REV Group, Inc. on Wednesday reported results for the three months ended October 31, 2021 (fourth quarter 2021). Consolidated net sales in the fourth quarter of 2021 were $589.9 million, representing a decrease of 4.3 percent compared to $616.3 million for the three months ended October 31, 2020 (“fourth quarter 2020”).
The decrease in consolidated net sales was primarily due to a decrease in net sales in the Fire and Emergency segment partially offset by an increase in net sales in the Commercial and Recreation segments. Consolidated net sales were $2.4 billion for the twelve months ended October 31, 2021 (full-year 2021), which was an increase of 4.5 percent over the twelve months ended October 31, 2020 (full-year 2020).
The company’s fourth-quarter 2021 net income was $0.0 million, or $0.00 per diluted share, which included a $6.2 million loss related to the expected exit of its interest in a China JV investment as well as $3.6 million related to restructuring and related activities and impairment of real property at certain facilities within the F&E segment. Adjusted Net Income for the fourth quarter 2021 was $17.9 million, or $0.27 per diluted share, compared to Adjusted Net Income of $11.8 million, or $0.19 per diluted share, in the fourth quarter 2020. Net income for the full year 2021 was $44.4 million, or $0.69 per diluted share, compared to a net loss of $30.5 million, or $0.48 per diluted share in full year 2020.
Adjusted EBITDA in the fourth quarter 2021 was $31.1 million, compared to $28.0 million in the fourth quarter 2020. The increase in Adjusted EBITDA during the quarter was driven by increased contribution from the Recreation segment and lower corporate expense partially offset by a decrease in the F&E and Commercial segments. Full-year 2021 Adjusted EBITDA was $141.5 million, compared to $67.5 million in full-year 2020.
During the quarter, the company appointed Eric Sandstrom as Senior Vice President, Engineering & Technology, a newly created executive leadership position. The new role will play a critical part in evolving the portfolio, optimizing engineering excellence, and leading product and powertrain design, innovation, and technological advancement. Prior to joining REV Group, Eric was Global Chief Engineer – Electric Propulsion Systems at General Motors.
“We exited the year with another quarter of year-over-year Adjusted EBITDA improvement, generated record full-year Free Cash Flow, and substantially improved the balance sheet. Our record $3.1 billion backlog combined with the significant progress we have made building our operational capabilities have positioned us well to continue to improve our performance and create shareholder value.” REV Group Inc. President and CEO Rod Rushing said. “I am proud of the dedication of our employees as they delivered strong performance in fiscal 2021, while navigating through supply chain challenges, difficult labor markets and inflationary headwinds.”
REV Group Fourth Quarter Segment Highlights
Fire & Emergency Segment
F&E segment net sales were $277.3 million in the fourth quarter 2021, a decrease of $52.3 million, or 15.9%, from $329.6 million in the fourth quarter 2020. The decrease in net sales compared to the prior-year quarter was primarily due to decreased shipments of fire apparatus and ambulance units compared to the prior-year quarter related to supply chain constraints and lower shipments at one fire manufacturing plant related to the impacts of Hurricane Ida. F&E segment backlog at the end of the fourth quarter 2021 was $1,498.6 million, an increase of $532.8 million compared to $965.8 million at the end of the fourth quarter 2020. The increase was primarily the result of continued strong demand and order intake for fire apparatus and ambulance units.
F&E segment Adjusted EBITDA was $10.1 million in the fourth quarter 2021, a decrease of $4.7 million, or 31.8%, from $14.8 million in the fourth quarter 2020. The decrease in profitability was primarily related to lower sales volume and labor inefficiencies resulting from supply chain constraints, inefficiencies related to Hurricane Ida, and the return of certain travel and trade show-related costs that were not incurred in the prior-year quarter due to COVID-19.
Commercial Segment
Commercial segment net sales were $94.5 million in the fourth quarter 2021, an increase of $3.5 million, or 3.8%, from $91.0 million in the fourth quarter 2020. The increase in net sales compared to the prior-year quarter was primarily due to increased shipments of municipal transit buses, terminal trucks, and street sweepers partially offset by decreased shipments of school buses. The commercial segment backlog at the end of the fourth quarter 2021 was $394.7 million, an increase of $120.9 million compared to $273.8 million at the end of the fourth quarter 2020. The increase was primarily the result of increased orders for school busses, terminal trucks, and street sweepers, partially offset by a decline in orders for municipal transit buses.
Commercial segment Adjusted EBITDA was $5.7 million in the fourth quarter 2021, a decrease of $0.7 million, or 10.9%, from $6.4 million in the fourth quarter 2020. Lower profitability in the quarter was primarily the result of a temporary suspension of school bus production related to supply chain disruptions, partially offset by increased sales volume of municipal transit buses, terminal trucks and street sweepers as well as productivity improvements within the terminal truck and street sweeper businesses.
Recreation Segment
Recreation segment net sales were $217.9 million in the fourth quarter 2021, an increase of $23.7 million, or 12.2%, from $194.2 million in the fourth quarter 2020. The increase in net sales compared to the prior-year quarter was primarily due to increased unit shipments and lower discounting and sales allowances. Backlog at the end of the fourth quarter 2021 was $1,234.5 million, an increase of $695.6 million compared to $538.9 million at the end of the fourth quarter 2020. The increase was primarily the result of strong demand and order intake across all product categories.
Recreation segment Adjusted EBITDA was $21.7 million in the fourth quarter 2021, an increase of $1.2 million, or 5.9%, from $20.5 million in the fourth quarter 2020. Profitability within the segment benefited primarily from increased production volumes, strong price realization, lower discounting and sales allowances, and benefits from strategic initiatives designed to improve profitability, partially offset by inefficiencies resulting from supply chain disruptions and labor constraints.
Working Capital, Liquidity, and Capital Allocation
Cash and cash equivalents totaled $13.3 million as of October 31, 2021. Net Debt was $201.7 million, and the company had $290.0 million available under its ABL revolving credit facility as of October 31, 2021, an increase of $13.2 million as compared to the July 31, 2021 availability of $276.8 million. Trade Working Capital3 for the company as of October 31, 2021 was $368.2 million, compared to $426.9 million as of October 31, 2020. The decrease was primarily due to decreased accounts receivable, decreased inventory and increased customer advances partially offset by decreased payables. Capital expenditures in the fourth quarter 2021 were $10.8 million compared to $3.8 million in the fourth quarter 2020. During the fourth quarter 2021, the company repurchased a total of 250,000 of its common shares for $3.9 million at an average purchase price of $15.45.
Fiscal Year 2022 Outlook
The company provided its outlook for its fiscal year ending October 31st, 2022, which includes the following performance expectations:
- Net sales of $2.3 to $2.55 billion
- Net income of $45 to $73 million
- Adjusted EBITDA of $125 to $155 million
- Adjusted Net Income of $64 to $89 million
- Free Cash Flow4 of $58 to $80 million
Quarterly Dividend
The company’s board of directors declared a quarterly cash dividend in the amount of $0.05 per share of common stock, which equates to a rate of $0.20 per share of common stock on an annualized basis, payable on January 14, 2022, to shareholders of record on December 31, 2021.
Conference Call
A conference call to discuss the company’s fiscal year 2021 fourth-quarter financial results is scheduled for December 15, 2021, at 10:00 a.m. ET. A supplemental slide deck will be available on the REV Group, Inc. investor relations website. The call will be a webcast simultaneously over the Internet. To access the webcast, listeners can go to http://investors.revgroup.com/investor-events-and-presentations/events at least 15 minutes prior to the event and follow instructions for listening to the webcast. An audio replay of the call and related question and answer session will be available for 12 months at this website.
About REV Group, Inc.
REV Group (REVG) companies are leading designers and manufacturers of specialty vehicles and related aftermarket parts and services. We serve a diversified customer base, primarily in the United States, through three segments: Fire & Emergency, Commercial, and Recreation. We provide customized vehicle solutions for applications, including essential needs for public services (ambulances, fire apparatus, school buses, and transit buses), commercial infrastructure (terminal trucks and industrial sweepers), and consumer leisure (recreational vehicles). Our diverse portfolio is made up of well-established principal vehicle brands, including many of the most recognizable names within their industry. Several of our brands pioneered their specialty vehicle product categories and date back more than 50 years. REV Group trades on the NYSE under the symbol REVG. Investors-REVG