Q4 2024 REV Group Inc Earnings Call & Investor Day
Good day and welcome to the Rev group fourth quarter earnings conference call. All participants will be in a listen-only mode. Should you need assistance? Please signal a conference specialist by pressing the star key followed by zero.
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I would now like to turn the conference over to Drew konop. Please go ahead sir.
Good morning and thank you for joining us earlier. Today, we issued our fourth quarter and full year fiscal 2024 results, a copy of the release is available on our website at investorsgroup.com
This morning, we will discuss our fourth quarter, and full year results, our fiscal, 2025 Outlook, and then transition the call to our investor Day presentation before opening the call to questions from analysts and investors.
Today's call is being webcast and a slide presentation, titled fiscal fourth quarter 2024 results. Which includes a Reconciliation of non-GAAP to gaap financial. Measures is available on the website. Please refer now to slide 2 of the presentation.
Our remarks and answers will include forward-looking statements which are subject to risks, that could cause actual results to differ from those expressed or implied by such forward-looking statements.
These risks include among others matters that we have described in our our Form 8K and form 10K filed with the FCC earlier today. And other filings that we make with the SEC. We disclaim any obligation update these forward looking statements, which may not be updated until our next quarterly earnings conference call. If, at all
all references on on the call today to a quarter or year or our fiscal quarter, or fiscal year unless otherwise stated
Joining me on the call today is our president and CEO Mark sketchy and our CFO. Amy Campbell, please turn to slide 3 and I'll turn the call over to mark.
Thank you, drew and good morning to everyone joining us on today's. Call this morning, I will discuss our fiscal 2024 Consolidated results before a highlighting select accomplishments as we exited the year and then move on to our Consolidated fourth quarter financial performance. I will then turn it over to Amy to discuss our segment financials and our fiscal 2025 outlook. Before we transition the call to the investor day discussion, where we will provide, our intermediate Financial targets and a refreshed Capital allocation framework.
Full year Consolidated, net sales decreased 258 million or 9.8% versus the prior year fiscal 2023 included a full year results, for Collins bus, which was deed at the end of the first quarter of 2024 Collins contributed 147 million in Revenue, during the last 3 quarters of 2023 adjusting for the 147 million of Revenue College generated in the last 3 quarters of 2023 and that sales decreased 1111 million or 4.4% year-over-year.
Lower net sales were primarily related to our cyclical Recreation vehicle and terminal truck businesses which experienced 257 million and 161 million full year sales, reductions respectively on a year-on-year basis, due to challenge market conditions that we have discussed on previous calls.
Partially offsetting these impacts with a 281 million or 23% year-over-year increase in net sales within the fire. And emergency groups that benefited from production ramps that drove throughput increases and price realization
Full year Consolidated, adjusted ebit da of 162.8 million increased 6.2 million or 4% year-over-year despite lower sales adjusting for 32.8 million of earnings at Collins contributed. During the last 3 quarters of 2023. Adjusted ebit da increased by 39 million or 31.5%.
Programs aimed at improving operating efficiencies across the Enterprise and favorable price realization within the specialty Vehicles. Businesses resulted in an impressive 180 basis point year-on-year. Margin expansion when, considering the sale of Collins,
Discipline cost management within the recreation of vehicle segments, and able to segment to maintain a 19% decremental, margin on the 28% sales Decline and hold 6.3%, margin for the full year.
Turning to slide 4.
Throughout the year, we achieved a meaningful increase in our fire and emergency production rates. Exceeding pre-pandemic levels of throughput. This Improvement is a direct result of our focus on operational excellence with lean initiatives that streamline workflows reduce inefficiencies and improve production schedules. Our cumulative, internal efforts have driven a significant Improvement in Specialty Vehicle results and positions us well for sustained operational performance.
Increase throughput has also contributed to expanded adjusted ebitda margins as higher output enabled greater price, realization and operational. Leverage our enhanced profitability also reflects discipline cost management and strategic pricing actions which led to a 7-year high in adjusted. Eva margins as both a fire and ambulance groups.
These results demonstrate our ability to drive both growth and efficiency, creating lasting value for our stakeholders.
Specialty Vehicle segment adjusted ebitda in the fourth quarter 11.4 percent provides a solid foundation for the achievement of the updated. Intermediate targets that Amy will present shortly.
Post-pandemic the emergency vehicles industry benefited from several favorable macro trends that increased demand for our products. And as resulted in rev group, exiting fiscal 2024 with a robust 2.5 year overall emergency vehicle backlog of units based on fourth quarter production rates. Key demand drivers including natural replacement cycle of Aging Vehicles, Federal stimulus, funding that bolstered Municipal budgets Rising real estate values and general tax bases, as well as population growth, and urban sprawl,
Our record high 4.2 billion specialty Vehicles. Backlogged provides a rare level of demand, certainty and production planning. Visibility setting us apart from industrial manufacturing peers who face greater variability in their order Pipelines.
In addition within the fourth quarter, we completed the previously announced wind down of the El Dorado National California or ENC Municipal Transit bus business.
Upon completion of all units within backlog. We announced the sale of ENC on October 18th for sale price of approximately 52 million before transaction costs to Rebus Inc.
And C has a long history with 5 decades in the mass transit industry and we are pleased to brand is set to continue. I want to thank all of our customers, as well as the NC employees and dealers for their support. Throughout this transition, with the wind down and sale of both Collins, and ENC we successfully exited both of our bus businesses. In 2024, resulting in a more streamlined and focused organization, which will drive value going forward. While also creating opportunity to return Capital to shareholders.
I was pleased to announce that David Dao was appointed to the board of directors in the fourth quarter. David serves as chairman of the board and chief executive officer of American Axle manufacturing. A global Tier 1, Automotive supplier headquartered in Detroit Michigan. He has served on his board since 2009 and currently serves on the board of Mayor schor. Mutual Holdings in the National Association of Manufacturers. He's also a member of the santis supplier advisory Council. We believe his significant knowledge and Industry insights will further rev groups, operational and performance imperatives
Finally today we are announcing that a board has authorized a new 250 million, share repurchase program and a 20% quarterly cash dividend increase.
These.
Actions underscore confidence in the company's Financial strength, and long-term growth prospects while demonstrating a focus strategy of returning, Capital shareholders the share repurchase program replaced. The current program expires in 24 months and provides management flexibility and manage the capital structure effectively. Meanwhile the dividend increase reflects a sustained commitment to rewarding shareholders with a growing income stream. Together these initiatives highlight the company's dedication to creating shareholder value and lying Capital allocation with investor interests.
Please turn the page 5 to the slide deck as I move to review of our fourth quarter Consolidated Financial results.
Fourth quarter, segment sales were 597.9 million as a reminder the prior Year's quarter included 54.2 million in net sales, attributed to Collins bus, excluding the impact of The Columns of investor net sales decreased 41.2, million or 6.4% compared to the prior year quarter. As I previously mentioned, our cyclical Recreation and terminal truck, businesses can continue to navigate through challenge markets in the fourth quarter, as we exit the year, we anticipate that these markets or main challenged through the first half of our 2025 fiscal year for
the more the wind down and sail, the ENC
Minutes will Transit bus business which was completed early in the fourth quarter this year, great and additional year-on-year. Revenue comparison headwind in the quarter. These headwinds were partially offset by continued sequential and year-on-year, momentum. That delivered strong performance in the fire and ambulance groups.
Consolidated adjusted ebitda of 49.6 million. Decreased 4.4 million excluding the impact of Collins bus Which generated 13.4 million in the prior year quarter that did not recur this year, adjusted Eva de increased 9 million or 22.2%. This was largely due to strong performance within the Fire Group driven by efficiency gains price realization, and a favorable product mix that more than offset lower performance within the recreational vehicle segment.
With that, please turn the slide 6 and I'll turn the call over to Amy for detailed segments, financials.
Sales we're about 440 million, the decrease of 38.9 million compared to the prior year.
As Mark mentioned, the prior Year's quarter included 54.2, million of net sales, attributed to Collins bus.
Excluding the impact of the columns to vesture net sales increased, 15.3 million, or 3.6% compared to the prior year quarter.
This increase in net sales was primarily due to increased sales of fire apparatus and ambulance units.
Along with favorable price realization and partially offset by lower sales and Municipal transit buses terminal trucks, and Industrial sweepers.
Segment adjusted ebitda of 50.2 million, increased 6.9 million.
The prior Year's quarter included 13.4 million of adjusted ebit da contributed to Collins.
Excluding the impact of the columns deveste adjusted ebta increased 20.3 million or 68%. Compared to the prior year quarter.
The increase in earnings was primarily due to increase sales of fire apparatus and ambulances.
Price, realization operational efficiencies and higher contribution from Municipal bus business.
Partially offset by lower sales of terminal trucks, and Industrial sweepers and inflationary pressures.
Segment profitability increased sequentially throughout the year, achieving an adjusted even de margin of 11.4%, and the fourth quarter.
X Collins this represents a 440 basis point Improvement. Versus the prior year quarter and is the highest segment margin performance since our IPO in 2017.
Segment performance was aided by a favorable, mix of fire apparatus shipments, within the quarter that benefited from having higher content.
We Believe, fourth quarter margin performance provides a strong indication of the segment's, potentials for double-digit margins and improved profitability. As we progress through fiscal 2025
As Mark mentioned the Specialty Vehicle segments, backlog of 4.2 billion is also a record adjusting for the removal of 388 million of bus backlog, that was included in the prior Year's backlog.
But by exiting the bus business, no longer exists backlog group, 13.3% versus the prior year.
The increase was primarily related to solid industry demand for fire apparatus and ambulances as well as pricing actions and partially offset by increased production rates.
At the fourth quarter production rate, the overall Legacy fire and emergency, backlog is in the range of 2 to 3 years, depending on the unit type and brand.
As we will detail shortly, it is our goal to reduce our lead times over the next 3 years and exit fiscal 2027. And a steady state of Demand with lead times that are closer to pre-pandemic levels.
We believe a reduction in lead times result from both increased throughput at our plants along with the normalization of demand in the market.
The fiscal 2025 Outlook provided today, Builds on the momentum, de demonstrated, by the Specialty Vehicle segment.
We anticipate full year Revenue to grow in the high single to low double digits as compared to a 1.56 billion, proforma Revenue base.
The proforma basis for sales excludes 164 million of divested bus Revenue, that was reported within the segment in fiscal 2024, but will not recur going forward.
Revenue growth will be driven primarily by the fire and emergency businesses which are expected to benefit from an increased mix of higher content, units and price realization as well as low single-digit unit volume growth, resulting from fiscal, 2024 Ramp rates.
These impacts are expected to convert incremental Revenue. At an incremental margin of 30 to 40% in fiscal 2025. From a pro-forma adjusted ebit of base of 136.8 million which excludes 17.6 million of fiscal 2024 earnings related to the domestic bus businesses that will not recur.
For modeling purposes, we expect greater than usual, seasonality in the first quarter with an approximate 20%, decline in Revenue as compared to the fourth quarter of 2024.
Due to the favorable mix of higher price. Fire apparatus delivered in the fourth quarter, that will not repeat in the first quarter.
This mix impact is expected to result in a sequential decremental margin of approximately 25% quarter over quarter.
Turning to slide 7 recreational vehicle. Segment sales of 158 million decreased 26.5% versus last year's fourth quarter.
Lower sales were primarily the result of a decline in unit volume related to in market conditions and increased retail assistance.
Viewer shipments in the class, A Class B. And towable categories were partially offset by a favorable mix of Class, C units.
Despite a decline in segments shipments, we believe that our motorized Branch shipments have outperformed their respective product categories throughout the year.
Adjusted ebitda of 8.1. Million was a decrease of 11 million versus the prior year. The decrease was primarily a result of lower unit volume increased retail assistance in inflationary pressures partially offset by actions taken to better. Align fixed and variable costs within market demand.
Segment backlog was 292 million a year, end a 24% decline versus the prior year.
The decrease is attributable to a challenging retail environment and dealer dies stocking throughout. 2024 after several challenging quarters of order intake and cancellations, over the past 2 years,
We are pleased to note that segments. Fourth quarter, net orders were the highest dollar total since the second quarter of fiscal 2022 and resulted in a revenue book to Bill of 1.3 times.
We are encouraged that order patterns early in the first in the fiscal. First quarter continue to remain favorable.
Within the fiscal 2025 guidance, provided today, we expect recreational vehicle segment revenue, and adjusted Eva to be roughly flat versus fiscal 2024.
After typical first quarter, seasonality, we anticipate gradual Market Improvement to begin in the second half of the fiscal year, which assumes dealer inventories within motorized categories will stabilize and overall market conditions will improve
Turning to slide 8 trade working capital on October, 31st 2024 was 248.2 million, a decrease of 70.3 million compared to 3 1, 8. 5 2 3.
The decrease was primarily related to the domestic jurors of Collins and E and C.
A full year cash flow from operating activities with 53.4 million and adjusted. Free cash. Flow is 102.2 million. We spent 5.3 million on Capital expenditures within the fourth quarter, and a total of 27.6 million for the full year, which included capex, Investments aimed to deliver organic growth lower manufacturing costs and invest in our it systems.
Net debt is on October 31st with 60.4 million including 24.6 million of cash on hand.
As Mark previously, mentioned the board authorized a new share repurchase program of 250 million which expires in 24 months and replaces the prior program. In addition, we declared a quarterly cash dividend of 6 cents per share. A 20%, increase payable January, 10th to shareholders of a record on December 26th.
Headquarters in the company. Maintained ample liquidity for our strategic initiatives with approximately 350 million available, under our abl revolving, credit facility
Now, turning to slide 9, we provide a 2025 fiscal full year outlook which builds upon the exit rate momentum delivered by the Specialty Vehicle segment.
As I mentioned, we expect High single to low double digit Revenue growth and the Specialty Vehicle segment, versus the 2024, proforma 1.56 billion Revenue base which excludes sales from the devest bus businesses.
Net sales, and the recreational vehicle segments are expected to be roughly flat year-over-year.
Consistency or mid single-digit growth at the midpoint versus fiscal. 2024 is pro-forma of 2.2 billion. Net sales.
Adjusted ebitda guidance is 190 to 220 million. An increase of 48% at the midpoint versus fiscal 2024 for Forma 145.2 million adjusted ebitda
We anticipate sequential improvements and Consolidated Revenue adjusted ebitda and adjusted ebitda margin throughout the year. With first half Consolidated Revenue, expected to be approximately, 45% of the full year. Guidance and first half Consolidated, adjusted Eva de expected to be approximately 40% of the
Your guides.
Pull your net income is expected to be 98 to 125 million and adjusted. Net income is expected to be 116 to 140 million.
Free cash flow is expected to be in the range of 90 to 110 million.
We anticipate a reduction in overall inventory to partially offset. The expected impact of lower net. Customer advances as we ship units from the backlog.
Pull your capital expenditure is estimated to be in the range of 30 to 35 million with investments, in our businesses to increase throughput and lower manufacturing costs.
Expect expected interest expense in the range of 18 to 20 million considers, a seasonal use of cash in the first quarter that typically impacts the full year. Average debt level as well as interest payments on customer advances. I would like now to turn it back over to Drew for an introduction to our virtual investor Day presentation.
Please refer to the investor Day presentation on our website.
After this presentation, we will then open it up for Q&A, from both sell side analysts and Investors Group.
Thank you. Amy in, April of 2021, we introduced our first intermediate, Financial targets, under our prior organizational structure. That included 3, segments fire and emergency commercial and Recreation.
Following the announcement in January 2024 of our plans to access the bus manufacturing business.
We reorganized our operating structure into 2 segments, specialty vehicles, and recreational vehicles. Today we are providing intermediate Financial targets under this new segmentation
In addition, to providing a view of the earnings potential of the current portfolio of businesses, we'll provide targets for 3-year-old free cash flow as well as an updated Capital, allocation framework aimed at delivering shareholder value.
As Amy mentioned, that the conclusion of our prepared remarks, we will open the line to questions from our research coverage analysts as well as investors.
If you prefer, you can message me directly in the chat box, labeled ask a question at the bottom of the webcast and I will moderate online questions.
Please turn to slide 3 and I will turn the call over to Mark to begin.
Thank you, drew. I'll begin with a brief overview of rev group for those that may be less familiar with the company and our journey.
Found it through an initial private Equity acquisition in 2006. Rev has grown into a leading Diversified specialty Vehicles manufacturer with approximately 5,700 employees and a portfolio of 20 distinctive brands.
This expansion was driven by strategic Acquisitions of established businesses across the United States, allowing the company to build a diverse portfolio and Manufacturing footprint leveraging a broad base of regional expertise dealer networks and customer relationships.
Over the past 4 years we have been on a journey of transforming these businesses to scale operations unlock manufacturing efficiencies strengthen our presence and key markets and broaden capabilities to drive shareholder returns and meet diverse customer needs.
To the way today, we are recognized as a market leader known for delivering quality Innovation and specialized Solutions across an extensive portfolio specialty vehicles.
Turning the slide 4 during the 2021 investor day. We unveiled the Rev Dr. Business system as a framework designed to drive Excellence across all aspects of our organization from operational efficiency and Innovation to customer satisfaction and employee development by leveraging. A structured set of tools processes, and performance metrics our operating system ensures consistent execution of our strategic priorities, fostering sustainable growth and profitability.
It empowers teams at all levels to focus on continuous Improvement problem, solving and value delivery, creating measurable benefits for customers employees, shareholders, and communities, like this discipline approach lines, our entire organization toward achieving world-class results. While reinforcing our commitment to being a trusted leader in our Industries.
Application of the Rev. Dr. Tenants has served us well over the past 4 years as we were faced with challenges to overcome during and following the pandemic along with Tailwind that provide opportunities to deliver improved financial performance over the intermediate and long-term
as we emerge from the pandemic, over the last few years we experienced strong market demand for fire and emergency vehicles while demand for recreational vehicles. Softened in both demand environments. We focused our efforts on optimizing efficiencies and building stronger operational capabilities.
The.
Segments remain disciplined and concentrate on enhancing margins and maximizing. Each dollar earned with within the fire and ambulance businesses, we added rigor to the operating Cadence of the plants with kpis to track new vehicle starts against completions creating more balanced production lines and improving stability. As we achieve stability manufacturing. We then executed targeted production ramps on a plant-by-plant basis to further. Increase line rates within the cyclical and markets such as RV. We benefited from a decision to limit over investment and capacity during Peak demand and have managed our cost structure to align with lower industry. Volumes over the past 2 years.
Looking deeper into the drivers of operational improvements, our teams have scrutinized production processes, looking for any inefficiencies, that could be minimized or eliminated.
Enhanced efficiency from Opex, projects led to reduce operating costs and leaner more streamline manufacturing processes that supported enhanced profitability.
Fortifying the supply chain also playing a critical role in enhancing efficiency and creating a more stable production, Cadence.
By developing, strong relationships with suppliers multi-source, and key components, and focusing on Inventory management. We ensured materials and components were more readily available when needed on the line.
As a result production accelerated cycle times improved and we have crazy more responsive manufacturing environment capable reducing backlog as are made committed to providing reduced delivery times.
To enhance margins and drive efficiency. Our businesses have enacted a comprehensive margin Improvement strategy, centered on product product simplification and standardization, SKU rationalization and process. Optimization this approach aims to reduce complexity streamline production, and boost efficiency, while ensuring the brands retain, their unique identities and continue to meet customer specifications.
By simplifying The Upfront processes. We are reducing complexity across design, engineering and production. This could be a brand specific Focus or targeted. Cross-brand communization where foundational elements and core features can be shared across Brands to minimize design. And Manufacturing, variations dust dust, decreasing costs, inventory, and time to Market.
While we drive toward greater communization, we remain committed to each Brand's product identity and we will retain the distinct Design Elements and specialized options to preserve its unique Market placement and customer appeal.
Using an 8020 approach to the portfolio. Our businesses are identifying and reducing product options and configurations that provide limited value to customers. But create manufacturing complexity by streamlining, the product lineup. Engineering time can be significantly reduced allowing teams to focus on high-value features and Innovations. Simplified product, configurations will also minimize manufacturing time and complexity and enabling more efficient supply chain. Strategies lowering procurement costs, while reducing lead times.
Converging designs across product lines, will enable a shift toward more standardized manufacturing practices, this supports the implementation of repeatable standard work, enabling consistent production quality and reducing production variability.
Standardization will also reduce skus and inventory. Requirements improving cash flow and lowering warehousing costs, ultimately driving efficiency and Manufacturing and supply chain processes.
Daily application of the continuous Improvement and mindset through lean manufacturing principles, as a key to our strategy. Our businesses are focused on eliminating waste improving workflow and enhancing productivity at every stage of production by promoting lean. Methodologies, employees are empowered to identify and act on areas for improvement, ensuring sustainable, gains, and efficiency and quality over time.
In addition, to operational improvements, we implemented a pricing strategy to reflect both the growing backlogs, and the increase in costs of materials and labor through carefully, calibrated price adjustments. We align pricing with expected market. Conditions adding value to our backlog without straining. Our customer base,
The pricing adjustments, not only protected margins but also reinforced the value proposition for the Rev portfolio of vehicles. In both the critical First Responders porting Industries as well as the consumer-facing recreational vehicle Market where premium brand differentiation creates an opportunity for higher margins.
Turning to slide 5.
Over the past 4 years. And since our 2021 investor day, rev group has achieved remarkable growth market capitalization is increased by 212% from 498 million to 1.55 billion. While adjusted ebit DA has compounded an annual growth rate of just over 24%, since fiscal 2020, we generated a strong adjusted free cash flow totaling 263 million over the trailing 3 years and strategically used it to return cash to shareholders while reducing our leverage ratio.
Strengthening our balance sheet and enhancing Financial flexibility for future growth opportunities and returns of capital to shareholders.
Leverage, decrease from the 10 P pandemic's peak of over 6 times, net debt, trailing 12-month, adjusted ebit da and 4.9 times as we exited fiscal 2020, to under 0.4 times as we exited fiscal 2024, these extraordinary accomplishments occurred. Even in the face of modest Consolidated Revenue growth on the scoring. Our strategic focus on improved operational efficiencies pricing strategy.
And discipline financial management.
A focused application of the Rev Dr. Principles and our strategic choices have contributed to a 380 basis point adjusted, Eva margin increase since 2020.
Significant Improvement that didn't rely on Revenue growth, but was achieved through our focus on operational. Excellence process improvements and discipline pricing strategies.
I've touched on demand and 1 item that jumps out on this slide is the growth of backlog fire and ambulance have experienced strong demand fueled by ongoing replacement and upgrades of age fleets robust tax receipts and federal stimulus. Urban sprawl that results in new firehouses and EMS facilities, and population growth that increases demand for equipment.
Municipalities and contractors are increasingly prioritizing Investments and emergency vehicles to meet safety standards and ensure quick effective response times.
These backlogs res represent, both a challenge and an opportunity for rev. The increased demand provides a stable base of future Revenue, but it ALS calls for careful planning to meet client timelines. And to maintain quality, our Focus has been to reduce these backlogs and by improving throughput, by almost 30% through fiscal years, 2023 and 24. We have demonstrated our ability to increase production while retaining our reliability as a partner and commitment to our customers,
Operational and pricing strategies, we have maintained exceptional. Financial discipline through diligent cash management practices rev has generated an impressive 263 million adjusted free cash flow that allowed us to pay down 269 million in debt over the past 3 years while continuing to invest in our business and return cash to our shareholders, by reducing,
We have significantly, strengthened the balance sheet, decreased Financial Risk and allowed ourselves more freedom and flexibility to direct direct future cash flow towards strategic initiatives and shareholder returns rather than debt Servicing.
Looking ahead, we are focused on maintaining a strategic Edge and building on a successes. We have demonstrated over the past 4 years, with a stable Foundation of operational, improvements effective price, realization and a strong balance sheet. The company is in an excellent position to continue leading and the specialty Vehicles industry and driving shareholder value.
Turning to slide 6.
I would like to reflect on some key Milestones, that further the company's positions to deliver value to our stakeholders. We have a group has undergone. Significant transformation recently marked by a transition in Sea suite and segment leadership a refreshed board of directors with 4 new directors, replacing Legacy members increased public flow and liquidity and a portfolio, simplification and organizational restructuring. These changes signal our commitment to driving strategic realignment enhancing governance and delivering shareholder returns.
First.
I am pleased to have announced the addition of Amy Campbell to the team at CFO earlier this year. Amy is an experienced and highly respected Finance executive with broad Financial operational and public company experience within manufacturing Industries.
Financial Acumen strategic vision and strong communication skills have benefited. The team shape, the targets. We are delivering today and will further our progress toward their achievement?
Steve zamansky joined rev group just over a year ago as general counsel and corporate secretary, Steve's background and corporate governance and m&a experience were integral to board reconstitution Salvo governance editions and reorganization. We will discuss shortly. I would like to mention the presidents of our specialty, vehicles, and recreational vehicles, Mike, Vernick, and Mike lanciotti.
Each brings exceptional value to our team through their extensive industry knowledge and proven leadership expertise their deep understanding of Industry, Dynamics Trends, and challenges, enables them to make informed strategic decisions that drive our businesses forward.
Recent updates to our corporate governance framework introduced significant benefits that aligned rev more closely with best practices and shareholder interests. A refresh board of directors brings diverse expertise and finance human capital and operational management which enhances the board's ability to provide well-rounded oversight and strategic guidance, across critical areas.
Strong Finance. Expertise brings valuable insights into cap, allocation risk management. And financial planning, with can directly support strategic decision-making around Investments m&a, activity and cash management.
This financial Acumen was a special evaluable earlier, fiscal 2024. When the use of proceeds from our exit of school bus, manufacturing was returned to shareholders and form of special dividend and share repurchases.
We will continue to rely on this expertise and future decisions aimed at maximizing long-term shareholder value.
In addition.
And we'll be essential in supporting a positive culture and effective succession planning approach and employee engagement strategies that align with our evolving goals.
Finally operational expertise offers practical insights on efficiency supply chain optimization and quality control, helping us make informed decisions on operational. Priorities, this is, especially valuable for identifying bottlenecks refining production, methods and implementing lean practices all of which are crucial for driving higher throughput. Additionally, this operational expertise helps us align strategic decisions with a practical Hands-On approach that cost control and productivity ultimately, supporting profitability improvements.
The combined experiences and skillfulness of the board, insurer can better assess and guide Management on scalable solutions that enhance both short-term performance and long-term operational resilience.
In addition to the board, directors, composition rather is proposing to enhance this governance policies in this year's proxy vote. By removing the supermajority voting requirements from our Charter. This change simplifies governance and makes it easier for shareholders to affect change. When that's necessary, my empowering shareholders with more straightforward voting rights. We will increase accountability and Foster more direct relationship with our investor base. Aligning management actions more closely with shareholder interests.
Moreover, the board has updated executive compensation to include performance-based, shares, and annual grants.
1 Edition within the new structure is the inclusion of relative return on invested capital or roic to align management incentives. Clearly with those of our shareholders we believe roic is a robust measure of Management's, Effectiveness and generating Returns on the company's Investments. Encouraging Executives focus on discipline Capital, allocation and profitable growth.
Earlier Drew mentioned that we have streamlined operations by Xing non-core businesses and restructured our operating model from 3 segments to 2. This consolidation allows for a sharper focus on core businesses. Improving operational efficiency and aligning resources, more effectively. The proceeds from these transactions were used to return a substantial amount of cash to shareholders reinforcing. Our focus on value, creation and shareholder returns.
Together, these changes position the company for a more agile and focused path forward in core markets.
Moving the slide 7 rev group presents, a compelling investment opportunity to its well-diversified portfolio products, aligned with favorable macroeconomic Trends, among others. We are positioned to benefit from population. Growth and aging demographic, and expanding urban sprawl and have been uniquely suited to meet the rising demand for Mission critical vehicles.
Les related to essential Services across Municipal markets.
These Tailwinds enhance revs Revenue potential and sustainability as our vehicles directly address, the evolving needs of communities and municipalities within critical infrastructure.
We have experienced strong order, volumes driven by pent-up demand and need for Fleet upgrades within the substantial installed base of vehicles. This robust demand environment inspected support, Topline growth and margin expansion over the long term as customers seek to modernize and expand fleets to meet current and future demands.
With the strong balance sheet and the discipline approach of capital allocation, we are well positioned to continue to provide attractive returns to shareholders through a combination of organic growth, dividends share repurchases and acquisitions.
When and if the opportunity to deliver a creative return through m&a arises, we will make these decisions with a focus on delivering Consolidated roic returns greater than 15%, which we believe over time will continue to drive value to our shareholders.
Please turn the page 8 and I'll turn the call over to Amy to present our updated targets.
Thank you, Mark.
Let's start by taking a look at the targets we set and the 2021 investor day and our progress against those goals.
Emerging from the pandemic's impacts that were challenging for industrial manufacturers and arguably delayed. Our progress toward our original targets by a year.
Rev is achieved outstanding financial performance.
Exceeding its fiscal goals across key metrics, including adjusted Eva, free cash flow and return on invested capital.
A strong performance reflects effective, operational strategies, discipline cost management and a focus on effective pricing discipline, which combines have allowed rev to surpass, expectations and deliver substantial value for shareholders.
Consolidated performance was driven by both a specialty vehicles and recreational vehicles meeting or exceeding. Their respective margin targets and posting impressive results.
The Legacy fire and emergency segment, which is more than 90% of the Specialty Vehicle segments and adjusted ebitda margin Target of 7 to 8% and the Specialty Vehicle. Segment. Delivered, an exceptional 8.9% margin in fiscal 2024 reflecting increased demand cycle and a highly discretionary consumer-facing industry.
These achievements underscore revs operate.
Strength and ability to deliver in both stable and challenging market conditions.
By capitalizing on demand Trends enhancing production processes and maintaining rigorous Financial discipline. We have positioned ourselves well for continued growth and profitability in the future.
Now, let's turn to slide 9 and I'm excited to share our updated, intermediate Financial targets for fiscal 2027 and our vision for sustainable growth.
Over the next 3 years, we're committed to ambitious goals that are intended to enhance our Market position and deliver solid returns to our shareholders.
Let's start with our Topline targets for 2027.
We are targeting 6% to 8%. Net sales growth annually.
Note that this growth is on top of a pro-forma base restated, for the exit of bus manufacturing that occurred in fiscal 2024.
Adjusted. Eva de margin is targeted to reach a Consolidated range.
10 to 12% by fiscal 2027.
In addition, over the next 3 years, we are targeting cumulative. Free cash, flow generation exceeding. 350 million dollars.
This level of cash generation will enable us to invest in our businesses, return cash to shareholders in the form of share repurchases, and dividends and make investments in high impact future growth opportunities.
Finally, our Target for roic is to exceed, 15% throughout the forecast. Period, a level we believe is achievable with a continued focus on asset efficiency discipline, Capital allocation and strong operational performance across our segments.
This target reflects our commitment to not only grow, but to do so profitably and sustainably.
Beyond the Consolidated targets. Today, we are also updating our intermediate adjusted ebitda margin targets for each of our segments.
We expect to build upon the momentum demonstrated by the Specialty Vehicle segments over the past 2 years with the 3-year target range, 14 to 16%.
In addition, we expect the mid-cycle recreational vehicle segment margin will be in the range of 7 to 9%.
The targets we are sharing today. Reflect our Assumption of normalization to mid-cycle demand and our cyclical and markets such as recreational vehicles by 2027.
As we embark on this journey, let's look at our starting point in 2024, on slide 10 and our path to double digit adjusted ebta margins by 2027.
We ended fiscal 2024 with net sales and adjusted ebitda of approximately 2.4 billion and 163 million respectively, including the performance of the domestic Collins bus in ENC businesses which were both deed in fiscal 2024.
And fiscal 2024. These businesses contribute to 163.6 million of Revenue and 17.6 million of adjusted. Eva de
excluding these sales and earnings, which will not recur in the future, net sales and adjusted even de for 2.2 billion and 145.2 million respectively on a pro-forma basis in fiscal 2024,
With our growth trajectory and operational improvements. We're setting our sights on significant advancements, over the next 3 years.
The anticipated 6 to 8% annual revenue. Growth off of the 2024. ProForm basis will be driven by volume increases price realization and an expectation of normalization to mid-cycle demand and are cyclical and markets of recreational vehicles and terminal trucks.
Accounting for corporate expensive of of approximately 1 and a half percent of net sales.
We expect Consolidated adjusted ebitda margin to be in the range of 10 to 12% in fiscal 2027.
At the indicative Revenue shown on the slide of 2.75 billion.
Which anticipates mid-cycle demand in the recreational vehicle segment.
this would result in adjusted ebitda in the range of 310 million,
Based on pro-forma fiscal, 2024 adjusted ebitda of 145.2 million. Achieving these targets would deliver annual compounded earnings growth of over 25% through the next 3, fiscal years,
Turning to slide 11. I will write more detail on an individual segments basis.
Before proceeding to the balance sheet and refreshed Capital allocation framework.
Over 90% of the Specialty Vehicle, segment, revenue and earnings are expected to be delivered by fire and emergency products over the next 3 years.
Rev group is a market leading manufacturer of fire chassis, fire apparatus and ambulances serving as a trusted supplier of municipalities and emergency response organizations across North America.
with a large installed base, the second benefits from a steady reliable replacement demand cycle driven by the need to maintain up-to-date safe and effective emergency vehicles
The replacement cycle for vehicles, is typically 5 to 7 years for ambulances, 14 to 16 years for fire trucks, and 20 to 30 years for aerial ladder trucks.
Ensuring consistent replacement demand over time.
The demand for these products is primarily backed by stable funding sources, including Municipal tax receipts and federal stimulus support which reinforced the resilience of our customer base.
And provides rev reliable and consistent Revenue stream.
Turning to slide 12. I'll provide some color behind our 3 year Revenue targets for the Specialty Vehicle segment.
Over the next 3 years, we anticipate steady Revenue growth across the segments supported by a combination of robust backlogs. And the re realization of a strategic pricing actions already taken.
The fire business which has a 2 and a half to 3 year. Overall backlog is projected to provide low single digit volume growth plus mid single digit price, realization annually, through fiscal 2027.
Meanwhile, the ambulance business with a 2-year overall backlog is positioned for similar growth in units and price realization.
Finally, the segment's terminal trucks, and street sweepers are, targeted to begin a return to mid-cycle demand, from its current trough driving substantial 30% Revenue growth for these businesses over the 3 year period.
Please turn to slide 13.
The low single digit unit volume growth and fire and emergency that I mentioned.
Is expected to result from opportunities to incrementally, increase, throughput within the existing footprint.
We plan to continue Opex programs aimed to streamlining production while supplementing our primary Workforce with additional team members, dedicated to areas such as paint and Fabrication that offer opportunities to accelerate throughput.
We expect that these volume increases will convert at what we consider a normalized contribution. Margin of 15%.
Compounding, the impact of these increases over the next 3 years, we anticipate that unit volume growth will add 100 basis points to the segment margin by fiscal 2027.
Next in response to Rising input costs in the post-pandemic period. We implemented strategic pricing actions by closely monitoring raw material and labor Trends. We were able to make timely and data-driven decisions to offset inflationary pressures.
Much of the price related to the 2022 and 2023. Fiscal year, actions remains in our backlog and will continue to be realized over the next 3 years.
Combined with aggressive sourcing activity, including input costs, clawback actions, and VAV we expect our net price cost profile will add 300 to 400 basis points to the segment's, bottom line by 2027.
Finally earlier, Mark discussed several operational Improvement programs being deployed across the Enterprise.
These strategic initiatives aimed to drive sustainable margin Improvement, while maintaining the high quality of our vehicles and integrity of Our Brands.
By reducing complexity enhancing operational, efficiency and fostering a culture of continuous Improvement. Our businesses are positioned to optimize costs improve profitability and ensure long-term, competitiveness,
a robust pipeline of lean projects, the combination of designs and a standardization of products that are expected to reduce cost, will result in additional 100 to 200 basis points of targeted segment margin
Turning to slide 14. I would like to provide some additional perspective on the long-term opportunity and sustainability of sales and earnings within the Specialty Vehicle segment.
As you.
You can see on the slide. And as we discussed earlier, the demand environment from 2020 to 2023, drove across the industry above Trend orders for fire, apparatus, and emergency vehicles.
That resulted in growing backlogs and concluded with revs fire and emergency businesses. Exiting fiscal 2024 with an overall 2 to 3 year backlog, which is 2 to 4 times the backlog. We had pre-pandemic, depending on brand and model,
we believe that orders for new equipment have started to normalize and are starting to return to long-term Trend levels which will likely result in the backlog also, normalizing over the next few years,
Over to emphasize the strength of the backlog and the visibility. It provides to our 3-year production plan.
If industry demand were to be below historical levels for the next 3 years.
the current backlog would provide visibility for increased sales and earnings growth, through fiscal 2027, while maintaining a plus 1 year backlog, as we escalate fiscal 2027,
Over the long term. The segments financial performance is expected to continue to be supported by ongoing replacement of a large installed, Fleet healthy, normalized, backlog, and ongoing operational initiatives that will continue to benefit margins.
If this scenario were to play out we would anticipate entering fiscal 2028 under a steady state of an industry. Demand that offers GDP plus sales growth with an opportunity for growth above Market. The commercial, Excellence efforts targeted at share, gains and innovation.
additionally, we believe that after fiscal 2027 discipline cost management and operational improvements can provide a foundation for annual margin expansion of approximately 30 to 50 basis points, providing ongoing opportunity for healthy shareholder returns
the summarize we believe that when the industry emergence from this period of above Trend demand the Specialty Vehicle segments, long-term earnings Outlook remains bright
Turning to slide 15.
Our recreational vehicle segment is known for producing RVs under several well recognized and trusted brands.
You may note on this slide that the profile of product categories and the recreational vehicle segment is different than the overall RV industry.
Well, industry shipments have typically been comprised of close to 90% 12s our segment produces predominantly motorized units, which account for over 95% of the segment sales and earnings and fiscal 2024.
Among Our Brands classy units lead and popularity and sales with 42% of total RV segment, sales benefiting from the Renegade, brand reputation, and the secular consumer shift to this category is more buyers seek an ideal mix of size, safety comfort and durability.
Our line of iconic brands in the classic class a motor homes, follow with, 33% of total sales offering, larger luxurious options for extended travel.
While the more compact Class, B Sprinter van units, cater to Consumers seeking a more Nimble and efficient RV experience and comprise 21% of the RV segment revenues.
The remainder of the segment is composed of Lance towable units and campers, which although a smaller part of our segments lineup, represent the largest product category in the overall RV industry.
The mix of RV offerings within our portfolio. Enables the segment to appeal to diverse consumer preferences, and meet the demands of a broad Market in dealer Bass.
Turning to slide 16. The RV industry is inherently cyclical.
With demand often influenced by broader economic conditions such as consumer confidence, interest rates and fuel costs.
Our business is no different and the segments of profitability typically follows these Cycles closely.
To understand the performance of the segments, across the different industry, demand Cycles. We have charted its performance over the past 7 years here on this slide.
In times of economic expansion, relatively low interest, rates and strong consumer spending the recreational vehicle segment experiences, higher sales, volume and greater profitability.
Conversely, economic slowdowns Rising interest rates and reduced discretionary spending typically result in lower demand affecting sales and profitability.
You can see from this chart that sales and profitability have tended to follow a relatively linear path through the cycles.
Beginning in the fourth quarter of fiscal 2023, the RV industry and our segments have faced a notable decline in sales. After experiencing a surge in demand. During the pandemic years when height interest and outdoor travel drove records sales.
The drop has been attributed to Rising. Interest rates inflationary pressures and Tighter consumer budgets which have impacted discretionary spending on, large purchases like RVS.
Dealer inventory levels have also adjusted as dealers, reduced, inventories, and manufacturers scale back production to match softer demand.
Creating a more cautious Market environment.
Over the intermediate term, RV industry, experts view, the Market Outlook optimistically with demand expected to gradually stabilized as economic conditions approved. A moderate recovery is anticipated as interest rates, potentially ease and consumer confidence. Strengthens
To manage these Market fluctuations, we will continue to adjust production levels and manage inventory. In response to demand changes aiming to maintain margin stability. Additionally, we remain focused on improving operational, efficiencies and controlling costs during slower periods.
Such as in the segment for profitability, is demand rebounds in the next Market upcycle.
we adhere to a disciplined Capital allocation philosophy that prioritizes long-term value creation, operational resilience and
Shareholder returns.
this approach guides, every investment decision, ensuring that we deploy Capital strategically to maximize our Returns on investment while maintaining Financial strength
We prioritize reinvesting in core areas that drive growth and competitive Advantage such as product, Innovation, operational, efficiency and Target expansion within high potential markets.
As we look at organic growth opportunities, you will continue to explore upgrades and advancements in manufacturing. Technology to deliver product Innovations growth and cost reductions while remaining focused on simplification and standardization.
Alongside these internal Investments, we are committed to maintaining a balanced capital structure.
We believe that a net debt ratio of 1 and a half to 2 and a half times is appropriate for a company with Reds characteristics. But this is a ratio that we would Target over time, not immediately.
Furthermore, we believe that we have the flexibility to increase debt opportunistically for the Rite, accretive acquisition.
As a part of our commitment to delivering shareholder value, we aim to consistently return, Capital shareholders, through dividends and share repurchases.
As Mark highlighted we returned over million dollars of cash to shareholders, in the form of special and regular cash, dividends and share repurchases, and fiscal 2024 alone.
And today, we announced that the board's approved a 20% increase to our quarterly dividend and replace the existing share repurchase program with an authorization for a new 250 million repurchase program which expires in 24 months and provides management flexibility to manage the capital structure effectively.
While returning Capital to shareholders, through dividends and share repurchases as a key part of our Capital, allocation strategy.