REV Group, Inc. (NYSE:REVG) Q2 2023 Earnings Call Transcript

So we still believe we have the right products in place. We did obviously Class A member participated in the uptick that we saw. So we continue to see a mix shift there of more of gas units versus high-end diesel. So we are seeing a mix impact. But from a productivity perspective, we are looking at managing the production flow there, but we still feel comfortable with that 9% to 10% range exiting the year.

Jerry Revich: Super. Thank you.

Operator: Our next question is from the line of Mig Dobre with Baird. Please proceed with your question.

Mig Dobre: Good morning. I want to follow up on Jerry’s question, just last question here. If I look at your implied guidance or recreation in the back half of the year, you’re still looking north of $220 million of quarterly revenue. And I’m curious if you are of the view that there is another sort of step down that we need to consider as we look into fiscal ’24 or if you’re comfortable with the notion that this revenue run rate is sustained, I ask, obviously, because the backlog is looking different than it did even a quarter ago. And at least for me, it’s a little bit harder to pinpoint exactly what the underlying level of demand currently is?

Mark Skonieczny: Yes. We obviously don’t want to get into 2024 guidance at this point, but we tried to include that in our prepared remarks. When you look at our B and C businesses, which are what we talked about, our higher-margin businesses, we still have a 6- to 9-month backlog in those businesses. So we still have a strong backlog in those units. So when we look at the back half of the year, we feel very comfortable in those categories. And in our Class A business, we still have in excess of 6 months, and we have the production. It’s more about a mix where we’re seeing the consumer go down into more gas units versus the high-end diesels and we talk about gas, those margins are 50% of what a high-end diesel would – would produce.

And obviously, the hours from a production perspective are less given the complexity is lower as well. So we are flexing our costs within that business. And so we feel good that we’re going to be able to flex with the units shipped there. But of course, we’ll have – we’ll have to maintain different production cadence than we did at the beginning of the year. And then on the towable side, we’re seeing what everyone else is seeing, but still, we still have not normalized our inventory in that lance [ph] product, as you know, is more of a niche product within the whole towables business. So we still have quite a heavy following there. And we did introduce as we’ve announced our Indura [ph] off-road product within the quarter, which was well received as well.

So we’re seeing some uptick from the acceptance of that product as well.

Mig Dobre: Understood. Maybe going back to Fire & Emergency. And maybe even more broadly onto your guidance. You raised your sales guidance by $100 million. I’m assuming it’s primarily driven by Fire & Emergency, but I’d love some confirmation there. Then the second question here would be very high level of backlog, right, almost $2.9 billion. And I’m sort of curious as to how you think about this backlog. Is this backlog stickier, for instance, and what we have seen in RV, what’s the risk of cancellations? And when you’re kind of talking to customers, how are they dealing with what appears to be very, very extended lead times at this point?