 percent.
Speaker Change: <unk> largest shareholder AIP by purchasing $8 million of Rev Group common shares for approximately $126 million.
Speaker Change: The secondary offering reduced the shareholder's ownership interest of approximately 19% in March that shareholder proceeded with a subsequent underwritten secondary offering of seven 4 million shares reducing its ownership stake to approximately three 4% well below the 15% threshold that allowed it to designate board.
Mark A. Skonieczny: In March, that shareholder proceeded with a subsequent underwritten secondary offering of 7.4 million shares, reducing its ownership stake to approximately 3.4 percent, well below the 15 percent threshold that allowed it to designate board members. As a result, on March 15th, the IAP Designated Directors stepped down from our board. We have been preparing for the potential departure of these board members over the past seven quarters. While the timing was uncertain to us, we felt it was important to identify and recruit new board candidates who could add value to the company and help guide us into the next chapter of our growth.
Speaker Change: Members.
Speaker Change: March 15th VIP designated directors stepped down from our board.
Speaker Change: We have been preparing for the potential exit of these board members over the past several quarters, while the timing was uncertain to us we felt it was important to identify and recruit new board candidates, who can add value to the company and help guide us into the next chapter of our growth in August 2023, we welcome Maureen O'connell to our board, replacing a lot.
Mark A. Skonieczny: In August 2023, we welcomed Maureen O'Connell to our board, replacing a long-term AIP Designated Director. Then, in January of this year, in anticipation of the retirement of a board member at an annual shareholder meeting in February, Kathleen Steele was appointed to the board. Finally, last week, Cindy Augustine was appointed to the board. She currently serves as the Global Chief Talent Officer at McCann World Group and has extensive experience as an HR and Operating Executive at leading public and private companies.
Speaker Change: Term AIP designated director that in January of this year anticipation of the retirement of board member at our annual shareholder meeting in February Kathleen's deal was appointed to the board finally last week Cindy Augustine was appointed to the board. She currently serves as the global Chief Talent Officer at Mccann Worldgroup.
Speaker Change: And his extensive experience as an HR and operating executive at leading public and private companies.
Mark A. Skonieczny: Rev will benefit from the wide-ranging and diverse set of experiences provided by our refresh board, and we look forward to the contributions the board will offer as we continue to execute our strategic agenda. Turn the slide forward.
Bård: We will benefit from the wide ranging and diverse set of experiences provided by a refreshed board and we look forward to the contributions to Bard will offer as we continue to execute our strategic agenda.
Bård: Turning to slide four.
Bård: Consolidated net sales of $617 million decreased $64 million compared to the second quarter last year and the prior year reported net sales included $47 million attributed to Collins bus, which was divested in the first quarter of this year adjusting for the sales impact the Collins net sales decreased $17 million.
Mark A. Skonieczny: Consolidated net sales of $617 million decreased $64 million compared to the second quarter last year. In the prior year, reported net sales included $47 million attributed to Collins Bus, which was divested in the first quarter of this year. Adjusting for the sales impact of Collins, net sales decreased $17 million, or 2.7 percent, due to lower sales in the recreational vehicle segment that was in line with expectations and fewer sales of terminal trucks.
Speaker Change: Our two 7% due to lower sales in our recreational vehicle segment that was in line with expectations and fewer sales of terminal trucks, partially offset by increased sales in the fire <unk> emergency businesses as I mentioned earlier recreational vehicles segment sales reflected soft industry demand as well as the increase.
Mark A. Skonieczny: As I mentioned earlier, recreational vehicle segment sales reflected soft industry demand as well as increased discounting and a mix of lower-priced units within certain businesses. Terminal truck sales were 59% lower than the previous year, which was consistent with the expectation and 2024 guidance we provided in December. However, increased fire and emergency sales benefitted from year-over-year units and revenue increases at all ambulance and fire apparatus manufacturing locations. Consolidated adjusted EBITDA of $37.5 million decreased $4.4 million compared to the second quarter of last year.
Speaker Change: Discounting and a mix of lower priced units within certain businesses terminal truck sales were 59% lower than previous year, which was consistent with the expectation in 2024 guidance. We provided in December increased fire <unk> emergency sales benefited from year over year unit and revenue increase at all Andrew.
Speaker Change: The fire apparatus manufacturing locations.
Speaker Change: Consolidated adjusted EBITDA of $37 5 million decreased $4 4 million compared to the second quarter of last year included in our prior year reported adjusted EBITDA was $10 2 million attributed Collins bus, resulting in an increase of $5 8 million or 18, 3% when the dress dream.
Mark A. Skonieczny: Included in the prior year reported adjusted EBITDA was $10.2 million attributed to Collins Bus, resulting in an increase of $5.8 million, or 18.3%, when adjusting for this divestiture. The increase was driven by the fire, emergency, and municipal transit bus businesses, partially offset by lower earnings. Fire and emergency results benefited from higher volumes, the operational improvements mentioned earlier, and increased price realization as we shipped more units that benefited from pricing actions enacted in 22 and 23. We remain encouraged by the efforts of the teams to offset costs through operational improvements, allowing businesses to maximize pricing opportunities within backlog. Please turn the slide flies on, and I'll turn the call over to Amy for
Speaker Change: For this divestiture the increase was driven by the fire <unk> emergency and municipal transit bus businesses, partially offset by lower earnings at a terminal trucks business and recreational vehicles segment.
Speaker Change: Emergency results benefited from higher volumes and the operational improvements mentioned earlier and increased price realization as we shipped more units that benefited from pricing actions and accident in 'twenty, two and 'twenty three we remain encouraged by the efforts of the teams to offset costs through operational improvements, allowing business.
Speaker Change: To maximize pricing opportunity within backlog.
Amy Campbell: Please turn to slide five and I'll turn the call over to Amy for detailed segment financials. Thank you Mark happy to be here I know many of you on the call from my previous role at Caterpillar and look forward to working together at rent room.
Amy Campbell: Thank you, Mark. I'm happy to be here.
Amy Campbell: This being my first call I thought I'd begin with a few opening comments.
Amy Campbell: I know many of you on the call from my previous role at Caterpillar and look forward to working together at Rev Group. This being my first call, I thought I'd begin with a few opening comments. Considering joining Rev Group, I learned of the great work this company does in support of our nation's first responders and the communities in which we live. Over the past several weeks, I've traveled to many of our business units and spent time with local management teams as well as the corporate staff to gain insight into our products, channel partners, and ability to increase profitability, generate cash, and drive shareholder value. My interactions with them have validated what I saw from the outside.
Speaker Change: Considering joining Rev group I, along with the Great work. This company does in support of our nation's first responders in the communities in which we live.
Amy Campbell: Over the past several weeks I've traveled to many of our business units and spend time with my management team as well as the corporate staff to gain insight into our products channel partners and ability to increase profitability generate cash and drive shareholder value.
Amy Campbell: My interactions have validated what I saw from the outside Theres, a significant value creation opportunity for our shareholders. As we continue our journey to improve execution and has resulted in the company delivering topline and bottom line momentum over the past several quarters I believe there is significant opportunity to continue.
Amy Campbell: There is a significant value creation opportunity for our shareholders. We continue our journey of improved execution that has resulted in the company delivering top line and bottom line momentum over the past several quarters. I believe there is a significant opportunity to continue this progress and build upon our 2021 Investor Day financial target, which we plan to refresh before the end of the year. Now, let's move to page 5.
Amy Campbell: This progress and build upon our 2021 Investor day financial targets.
Amy Campbell: We plan to refresh before the end of the year.
Amy Campbell: Now, let's move to page five.
Amy Campbell: Specialty Vehicles, second quarter. As a result, segment sales were $437.4 million, an increase of 2.9% compared to the prior year. As Mark mentioned, the prior year quarter included $47 million of net sales attributed to Columns Boston, which was divested in the first quarter of this year.
Speaker Change: How should we be nickel second quarter.
Speaker Change: <unk> segment sales were $437 4 million, an increase of two 9% compared to the prior year as.
Speaker Change: As Mark mentioned the prior year quarter included 47 million of net sales attributed to Collins bus, which was divested in the first quarter of this year.
Speaker Change: Adjusting for the sales impact of calling segment sales increased $59 million or 16% year over year.
Amy Campbell: Adjusting for the sales impact of columns, segment sales increased 59 million, or 16% year over year. The increase in net sales was primarily due to higher shipments. Fire Apparatus and Ambulance Units, along with favorable price realization, partially offset by lower sales in the terminal truck business. Shipments of legacy fire and emergency units increased 18% versus the prior year period. We are reflected the success and continued momentum of the operational improvement initiatives that have been put in place and are delivering increased throughput.
Speaker Change: The increase in net sales was primarily due to higher shipments.
Speaker Change: Fire apparatus and ambulance units, along with favorable price realization.
Speaker Change: Actually offset by lower sales in the terminal trucks business.
Speaker Change: Shipments of legacy fire and emergency units increased 18% versus the prior year period, reflecting the success and continued momentum of the operational improvement initiatives that have been put in place and are delivering increased throughput.
Speaker Change: Combined net sales of fire apparatus, and Andy lenses increased 33%, which included favorable product mix and price realizations as we shipped a greater number of units benefiting from price actions taken in 2022 and 2023.
Amy Campbell: Combined net sales of fire apparatus and ambulances increased 33%, which included favorable product mix and price realization as we shipped a greater number of units benefiting from price actions taken in 2022 and 2023. The higher fire apparatus shipments were led by our largest plant in Ocala, Florida. This location is better described as a campus with 10 buildings over 4 square miles.
Speaker Change: The higher fire apparatus shipments were led by our largest plant in Ocala, Florida.
Speaker Change: This location is better described as a campus with 10 buildings over four square mile.
Amy Campbell: The campus has benefited from a focus on simplification and reorganization to focus on manufacturing by value. These changes have led to better alignment across the local teams. This project resulted in improved efficiencies, quality, and throughput, along with better supply chain management. Their commitment to operational excellence contributed to them delivering the highest quarterly total of unit shipments since 2020. Within Ambulance, higher unit volumes also demonstrate the continued success of that division and their local OPEX and LEAN teams, which have delivered a cadence of measured production ramp rates throughout the past year.
Speaker Change: Campus has benefited from our focus on simplification and Reorganisation just focused on manufacturing by value screen.
Speaker Change: These changes have led to better alignment across the local team resulted in improved efficiencies quality and throughput along with better supply chain management.
Speaker Change: Their commitment to operational excellence contributed to them delivering the highest quarterly total in unit shipments in 2020.
Speaker Change: With an Anti-war higher unit volumes also demonstrates the continued success that division and their local opex and lead teams that have delivered a cadence of measured production ramp rate throughout the past year.
Speaker Change: Specialty vehicle segment, adjusted EBITDA was $33 8 million in the second quarter of 2024.
Amy Campbell: Specialty vehicle segment adjusted EBITDA was $33.8 million in the second quarter of 2024, an increase of $13.5 million compared to $20.3 million in the second quarter of 2023. Adjusting for $10.2 million of adjusted EBITDA attributed to Collins Bus in the prior year, second quarter earnings increased $23.7 million year-over-year, or 235%.
Speaker Change: Increase of $13 5 million compared to $20 3 million in the second quarter of 2023.
Speaker Change: Adjusting for $10 2 million of adjusted EBITDA attributed to Collins bus in the prior year second quarter earnings increased $23 7 million year over year or 235%.
Amy Campbell: The increase in adjusted EBITDA was primarily due to increased contributions from the fire, ambulance, and municipal transit bus business, partially offset by lower earnings from the terminal truck. As Mark previously noted, legacy fire and emergency margins improved 480 basis points versus the prior year. The increased contribution was primarily related to price realizations and higher unit volumes. The Bulletproof Executive, 2013, and the Ambulance Group.
Speaker Change: The increase in adjusted EBITDA was primarily due to increased contributions from the fire.
And municipal transit bus businesses.
Speaker Change: Partially offset by lower earnings from the terminal trucks business.
Speaker Change: As Mark previously noted legacy fire and emergency margins improved 480 basis points versus the prior year.
Speaker Change: Increased contribution was primarily related to price realizations higher unit volume and favorable mix.
Speaker Change: Within the ambulance groups.
Speaker Change: Performance, Mark a seven year high in quarterly profitability with all businesses delivering year over year and sequential margin improvements.
Amy Campbell: Performance marks a 7-year high in quarterly profitability with all businesses delivering year-over-year. The Bulletproof Executive 2013, Segment backlog of $4.1 billion increased $706 million, or 21 percent. Prior backlog of $3.4 billion included $353 million of backlog attributed to the bus business. Adjusting for the divestiture of Collins, backlog increased $898 million, or 28% versus the prior year quarter. The increase reflects strong orders for fire and ambulance units over the past year, as well as the benefits of pricing action, partially offset by lower demand for terminal trucks and a reduction in transit bus business backlog related to the business' winding down.
Speaker Change: Segment backlog of $4 1 billion increased $706 million or 21%.
Speaker Change: Prior year backlog of $3 4 billion included $353 million backlog attributed to the bus businesses.
Speaker Change: Adjusting for the divestiture of Collins backlog increased $898 million or 28% versus the prior year quarter.
Speaker Change: The increase reflects strong orders for fire and ambulance units over the past year as.
Speaker Change: As well as the benefits of pricing actions.
Partially offset by lower demand for terminal trucks, and a reduction in transit bus business backlog related to the businesses wind down.
Speaker Change: Is there any update to the consolidated outlook anticipates continued fire and emergency earnings momentum.
Amy Campbell: Today's update to the Consolidated Outlook anticipates continued fire and emergency earnings momentum, partially offset by continued in-market softness in the terminal trucks business and the completion of the wind-down of E&C municipal transit bus operations in the fiscal fourth quarter. Lower-than-expected terminal truck orders are now expected to result in a $150 million revenue headwind year-over-year, versus a $100 million headwind in previous guidance; continue to execute cost actions to manage to a 15% decremental margin. More than offsetting the revenue headwinds from the transit, bus, and terminal truck businesses, we expect the fire and emergency businesses to build upon their second quarter outperformance.
Speaker Change: Partially offset by continued end market softness and the terminal trucks business and the completion of the wind down of EMC Municipal transit bus operations in the fiscal fourth quarter.
Speaker Change: Lower than expected terminal truck orders is now expected to result in a $150 million revenue headwind year over year.
Speaker Change: Versus a 100 million dollar headwind and previous guidance.
Speaker Change: We continue to execute cost actions to manage to a 15% decremental margin.
Speaker Change: More than offsetting the revenue headwinds from transit Boston terminal truck businesses, we expect the fire and emergency businesses to build upon the second quarter outperformance, resulting in specialty vehicles segment revenue, increasing by low single digits as compared to first half revenue.
Amy Campbell: Resulting in specialty vehicle segment revenue increasing by low single digits as compared to first half revenue. Additionally, improved profitability within fire and emergency businesses is expected to result in legacy F&E adjusted EBITDA margins in the low double digits exiting the fiscal year. F&E performance is expected to more than offset softness in the terminal truck end market, resulting in the specialty vehicle segment margin increasing sequentially in the third and fourth quarters as we continue to focus on operational excellence and achieve improved pricing within the backlog, delivering total segment adjusted even to margin and the high single digits exiting the fourth quarter. On slide 6, the recreational vehicle segment results were in line with expectations.
Speaker Change: Improved profitability with our fire <unk> emergency business is expected to result in legacy F&B adjusted EBITDA margins in the low double digits exiting the fiscal year.
Speaker Change: Anthony performance is expected to more than offset softness in the terminal truck end markets, resulting in a specialty vehicles segment margins increasing sequentially in the third and fourth quarters as we continue to focus on operational excellence and achieve improved pricing within the backlog.
Speaker Change: Delivering total segment adjusted EBITDA margin in the high single digits exiting the fourth quarter.
Speaker Change: On slide six recreational vehicle segment results were in line with expectations.
Amy Campbell: Sales of $179.7 million decreased $76.9 million, or 30% year-over-year. Lower segment sales versus the prior year were primarily the result of fewer unit shipments of Class A, Class B, and total units, along with increased discounting, which was partially offset by increased shipments of Class C units and price realization. In total, unit shipments declined 43% versus a year ago, driven by a 70% decline in towable and camper unit sales.
Speaker Change: Sales of $179 7 million decreased $76 9 million or 30% year over year.
Speaker Change: Lower segment sales versus the prior year were primarily the result of fewer units shipments of class a class B and towable units along with increased discounting, which was partially offset by increased shipments of class C units and price realization.
Speaker Change: And total <unk>.
Speaker Change: Shipments declined 43% versus a year ago, driven by a 70% decline in two level and camper unit sales.
Speaker Change: Recreation segment, adjusted EBITDA of $12 1 million decreased $17 million or 58% versus the prior year.
Amy Campbell: The recreation segment adjusted EBITDA of $12.1 million decreased $17 million or 58% versus the prior year. The decrease in adjusted EBITDA was primarily the result of lower unit volume inflationary pressures, increased discounting, partially offset by price realizations. Labor Efficiencies, Materials Savings, and cost reduction actions that were executed in certain businesses to align production with the current level of demand.
Speaker Change: The decrease in adjusted EBITDA was primarily the result of lower unit volume inflationary pressures and increased discounting partially offset by price realization labor efficiencies material savings and cost reduction actions that were executed in certain businesses to align production.
Speaker Change: With the current level of demand.
Speaker Change: Recreation segment backlog of $275 million at quarter end decreased $220 million or 45% versus the prior year.
Amy Campbell: The recreation segment backlog of $275 million at quarter end decreased $220 million or 45% versus the prior year, decreases primarily due to production against backlog, lower order intake over the trailing 12 months, and order cancellation. Backlog in the Class B and Class C categories remains in the range of five to six months.
Speaker Change: The decrease was primarily due to production against backlog.
Speaker Change: Lower order intake over the trailing 12 months and order cancellations.
Speaker Change: Backlog in the class B and class C category remains in the range of five to six months and profitability of the combined class B and C businesses.
Amy Campbell: The profitability of the combined Class B and C businesses is expected to remain in the low double-digit range. Class A and Total Businesses are expected to produce at lower line rates, aligned with in-market demand. To the extent that the Class A and Total market doesn't improve in the second half of the year, we will continue to execute cost actions aligned with demand.
Speaker Change: Pat did you remain in the low double digit range.
Speaker Change: The class a in total businesses are expected to produce at lower line rates line with end market demand.
Speaker Change: To the extent that the class and total market doesn't improve in the second half of the year, we will continue to execute cost actions aligned with demand.
Speaker Change: Our update to the consolidated outlook now anticipates the recreational vehicle segment revenue to be in the second quarter run rate for the remainder of the year.
Amy Campbell: Our update to the Consolidated Outlook now anticipates the recreational vehicle segment revenue to be at the second quarter run rate for the remainder of the year, down 20-25% year over year, to download double digits in our prior guidance. Lower discounting and the impact of cost action is expected to improve the second half adjusted EBITDA margin approximately 100 basis points compared to the second quarter. Full year segment margin is expected to be in the 7 to 7.5% versus high single digits under prior guidance. Her name is slide 7.
Speaker Change: We're down 20% to 25% year over year.
Speaker Change: We're just down low double digits and our prior guidance largest county and the impact of cost actions is expected to improve in the second half adjusted EBITDA margin, approximately 100 basis points as compared to the second quarter.
Speaker Change: Full year segment margin is expected to be in the seven to seven 5% versus high single digits under prior guidance.
Speaker Change: Turning to slide seven.
Speaker Change: Trade working capital on April 32024 was $324 million, an increase of $5 5 million compared to $319 million at the end of fiscal 2023.
Amy Campbell: Trade working capital on April 30, 2024 was $324 million, an increase of $5.5 million, compared to $319 million at the end of fiscal 2023. The increase was primarily a result of lower accounts payable and customer advances, partially offset by a decrease in account receivable and inventory. Year-to-date cash used by operating activities was $29.6 million. Adjusted free cash flow within the quarter was $67.2 million, including $5.9 million spent on capital expenditures. Net debt as of April 30 was $181.8 million, including $38.2 million of cash on hand, compared to net debt of $128.7 million as of October 31, 2023.
Speaker Change: Increase was primarily a result of lower accounts payable and customer advances, partially offset by a decrease in accounts receivable and inventory.
Speaker Change: Year to date cash used by operating activities was $29 6 million adjusted free cash flow within the quarter was $67 2 million, including $5 9 million spent on capital expenditures.
Speaker Change: Net debt as of April 30 was $181 8 million, including $38 2 million of cash on hand.
Speaker Change: <unk> to net debt of $128 7 million as of October 31, 2023.
Speaker Change: As Mark noted earlier, we returned essentially all of the 308 million gross proceeds from the sale of Collins bus to shareholders within the second quarter.
Amy Campbell: As Mark noted earlier, we returned essentially all of the $308 million gross proceeds from the sale of Collins Bus to shareholders within the second quarter. On February 16th, we paid a special cash dividend of $3 per share of common stock, totaling $179 million, in addition to our regular quarterly dividends. Then, on February 20th, we repurchased 8 million common shares for a total of 126 million.
Speaker Change: On February 16, you paid a special cash dividend of $3 per share of common stock.
Speaker Change: $179 million in addition to our regular quarterly dividend.
Speaker Change: Then on February 20th we repurchased 8 million common shares for a total of $126 million, reducing total outstanding shares versus 2023 fiscal yearend by 13%.
Amy Campbell: Reducing Total Outstanding Shares vs. 2023 Fiscal Year-End by 13% In addition, we declared a regular quarterly cash dividend of $0.05 per share payable on July 12 to shareholders of record on June 28. At quarter end, the company maintained ample liquidity for strategic initiatives, approximately $280 million available under our ADL Revolving Credit Facility. Turning to slide eight, we provide our updated 2024 Fiscal Full Year Outlook, which builds upon the momentum within the specialty vehicle segment, partially offset by greater than expected end market weakness in the recreational vehicle segment.
Speaker Change: In addition, we declared a regular quarterly cash dividend of <unk> <unk> per share payable on July 12 to shareholders of record on June 28.
Speaker Change: At quarter's end the company maintained ample liquidity for strategic initiatives.
Speaker Change: <unk> $280 million available under our ABL revolving credit facility.
Speaker Change: Turning to slide eight we provide our updated 2020 for fiscal full year outlook, which builds upon the momentum within the specialty vehicle segment part.
Speaker Change: We offset by greater than expected end market weakness and the recreational vehicles segment.
Amy Campbell: Today's update for Top Line Guidance is a range of $2.4 billion to $2.5 billion, with adjusted EBITDA guidance of $151 million to $165 million or $158 million at the midpoint, which reflects an improvement of $6 million at the low end of the range to account for the second quarter performance. The updated guidance today includes an approximate $150 million total revenue reduction within the cyclical terminal truck and RV businesses, and its resulting earnings impact is expected to be managed to a 15% decremental margin.
Speaker Change: Days update for topline guidance is a range of $2 4 billion to $2 5 million.
Speaker Change: And adjusted EBITDA guidance of $151 million.
Speaker Change: $265 million or $158 million at the midpoint.
Speaker Change: This reflects an improvement of $6 million at the low end of our range to account for the second quarter performance.
Speaker Change: The updated guidance today includes an approximate $150 million total revenue reduction within the cyclical terminal truck and RV businesses and.
Speaker Change: And its resulting earnings impact if we manage to a 15% decremental margin.
Amy Campbell: However, we expect that the performance of the fire and emergency businesses will more than offset these headwinds, which provides the confidence to raise the midpoint of our full year consolidated earnings outlook. Adjusted net income is expected to be in the range of $76 million to $90 million and net income in the range of $230 million to $245 million. The adjusted free cash flow is expected to be in the range of $61 million to $72 million.
Speaker Change: However, we expect that the performance of the fire and emergency businesses were more than offset these headwinds which provides the confidence to raise the midpoint of our full year consolidated earnings outlook.
Speaker Change: Adjusted net income is expected to be in the range of 76 million to $90 million and net income in the range of $230 million to $245 million.
Speaker Change: Adjusted free cash flow is expected to be in the range of 61 million to $72 million.
Speaker Change: Note that the adjusted free cash flow excludes approximately $71 million of tax and transaction costs related to divestiture activities and are presented within the cash from operations, but offset by gross cash proceeds included in the investing section of the statement of cash flow.
Speaker Change: Expected full year capital expenditures remain in the range of 30 to 35 million and interest expense is expected to be 26 million to $28 million.
Speaker Change: Thank you again for joining us today on the call operator, we would now like to open the call up for questions.
Amy Campbell: Note that the adjusted free cash flow excludes approximately $71 million of tax and transaction costs related to divestiture activities that are presented within the cash from operations but offset by gross cash proceeds included in the investing section of the statement of cash flow. Estimated full-year capital expenditures remain in the range of $30 to $35 million, and interest expense is expected to be $26 million to $28 million. Thank you again for joining us today on The Call. Operator, we would now like to open the call up for questions.
Operator: Thank you. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. And for participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Our first question is from Jerry Revich with Goldman Sachs. Please proceed.
Speaker Change: Thank you if he would like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question queue. You May press star two if he would like to remove your question from the queue and for participants using speaker equipment may be necessary to pick up your handset before pressing the star keys.
Speaker Change: Our first question is from Jerry Revich with Goldman Sachs. Please proceed.
Speaker Change: Hi, This is clay Williams on for Jerry.
Clay Williams: Hi, this is Clay Williams on behalf of Jerry. In fire and emergency, how much was pricing up in the quarter, and then how much higher is pricing on what you're booking today versus what you're booking today compared to what you're delivering?
Speaker Change: In fire and emergency.
Speaker Change: How much was pricing up in the quarter and then how much is how much higher is pricing on what are you booking today versus where you are booking today compared to you know what you're delivering.
Speaker Change: Yeah. Thanks, Clay, so I think one way to think about that if you look at fire <unk> emergency sales total sales were up 33%.
Mark A. Skonieczny: Yeah, thanks, Clay. So I think one way to think about that is if you look at fire and emergency sales, total sales were up 33%, and units were up 18%. And I would say the delta of that is pretty evenly split between price and favorable mix in the quarter. And then if you think about how the units we're shipping today are versus what we price today, I think you have to step back and, you know, look at the price increases we've taken over the last couple years.
Speaker Change: And units were up 18%.
Speaker Change: And I would say the delta of that it's pretty evenly split between price and favorable mix in the quarter.
Speaker Change: And then if you think about how the units were shipping today are versus the price today I think you have to step back.
Speaker Change: Look at the price increases we've taken over the last couple of years.
Mark A. Skonieczny: Over the last few years, we've had a combined pricing increase of 40% through about mid-year 2023 when we started to take more normalized annual increases of three to four percent. (Inaudible) We're about in the third to fourth inning, working through those price increases, and an ambulance is about in the 5th or 6th inning as we work through those prices.
Speaker Change: Over the last few years, we've got a combined.
Speaker Change: Pricing increases of 40% through about mid year 2023, when we started to take more.
Speaker Change: Normalized annual increases of 3% to 4%.
Speaker Change: In fire.
Speaker Change: We're about in the third or fourth inning working through those price increases.
Speaker Change: And an ambulance were about in the fifth or sixth inning as we worked through those price increases.
Speaker Change: Great That's super helpful and then lastly.
Clay Williams: Great, super helpful. And then lastly, looking at the midpoint of the outlook on EBITDA margins, seems to imply weaker margins than normal seasonality in the back half. Just curious if there's any specific drivers there or just double checking our math. Thanks.
Speaker Change: Looking at the midpoint of the outlook on EBITDA margins it seems to imply a.
Speaker Change: Weaker margins than normal seasonality in the back half just curious if there's any specific drivers there are just double checking out Matt.
Speaker Change: <unk>.
Speaker Change: Yeah, I think so.
Speaker Change: Double check the math as you look sequentially.
Speaker Change: From the second quarter to the are you speaking just for specialty vehicles margins Glenn.
Clay Williams: To double check the math, as you look sequentially from the second quarter to the, are you speaking just about specialty vehicle margins, Clay?
Clay Williams: just like the company as a whole for second half margins just normal seasonality on a sequential basis
Speaker Change: Just for the company as a whole for.
Speaker Change: For our second half margins, just normal seasonality on a sequential basis.
Mark A. Skonieczny: Yeah, guys, starting with specialty vehicle margins. We expect third-quarter EBITDA margins to increase 50 to 100 basis points from the second quarter to the third quarter and then about another 100 BIPs from the third quarter to the fourth quarter. And recreation, even a margin, should be fairly consistent.
Speaker Change: Yeah, well, that's starting with specialty vehicle margins, we expect a.
Speaker Change: Third quarter EBITDA margins to increase 50 to 100 basis points.
Speaker Change: From the second quarter to the third quarter, and then about another 100 bps from the third quarter to the fourth quarter.
Speaker Change: And recreation EBIT margins should be fairly consistent seven to seven 5% for the full year.
Mark A. Skonieczny: Yes, so I think you should just check your math. I think, sequentially, we're actually up as well.
Speaker Change: Yeah. So I think just check your math I think Greg the Mavic sequentially, you were actually up with yes, yes.
Mark A. Skonieczny: We're actually up as well. Yeah.
Speaker Change: Yes.
Speaker Change: Thanks, I'll pass it on.
Thank you.
Operator: Our next question is from Mike Shlisky with D.A. Davidson. Please proceed.
Speaker Change: Our next question is from Mike sits key with D. A Davidson. Please proceed.
Speaker Change: Yes, Hello, good morning, and thanks for taking my questions.
Michael Shlisky: Yes, hello, good morning, and thanks for taking my question. Amy, it's great to hear your voice again. Yes, so just a quick question first on recreation.
Speaker Change: Amy its great to hear your voice again.
Amy Campbell: Hey, Mike.
Mark A. Skonieczny: Can you give us some thoughts on the margin potential there in 2025 if the orders have started out a bit soft? Are there things you can do on the cost side or mix side that might make next year an up year for the recreation margin outlook? Yeah, I think, Mike, as we've talked about previously, we're not going to provide 25. And again, the market's still choppy now, so we have to see what's going to happen in the back half of the year, which I think everyone's talking about from an industry perspective. So I think to give anything from a 25 until we see what happens in the back half of the year wouldn't be appropriate this time.
Amy Campbell: Yes, so maybe just a quick question first on recreation.
Speaker Change: Can you give us some thoughts on the margin potential there in 2025, if the orders have started out a bit soft although things you can do on the cost side or mix side that might be.
Speaker Change: Next June and up year for the recreation margin outlook I think Mike as we've talked about for years, we're not going to provide 25 and again the market's still choppy now so we have to see what's going to happen in the back half of the year, which I think everyone's talking from an industry perspective, So I think to give anything from a 25 until we see what.
Speaker Change: Happened in the back half of the year it wouldn't be appropriate at this time.
Speaker Change: Okay no problem.
Speaker Change: Got it.
Speaker Change: Tuesday with fire and emergency.
Michael Shlisky: Okay, no problem. (Inaudible) I'd like to turn it over to Fire and Emergency. You mentioned some interest in the Spartan S-180. At this point... How successful have you been with delivering that product in 180 days every time? And can customers now? I know there's been some problems with the supply chain over the last couple of quarters. Are you at the point now where you can? Say it, put the money in the actual name, and deliver it within six months.
Speaker Change: You had mentioned some interest in the sport in S 180.
Speaker Change: At this point.
Speaker Change: How successful have you been with delivering that product in 180 days every time.
Speaker Change: And customers now.
Speaker Change: As with our supply chain over the last couple of quarters.
At the point now where you can.
Speaker Change: So you have to put the money in the actual name and deliver within six months, yes.
Mark A. Skonieczny: Yes, for sure, and the way we've done that, we actually have a dedicated line in one of our facilities, Mike, that is doing that, so we've invested in that product line as well as having a dedicated line within one of our facilities, so that is within the, we are meeting those lead times.
Speaker Change: Yes for sure in the way we've done that we've actually we have a dedicated line of all of our facilities.
Speaker Change: Mike that is doing that so we've invested in that product line as well as having a dedicated line within one of our facilities. So that is within though we are meeting those lead times.
Okay.
Michael Shlisky: Okay. And then perhaps outside of that, Inspire, and the other models, are you past any major supply chain issues? And I'm just trying to figure out how much faster you can make the runaway from here. Perhaps you had mentioned you had seen the best run rate since the pandemic, but what was the prior peak? How far off are you from the prior peak?
Speaker Change: Then perhaps.
Speaker Change: Outside of that inspire the other models are you past any major supply chain issues and I'm just trying to figure out.
Speaker Change: How much faster you can make the run rate from here, perhaps maybe you had you had mentioned.
Speaker Change: You have seen the best run rate since <unk>.
Speaker Change: But what was the what was the prior peak how far off are you from the prior peak.
Speaker Change: Run rates there.
Speaker Change: Yes, we're not that far off but again like we've talked about you know.
Mark A. Skonieczny: Yeah, we're not that far off. But again, like we talked about, FIRE is still six to nine months behind where Ambulance is. And we expect in the back half, you know, a lot of the guidance that we're talking about today is still the continued momentum in FIRE and catching up to the ambulance throughput improvement. So I would just say from that perspective, you know, it's again how we're going to demonstrate that in the back half of the year, but we feel good about our momentum and where we're at.
Speaker Change: Fire is still six to nine months behind where am Linzess and we expect in the back half a lot of the guidance that we're talking about today is still the continued momentum and buyer.
Speaker Change: Catching up to the ambulance throughput improvement so I would just say from that perspective.
Speaker Change: Again, how we're going to demonstrate that in the back half of the year, but we feel good about our momentum from where we're at and we've quoted obviously from pre Covid we've.
Mark A. Skonieczny: And we've obviously quoted, obviously from pre-COVID, we've doubled our throughput at Spartan. So when you look at our overall, we're up to actually pre-COVID levels when you can include the Spartan facilities and what they've been able to do.
Speaker Change: We've doubled our throughput at the smart and so when you look at our overall were up actually the pre COVID-19 levels, where they could include a spartan facilities, what they've been able to do.
Mark A. Skonieczny: And I would just add, Mike, that the guide for that facility in Ocala. The guide would suggest that the 3rd and 4th quarters would both be record quarters for ships because of that.
Speaker Change: And I would just add Mike that.
Speaker Change: The guide for that from that facility in Ocala to Ocala, Florida. The guide would suggest that the third and fourth quarters with both be record quarters of shipments for.
Speaker Change: For that plant.
Speaker Change: Yeah perfect I appreciate the color.
Michael Shlisky: Yeah, perfect. I appreciate the color, everybody. I'll pass it along.
Speaker Change: I'll pass it along.
Mike: Great. Thanks, Mike.
Our next question is from made deliberate with Baird. Please proceed.
Operator: Our next question is from Meg Dobre with Baird. Please proceed.
Mike: Good morning, Amy I look forward to working working with you again.
Mircea Dobre: Good morning, Amy. I look forward to working with you again. So that's great. I guess the Well, what I'm trying to make clear for myself here are the moving pieces to your guidance because your commentary contains kind of a lot of moving pieces. Can we put a finer point on revenue in terms of what's moving here? It sounds like terminal truck is lower, and RV is lower. There is a fire and emergency partial offset. You also divested that dealership in fire. I don't know how much of an impact that was. Can we kind of parse out all these factors, please?
Speaker Change: That's great.
Speaker Change: I guess the.
Speaker Change: Well, what I'm, what I'm trying to make clear for myself.
Speaker Change: Are the moving pieces to your guidance because your commentary contain kind of a lot of.
Speaker Change: A lot of moving pieces here so.
Speaker Change: So when you put a finer point on our revenue in terms of what's moving here it sounds like terminals pockets more RFP is lower.
Speaker Change: Foreign emergency partial offset you also divested.
Speaker Change: The dealership.
Speaker Change: In fire I don't know how much of an impact that was but.
Speaker Change: Can you kind of parse out all of these factors. Please.
Mark A. Skonieczny: Yeah, sure Meg, so I think a way to think about it is, you know, we guided recreation about $100 million lower. That's how that math works out, $90 to $100 million lower, and our terminal trucks business, down an additional $50 million, and we took the midpoint of the guide down $50 million. And so the offset to that is the second quarter beat in the specialty vehicles business and then about a 70 to 80 million increase in F&E in the back half.
Speaker Change: Yeah sure. It makes I think a way to think about it you know we guided.
Recreation about $100 million lower how that math works out 90 to 100 million lower and our terminal trucks business.
Mircea Dobre: That's helpful. Thank you.
Speaker Change: Down an additional $50 million.
Speaker Change: And we took the midpoint of the guide down $50 million.
Speaker Change: And so the offset to that is the second quarter beat.
Speaker Change: And the specialty vehicles business and then about a 70 to 80 million.
Speaker Change: Kris.
Speaker Change: And Anthony in the back half of the year.
Speaker Change: That's helpful. Thank you.
Speaker Change: Yeah.
Mircea Dobre: You know, in F&E, it sounds like you're making good strides in being able to increase throughput. And Mark, you know, we were talking just a couple months ago about where you are relative to normal. And at the time, your throughput was still quite a bit below what you consider to be normal. So I'm kind of curious what this throughput is going to be for fiscal 24 based on kind of what you know today.
Speaker Change: In F N E.
Speaker Change #100: It sounds like you're making good strides in being able to increase throughput.
Speaker Change #100: And Mark you know we were talking just a couple of months ago about.
Speaker Change #101: Where you are relative to normal and at the time your throughput was still quite a bit below what you consider to be normal so I'm kind of curious.
Speaker Change #101: What this throughput is going to be exiting.
Mark: Fiscal 'twenty four.
Mark: Based on kind of what you know today.
Mark A. Skonieczny: Yeah, like I said, we've been talking about where Ambulance is, and you know, that's in, you know, 60, 70, 80 percent where we want to be. So, you know, when we talk about where the fire is, like Amy talked about, we're expecting the fire to catch up to that site. So, we still have room to go across the Legacy F&E business, but we'd expect fire to be more in line with Ambulance at the exit there.
Mark: Yeah, like I said I think.
Mark: We've been talking about where ambulances and you know that's in the.
Mark: 70%, 80%, where we wanted to be so you know when we talk about where fires like Amy talked about we're expecting fire to catch up to that site. So we still got room to go across the legacy <unk> business, but we'd expect fire to be more in line with and the ones that the exiting there. So we're.
Mark A. Skonieczny: So, we're slowly catching up, and as Amy said, in Ocala, we definitely are expecting a nice second half to the build here. So, you know, I expect to exit at that low double-digit margin that we're talking about, that we're more aligned, both businesses are aligned, and that we have opportunity beyond that as we exit 24. But we're fully not there back to, you know, 85 to 90 percent efficiency.
Speaker Change #102: We're slowly catching up and as Amy said I know Paolo we definitely are expecting a nice second half two to build here. So you know I expect exiting at that.
Speaker Change #102: Low double digit margin that we're talking about that we're more aligned both business our line and now we have opportunity beyond that as we exit 'twenty four but we're fully not they're back to 185% to 90% efficiency.
Speaker Change #103: Yes, because that's what I was trying to get at it but when we're thinking about 25.
Mircea Dobre: Yeah, because that's what I was trying to get at. When we're thinking about 25, in your existing footprint today in F&E, is there potential for you to further increase production volume? Or do we start to run into capacity issues where you kind of need to add additional capex or whatnot?
Speaker Change #104: In your existing footprint today in F&B is there potential for.
Speaker Change #105: You to further increase production volume.
Speaker Change #106: Or do we start to run into capacity issue, where you kind of need to add additional capex or whatnot.
Mark A. Skonieczny: No, no. There's nothing from that perspective, and as you know, Meg, in the majority of our plants, we run four tens, right? So we have theoretical capacity of a minimum of double, right, if we were into a second shift. As we ramped up some of our businesses, we've actually added second shifts in, say, welding or paint and fabrication, not on the assembly side, but there is opportunity to increase from that perspective.
Mark A. Skonieczny: No, no, they're not...
Speaker Change #107: No no there is nothing from that perspective, and as you know the majority of our plants. We run four four tons right. So we have theoretical capacity of a minimum double right. If we were enter a second shift as we ramp and some of our businesses. We've actually added second shifts in say welding or paint and fabrication.
<unk>.
Speaker Change #108: Not on the assembly side, but there is opportunity to increase from that perspective. So again, you know what I wanted to do in the back half as we've talked about previously is stabilized fire to the current rates and meet the expectations of the <unk>.
Mark A. Skonieczny: So again, what I want to do in the back half, as we've talked about previously, is stabilize fire at the current rates and meet the expectations of the increase, and then go from there, heading into 25, right, and building off of that. So we need to get stable at the rates we're at, and then we can look at opportunities to increase our line rates and our shifts at those facilities as we move forward.
Speaker Change #108: Increase and then go from there heading into 'twenty five right and building off of that so we need to get stable at the rates. We're at and then we can look at do we wanted to look at opportunities to increase our our mine rates of inter shifts at those facilities as we move forward.
Speaker Change #108: Okay.
Mircea Dobre: Okay, um, and then maybe pivoting to recreation. I guess I'm going to try to ask Mike's question a little bit differently.
Speaker Change #109: And then maybe pivoting to recreation.
Speaker Change #110: I guess I'm going to try to ask Mike's question, a little bit differently.
Speaker Change #111: Backlog continues to come down here and you revised your outlook lower by $100 million on the revenue side for this year.
Mircea Dobre: Backlog continues to come down here, and you revised your outlook lower by $100 million on the revenue side for this year. But obviously, from what's embedded here, it seems like your revenues, your shipments, continue to exceed your incoming order intake. And I'm wondering what the implications are here. I mean, it's. It's difficult for me to see how 2025 is now going to be down again, just based on the fact that your backlog is contracting. Do you think differently? You know, should we think differently based on what we see today?
Speaker Change #112: But obviously.
Speaker Change #113: And what's embedded in here it seems like your your revenues your shipments.
Speaker Change #113: Continued to exceed your incoming order intake and I'm wondering what the implications are here I mean, it's it.
Speaker Change #113: It's difficult for me to see how 2025, it's not going to be down again, just based on the fact that your backlog is contracting.
Speaker Change #114: Do you think differently you know should we think different differently based on what you see today.
Mark A. Skonieczny: Yeah, and again, it's a wait-and-see situation for the back half of this year, Meg, and unfortunately, we don't have a crystal ball from that perspective, but you know from a five to six month backlog you're exactly right. For the B's and C's, we feel like you know they're entering the back half, and it's really a discussion on the A's and toll You know RVIA is quoting the A business as an 8,000 unit market now versus a 10,000 unit market, so we've seen a retraction there, and we talked about that in Q1, those are operating at a low backlog, and our tollables business is, you know, less than a one month backlog, right?
Speaker Change #114: Yeah.
Speaker Change #115: It's a wait and see on the back half of this year and Unfortunately, we don't have a crystal ball from that perspective, but you know from a five to six month backlog, you're exactly right. There in the BS and CS and we feel like are you know, they're entering the back half and that's really a discussion on the <unk> and <unk>, which have just not come back you know RBI is close.
Speaker Change #115: The ne business being at 8000 unit market now versus a 10000 unit market. So we've seen a retraction there and we've talked about that in Q1 those are operating at a low <unk>.
Speaker Change #116: Backlog at our Towboat businesses, you know less than a one month backlog right. So we continue if you look at the back half, but it's really a reflection of the A's and told them not coming back and to the extent we have to build our backlog, but again when you look at the margin we're generating it's really managing the cost within that eight in total.
Mark A. Skonieczny: So we continue, if you look at the back half, it's really a reflection of the A's and tollables not coming back and to the extent we have to build our backlog, but again, we look at the margin we're generating, it's really managing the cost within that A and tollable business in the back half until we see what the order rates are coming into Q3 and Q4. So, unfortunately, we're waiting to see what the order rates are going to be, really, on the A and tollable numbers. We feel good about our market position, where we are in the B's and C's, and our ability to build that backlog entering 25. It's more around the A's and tollables still. [inaudible]
Speaker Change #116: Business in the back half until we see what the order rates are coming into Q3 and Q4.
Speaker Change #116: So unfortunately, the weight body to see what the order rates are going to be really on the <unk>. We feel good about our market position, where we're at in the B's and C's our ability to build that backlog entering twenty-five it's more around the <unk> and <unk> still.
Speaker Change #116: Really gets told those business and I know authority came out their earnings. This morning as well we're seeing the same thing that people are the tolls are picking up but they're more on the shorter neither the stick and tin sort of trailers. The lower end trailers that are shorter.
Speaker Change #116: Shorter lengths as well and as you know, we're a premium provider within that space. So we just haven't seen the uptick in the premium side of that business as industry.
Speaker Change #117: Understood final question.
Mircea Dobre: Okay. Final question on margins in recreation. Considering the challenges that you're having with both TOEBLs, but especially with Class A, you know, seven, seven and a half percent margin is not too bad, I guess. That implies that in Class A and TOEBLs, you're still above breakeven. That's kind of how I'm interpolating here. Correct me if I'm wrong.
Speaker Change #118: On margins and recreation, considering the challenges that you're having with both toll booths, but especially with class a.
Speaker Change #118: 775% margin.
Speaker Change #119: Not too bad I guess.
Speaker Change #120: That implies that in this class a and <unk>.
Speaker Change #121: Youre still above breakeven, that's kind of how I'm interpolating here correct me if I'm wrong.
Speaker Change #122: What what exactly are you doing on a go forward basis to manage the cost structure here can we get a little more context.
Mark A. Skonieczny: What exactly are you doing on a go-forward basis to manage the cost structure here? Can we get a little more context and maybe what could carry into 25 relative to 24 based on your restructuring actions in the second half? Thanks. Yeah, and again, we continue to flex as we've talked about.
Speaker Change #122: And maybe what could carry into 25 relative to 'twenty four based on your restructuring actions in the second half.
Yeah, and again, we continue to flex as we've talked about we've taken a significant amount of people out but we've also looked at our cost structure across our fixed cost as well as addressing those so we've just been very proactive and as our backlog to come down we've taken the appropriate not only direct labor, but indirect and S. J.
Mark A. Skonieczny: Yeah, and again, we continue to flex as we've talked about. We've taken a significant amount of people out, but we've also looked at our cost structure across that, our fixed costs as well, and are addressing those. So we've just been very proactive, and as our backlogs have come down, we've taken the appropriate not only direct labor but indirect and SG&A costs out of the business to get more of a normalized view of what the break-even view of those businesses is, and we manage to that.
Speaker Change #122: They passed out of the business to get more of a normalized what a breakeven view of those businesses are managing to that so we've gotten ahead of it to make sure and so we've anticipated a bigger drop or challenge ourselves to say, let's run to the bottom and then work our way up as the volume comes back which is really play to our advantage there to your point.
Mark A. Skonieczny: So we've gotten ahead of it to make sure, and so we've anticipated a bigger drop or challenged ourselves to say, let's run to the bottom and then work our way up as the volume comes back, which has really played to our advantage here, to your point that we haven't incurred losses like we previously had when you look at those businesses collectively. So I think that's really been the strategic piece of that, is that we saw the market coming down, we challenged our companies to run to the bottom and then work their way up, and unfortunately, we just haven't seen the uptick that is there, which with the new cost structure, we'll see upside from a margin perspective as we go forward with the new cost structures these businesses are operating in.
Speaker Change #122: That we haven't incurred losses like we previously had when you look at those businesses collectively so I think that's really been the.
Speaker Change #122: The strategic piece of that is that we saw the market coming down we challenge our companies to run to the bottom and then work our way up and Unfortunately, we just haven't seen the uptick that is there which with the new cost structure, we will see upside from a margin perspective as we go forward with the new cost structure of these businesses are operating at.
Speaker Change #123: Okay. Thank you.
Speaker Change #124: Alright. Thank.
Rick: Thanks, Rick.
Speaker Change #126: As a reminder, the star one on your telephone keypad, if he would like to ask a question we will pause for a brief moment to see if there's any final questions.
Operator: As a reminder, it is star one on your telephone keypad. If you would like to ask a question, we will pause for a brief moment to see if there are any final questions. And with no further questions, we will conclude today's conference. Thank you for your participation. You may now disconnect.
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Speaker Change #127: And with no further questions. We will conclude today's conference. Thank you for your participation you may now disconnect.
Speaker Change #127: Yeah.
Speaker Change #127: [music].